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U.S. Chip Manufacturer Incentive Will Come With a Surprise: Compulsory Unionization

The semiconductor world crisis that emerged from the COVID-19 pandemic showed multiple governments that local production is a must. As much as Adam Smith was right about some countries being better than others in producing some goods, there are things that you need to have right around the corner. The problem is how people plan to make it happen.
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The Biden administration wants to offer incentives to local chip factories, but it will demand union representation from the companies that wish to receive the money.

The CHIPS Act is currently under discussion in Congress, and the Biden administration would be making an incredible effort for it to be approved by the year’s end. According to Crain’s Detroit Business, U.S. Commerce Secretary Lisa Raimondo said she wants the possible new law to create “good, union, high-paying jobs in America." To make sure that will happen, “there will be strings attached."

Although Raimondo did not clarify if those strings would demand that the new chip factories be unionized, she made the announcement at the UAW Region 1A hall. We just don’t understand why this agenda is integrated into something that wants to make the automotive industry more competitive.

Unionization is voluntary. If these new factories have to ensure that will happen, it automatically becomes compulsory for those seeking federal credits. On top of that, there’s a reason why the U.S. does not have as many chip factories as the government reputes necessary: it is not competitive to produce them in the U.S. That’s also the case in Europe.

Just imagine the scene: now that chips are in short supply, automakers will buy chips at almost any price just to keep production going. When things get back to normal, and the current chip factories in China, Taiwan, and other significant centers for those industries will be producing more semiconductors.

Do you really think that American carmakers will buy local chips at possibly higher prices when they can get them from lower prices? The answer is no, regardless of how much money the American government lends these companies: it will be $52 billion in total. They will only stand if they can sell better chips at lower prices, and it is not clear how a union can help that happen. On the contrary.

With the possibility of strikes to demand higher wages, these chip manufacturers may prefer to allow their employees to decide. If they want to unionize, these factories may require the government's incentives to stay afloat. If they don’t, they may build those factories with their own money – if that even pays off in the first place.

These companies will still have to fight to make semiconductors that beat those produced in Asian countries. If it were that easy, we would have already seen that spontaneously happen.

Either American lawmakers consider that, or they will only spend taxpayers’ money for a limited benefit that may not resist for that much time. If unions have a solution for that, they should mention it right away.


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