Why the CHIPS Are Down: Stock Buybacks and Subsidies in the U.S. Semiconductor Industry

William Lazonick and Matt Hopkins
Additional contact information
William Lazonick: Academic-Industry Research Network
Matt Hopkins: Academic-Industry Research Network

No inetwp165, Working Papers Series from Institute for New Economic Thinking

Abstract: The Semiconductor Industry Association (SIA) is promoting the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, introduced in Congress in June 2020. An SIA press release describes the bill as `bipartisan legislation that would invest tens of billions of dollars in semiconductor manufacturing incentives and research initiatives over the next 5-10 years to strengthen and sustain American leadership in chip technology, which is essential to our country`s economy and national security. On June 8, 2021, the Senate approved $52 billion for the CHIPS for America Act, dedicated to supporting the U.S. semiconductor industry over the next decade. This paper highlights a curious paradox: Most of the SIA corporate members now lobbying for the CHIPS for America Act have squandered past support that the U.S. semiconductor industry has received from the U.S. government for decades by using their corporate cash to do buybacks to boost their own companies` stock prices. Among the SIA corporate signatories of a letter to President Biden in February 2021, the five largest stock repurchasers - Intel, IBM, Qualcomm, Texas Instruments, and Broadcom — did a combined $249 billion in buybacks over the decade 2011-2020, equal to 71 percent of their profits and almost five times the subsidies over the next decade for which the SIA is lobbying. In addition, among the members of the Semiconductors in America Coalition (SIAC), formed specifically in May 2021 to lobby Congress for the passage of the CHIPS for America Act, are Apple, Microsoft, Cisco, and Google. These firms spent a combined $633 billion on buybacks during 2011-2020. That is about 12 times the government subsidies provided under the CHIPS for America Act to support semiconductor fabrication in the United States in the upcoming decade. If the Congress wants to achieve the legislation`s stated purpose of promoting major new investments in semiconductors, it needs to deal with this paradox. It could, for example, require the SIA and SIAC to extract pledges from its member corporations that they will cease doing stock buybacks as open-market repurchases over the next ten years. Such regulation could be a first step in rescinding Securities and Exchange Commission Rule 10b-18, which has since 1982 been a major cause of extreme income inequality and loss of global industrial competitiveness in the United States.

Keywords: Semiconductor fabrication; nanometer technology; global competition; CHIPS for America Act; Semiconductor Industry Association; Semiconductors in America Coalition; stock buybacks; Intel; TSMC; Samsung Electronics; IBM; GlobalFoundries; Apple; semiconductor fabrication equipment; Huawei. (search for similar items in EconPapers)
JEL-codes: D01 D21 D25 D40 G22 G28 G35 G38 L21 L52 L63 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2021-09-27
New Economics Papers: this item is included in nep-fmk and nep-pke
References: Add references at CitEc
Citations:

Published

Downloads: (external link)
https://www.ineteconomics.org/uploads/papers/WP_165-Lazonick-and-Hopkins.pdf (application/pdf)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3952144 First version, 2021 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:inetwp165

DOI: 10.36687/inetwp165

Access Statistics for this paper

More papers in Working Papers Series from Institute for New Economic Thinking Contact information at EDIRC.
Bibliographic data for series maintained by Pia Malaney ().