Is the U.S. ready to be a chipmaking superpower?

This episode explores the U.S.'s readiness and strategic initiatives to become a leading chipmaker, focusing on economic policies, national security, and technology advancements.

1. The U.S. is heavily investing in becoming a semiconductor powerhouse for economic and national security reasons.
2. Consumer sentiment is shaky despite favorable economic indicators, hinting at underlying economic anxieties.
3. The geopolitical tensions with China are a critical concern, especially regarding Taiwan's dominance in chip manufacturing.
4. There's a bipartisan push in policy-making to enhance U.S. competitiveness in high-tech industries.
5. Experts debate the long-term economic implications of current policies, including potential inflation driven by political decisions.

1: Economic Overview

The episode opens with an economic overview, discussing jobless claims and consumer sentiment. It sets the stage for a broader discussion on U.S. economic policies and their implications.

• Kai Rizdal: "Consumer sentiment we got this morning from the University of Michigan. It is, in a word, terrible."

2: Chips Act and Technological Sovereignty

Focuses on the U.S. efforts to enhance chip manufacturing through the Chips Act, discussing the significant investments and strategic importance of these initiatives.

• Gina Raimondo: "All the leading edge manufacturers in the world have committed to scale in the United States."

3: Geopolitical Implications

This section examines the geopolitical stakes, especially concerning China and Taiwan, highlighting the risks and strategies involved in U.S. chipmaking ambitions.

• Gina Raimondo: "If the Chinese go into Taiwan and take TSMC, it would be disastrous."

4: Economic Policy and Democracy

Discusses the intersection of economic policy and political stability, emphasizing the economic stakes in upcoming U.S. elections.

• Kathryn Rampel: "I would urge them to look at the actual policy proposals... many of them would be very inflationary."

1. Support policies that bolster technological advancements and economic competitiveness.
2. Stay informed about the implications of global economic policies on national security.
3. Consider the long-term impacts of political decisions on consumer prices and economic stability.
4. Engage in discussions and educational opportunities related to economic policy and technology.
5. Advocate for balanced trade policies that ensure national security without stifling global cooperation.

Commerce Secretary Gina Raimondo wants to position the U.S. to become a leader in semiconductor manufacturing. After all, the U.S. invented the industry not so long ago. The Biden administration has invested $30 billion in new factories, and companies have thrown in 10 times that sum. In this episode, Raimondo tells “Marketplace” host Kai Ryssdal where she hopes U.S. chip production will be by 2030. Plus, her broadband expansion plan and how she views our trade relationship with China.

People

Kai Rizdal, Neil Richardson, Kathryn Rampel, Gina Raimondo

Companies

Intel, TSMC, Samsung

Content Warnings:

None

Kai Rizdal
You turn to marketplace for the latest news about what's happening in the economy and how it impacts you and your community. When you donate to support our nonprofit newsroom, you can also get something a little more tangible. We've got a great lineup of donor thank you gifts right now, a shrinkflation mini tote bag, water bottles, mugs, hats, and yes, the Kai pie glasses are back, but only while supplies last. And I'm taking some of them. Contribute any amount to make a difference.

And pick up one of these gifts. Go. Go to marketplace.org donate.

All right, let's try to make sense of the week, shall we? From american public media, this is Marketplace in Washington, DC, today. I'm Kai Rizdal. It is Friday the 10 May. Good as always to have you along, everybody.

One of those weeks, honestly, we're getting a sense of the economic zeitgeist is going to require pulling together some seemingly loose threads. Here to do that are Kathryn Rampel from the Washington Post, Neil Richardson from ADP. Hey, you two. Hey. All right, Neil, you get first whack at pulling together these threads.

I'm going to recite some statistics and then you're going to tell me what they all mean. Jobless claims, first time claims for unemployment benefits. They were up this week after like ten, maybe twelve weeks of being reasonably steady. Consumer sentiment we got this morning from the University of Michigan. It is, in a word, terrible.

Inflation expectations are higher now than they were by a not insignificant amount at the last reading. I would like to know what you make of that. Thanks for starting off with the easy questions. Love that. Let's start with jobless claims.

Neil Richardson
Yes, they're up for the first time in a long time by the most amount. Except context matters a heck of a lot here. They're still super low. In fact, if you look at historically where jobless claims are, and remember, jobless claims is a proxy for layoffs in the economy, we're at record lows still, even with a jump up. So it only matters, it's only a jump relative to the super super low weeks before, not relative to history.

So let's move on to consumer sentiment. This one kind of came out of nowhere because that number hadn't really budged for a couple of months. Consumers didn't have a lot new to say about the economy. And then now when gas prices are falling, the stock market is rising and unemployment is still low, there's a downbeat sentiment like they're waiting for that other shoe to drop on their heads. And so that is a puzzle most economists I read or spoken to don't really know what to make of this, but they're pointing to that inflation expectation that took a jump up, that inflation might be rising again in pockets that we're not seeing yet.

And so there's still a little mystery surrounding this. But so goes the consumer, so goes the economy. So it's worth watching Kathryn Rampel riff on that for a little while. And specifically the consumer angle and why we're feeling terrible. And you cannot use price levels are still elevated as a reason?

Kathryn Rampel
No, but I think that's a large part of it. Well, look, there's also been a little bit of reacceleration in price growth. I'm not talking about levels. Right. There's been a little bit of a setback in a sense that like we had been getting inflation down by a lot and maybe we're either, you know, treading water or it's getting a little bit worse.

I think that's part of it. It's weird because consumers are still spending more or less like they feel pretty good and as if the prices, whether we're talking about levels or growth, are not bothering them so much. Although, of course, if you interview them, whether in a survey format or as we journalists do in a longer form, open ended conversation, they are very cranky about prices. So there's a little bit of, I don't know, a contradiction here that we've been seeing for years now about how much consumers say prices bother them, although, but clearly not enough to dissuade them from continuing to buy now. It does also look like they're fueling some of that growth, more of that growth through borrowing, which could be part of the reason why they're feeling so unhappy.

It's not that they're spending more because they have a lot more income, even though income is now, or wage growth is now at pacing inflation. If they feel like to keep up with the Joneses or to keep up with their ongoing lifestyle, they need to borrow more and they continue to do so. That's probably going to weigh on their psyche and their finances. Right. And the reserves people built up during the pandemic are now largely exhausted.

Kai Rizdal
So that's why they're going through credit cards. Neela, here's another curveball, stagflation, and I'm going to set it up this way. Two weeks or ten days ago, whatever it was. Chair Powell got the question of are you seeing stagflation in this economy, which is, of course, stagnant economic growth and inflation? And he said, I am seeing neither the stag nor the flation.

And yet, in a perusal of Wall street bank analysts notes this afternoon, stagflation comes up a lot. And I wonder, do you buy it or are you with the chair? I'm with the chair on this one. It's hard to talk about stagflation with unemployment rates below 4%. It's a, it's a three pronged economy that supports stagflation.

Neil Richardson
That's slower growth, higher inflation, and high unemployment. We're not seeing that. I think the narrative on the economy continues to swing between extremes. Soft landing, hard landing, recession, stagflation. Pick a day.

There's a different story about what the economy is. It kind of dovetails to what the consumer sentiment numbers. There is some anxiety. There is a uncertainty about what happens next. And I think that colors some of the data, that the data is not what it is on its own.

It's what fits into a narrative sometimes. And that uncertainty does matter because it translates eventually to behavior. Right. And those gyrations just make people more anxious, which feeds itself, and nothing good happens from there. Katherine, I want to talk for a second, sort of riffing on the conversation I had with Secretary Yellen yesterday about the democracy and this economy and why the economy needs democratic institutions.

Kai Rizdal
You've been writing a little bit about. This, and I know you want to. Talk about it, so we're gonna. I think it's time for a clear eyed look at the implications for the economy of a Trump second term. And you've been writing on this a.

Lot, and I'd like a minute and 25 seconds from you on that. Sure. So obviously, I care about democracy for democracy's sake, not only for its potentially devastating effects on the economy if we lose said democracy, but if voters out there care about the economy, if they care about inflation, for example, I would urge them to look at the actual policy proposals that are on the table from both of the presumed presidential candidates, including Donald Trump. Donald Trump is overwhelmingly favored on economic issues if you look at polling. But if you look at the actual policies that he has proposed relating to the economy, many of them would be very inflationary.

Kathryn Rampel
Things like raising prices through a universal tariff, for example. That's things like slashing immigration, which means cutting the labor supply, which is also likely to be inflationary. And then there's this kind of nerdier thing, which is about his desire to kneecap the Federal Reserve. The Federal Reserve actually, in a way, is not a particularly democratic institution. It's supposed to be shielded politically from the ebbs and flows of popular sentiment so that the technocrats at the Federal Reserve can do what they think is best for the long run economic outcomes, rather than what feels good in the moment.

And that might mean taking the proverbial punch bowl away when the economy is overheating. And Donald Trump has made quite clear in a variety of policies that he would like to exert more political pressure on the Federal Reserve, which lots of research has suggested would lead to much worse inflationary outcomes. Katharine Pell at the Washington Post. You, should read her column on the economic implications of a second Trump term. And the Wall Street Journal had the reporting on the Fed.

Kai Rizdal
We should say that. So Katherine at the Washington Post and, yeah, and Neil Richardson at ADP on a Friday afternoon, getting late. Thanks, you two. Thanks, Kai. Bye.

Wall street on this Friday, traders were cautious, one might say. Details, numbers, you all know the drill.

Financial lives are complicated. People have retirement savings to think about, car insurance, maybe credit card bills, student loans, house or car repairs to pay off. Pocket money for the kids, too, if you feel like it. The list goes on. The point is that our personal economies aren't just one thing.

So with that in mind, an update now from Violet O'Brien. She's a notary in Houston, Texas. But like all of us, her financial life neither starts nor ends with her career. Here's today's installment of our series, adventures in housing. My fiance and I were out rollerblading one Saturday morning, summer 92, and we saw a sign that said for sale.

Violet O'Brien
And then underneath it, there was that little sign that said pool. We just looked at each other and went, let's go look at it. I still remember how excited we were. We just rolled up to the door, knocked on the door, and rolled in. We fell in love with the place, even though it was in shambles.

I mean, they were working on it. The carpet was all torn up and laying on the floor, but we saw the possibilities. I think our original interest rate was something like 8.75. You know, this was right after the eighties were terrible. The first house I was living in with my first husband, I think our interest rate was like 14%.

So 8.75 sounded real good. But I remember when we applied for the mortgage, it took about six weeks for her to call me back and tell me that we had been approved. And I cried because it was such an ordeal. I guess it's still like that for people, you know, to get your first mortgage and, you know, all the qualifications and the letters and everything, it's just you just begin to think, why am I doing this? This is just more trouble than it's worth.

But it wasn't. In the end. It all worked out.

I had friends that had what they called starter homes. So I guess I've considered it to be a starter home. But it's turning out to be a starter middle and ending home, which is fine with me. After the big move in, I thought, you know what? I never want to do this again.

I usually say they're going to carry me out of here feet first. That's what I've been saying for years. I'm like, I'm not moving. And I've decided that I'm just going to age in place here because, a, it's a good house to do that in, but I'm attached to it, you know, I guess I'm just attached to it. The thought of, you know, have friends that live in, like, retirement centers and places where you wouldn't have to hassle with all this maintenance.

But I was so excited to own my own home. And we put a lot of love and care into this house. We fixed it when it needed to be fixed. We painted it when it needed to be painted. And, gosh, we've grown with it.

You know, we raised our family here, had fights and made up and had parties, and it's still going. So I'm just attached to it because it's taken care of me and I've taken care of it.

Kai Rizdal
Same, same Violet. Same, same. Violet O'Brien there. She's a notary and a homeowner in Houston. We cannot do this series without you.

Weather you're in your forever home or your right now home. Tell us about it. Marketplace.org Adventuresin housing coming up, we need. To trade where we can but protect what we must. It is kind of a balancing act, actually.

First, though, let's do the numbers. Dow industrials gained 125 today. Three tenths percent finished at 39,512. The Nasdaq, off five points less than a 10th percent, added eight. That's two tenths percent, 52 and 22 for the five days gone by the week that was, the Dow grew one and a 10th percent, the Nasdaq up 1.4%.

The S and P 500 rose about a half percent. Just heard from Violet O'Brien about the journey of buying her home back in the nineties. In real estate, residential stocks zillow down almost one and seven tenths percent today. Compass dropped three and nine tenths. Bonds down yield on the ten year t note four and a half percent you're listening to Marketplace.

You turn to Marketplace for the latest news about what's happening in the economy and how it impacts you and your community. When you donate to support our nonprofit newsroom, you can also get something a little more tangible. We've got a great lineup of donor thank you gifts right now, a shrinkflation mini tote bag, water bottles, mugs, hats, and yes, the kai pie glasses are back, but only while supplies last. And I'm taking some of them. Contribute any amount to make a difference and pick up one of these gifts.

Go to marketplace.org. Donate.

With access to so much information, it's hard to feel like an informed, discerning citizen. That's why on make me smart, which is a podcast from Marketplace, we make it easy for you to stay in the know. Hi, I'm Kai Risdahl. Every weekday, Kimberly Adams and I unpack the latest from Washington, DC. The Senate minority leader has announced that.

Neil Richardson
He will step down as the republican leader. What's happening in AI? I mean, don't buy at the top, but holy cow, artificial intelligence and all the companies related to it are the hot new thing. And we do the numbers so as a refresher. Inflation is the rate of increase in the prices of things.

Gina Raimondo
It's not just sort of things getting more expensive, speed at which things get. More expensive, because in a world that's constantly changing, we all need to stay smart. Listen, to make me smart wherever you get your podcasts, this is Marketplace. I'm Kai Rizdahl. Treasury Secretary Janet Yellen was the cabinet level guest on the program yesterday.

Kai Rizdal
We had a conversation about the overall economy, how consumers are feeling, keeping the United States competitive globally, in part through the billions of dollars being invested in high tech and also the current state of our relationship with China. But treasury is not the only department of this government working on this. So for a different perspective today at the cabinet level, Commerce Secretary Gina Raimondo. Madam Secretary, it's good to have you back on the program. Thank you.

Gina Raimondo
Thank you. I want to start where we left off last time, a year or so ish ago with you. Industrial policy, the Biden administration getting the government into this economy Chips act. You've been busy. Lots of loans and grants.

We were on Phoenix a number of weeks ago looking at the TSMC plant out there. Three of them, I guess, are going to be built now. Extraordinary. They're huge, many, many billions of dollars. Here's my question.

The CEO of intel, Pat Gelsinger, came out maybe that day that the president was there and said this is great, but we need a chips act two. And my question is. Come on. Really? Well, you can't blame him for trying.

Gina Raimondo
Can't blame them for trying. First of all, aren't they massive? They're huge. They're unbelievable. It's the biggest thing I've ever seen.

I wish everybody in America could see them. I was in Texas with Samsung. They have 50 cranes in the air right now. Each of those clusters will employ, you know, 15,000 people eventually, right? It's gonna be a number of years.

It'll be a number of years. But at sketch, you know, by the end of the decade, they'll be humming. You know, I'm not gonna comment on the need for chips, too. What I am going to say is, I feel great about where we are. When I.

You came here about a year ago, a year ago, I didn't have a team. No money was out the door. We hadn't even put the applications out. Today we have 200 people here working on chips. We've committed almost $30 billion.

All the leading edge manufacturers in the world have committed to scale in the United States. So, as you say, it will take years, but I couldn't be happier. Fair enough. You're not going to comment on what Mister Gelsinger said, but here's the question in a different way. Is there a moment when the government says, you know what?

We've given you the seed corn. Go forth and profit? It's a good question. Let me say this. The whole point of the chips program was to be very targeted for national security purposes.

Gina Raimondo
And this is a key thing you need to know for the 30 billion of taxpayer money that we have announced. The private sector has announced over 300 billion. So I would say this is working. You know, we have given the seed corn and they've invested ten x private capital. Whether we need more down the road, I don't know, because 50 billion is pretty small relative to what's needed.

But we may not, because, as I said, they've already invested ten x private capital for the public capital. So we'll see. We'll see. Are you satisfied that the early signs of the long game the Biden administration is playing are paying off? Absolutely.

In addition to the fact that they are investing $10 for every dollar we're investing, no one thought we could get TSMC, which is the world's biggest, most successful company, to do three fabs. So here comes a trickier question. Is TSMC more important than intel right now? No, they're all important. Here's the goal.

They're all your favorite children. They're all my favorite children. Look, here's the goal. You said the right thing. It's a long term bet.

Gina Raimondo
It is a long term bet. When will we know we're successful if, in 2030, we are making 20% of the world's leading edge chips in the United States of America? 2030 is, like, tomorrow. Yeah, it's going to happen. It will happen.

Right now, we're at zero. Just so your listeners know, right now, we make 0% of these chips in America, we buy 90% from TSMC in Taiwan. By 2030, I want 20% made in America. To hit that goal, you need several companies. You need intel, plus TSMC, plus Samsung, manufacturing at scale in America.

I don't want to get too geopolitical about this, but since you mentioned Taiwan, you were up on the hill yesterday, right? I forget what day of the week. Yes. Where you said, look, if the Chinese go into Taiwan and take TSMC, it would be disastrous. You have spent a lot of time in your first three years on this job dealing with China, specifically more in the past year or so.

Where do you strike the balance between cooperating in a global economy which needs us both, and worrying about national security and saying to the Chinese, you know what? Back off. Yeah. Look, we don't want conflict. We don't want to escalate.

Gina Raimondo
The president has said to me, has said to all of us on his team, we want to deescalate. We want to trade with China wherever we can. Of course, we had President Xi here at the end of last year. So I see it as. I think our trading relationship with China is like $700 billion.

That's a good thing. Creates american jobs. So we need to trade where we can but protect what we must. And right now, making 0% of the world's leading edge chips in our country when we invented the chip industry. That's unacceptable.

Are we vulnerable right now? Absolutely vulnerable. Like I said, look, there are leading edge chips in this room, in your fantastic apple fancy thing. That's right. In your phone, in your product, in your car.

Gina Raimondo
Every piece of military equipment, fighter jets. We don't make it in America. By the way, I talked to you just about a year ago. The word that didn't come up when we spoke last time about chips. AI.

Artificial intelligence. Right? All AI runs on chips. So are we vulnerable? Yes.

We want to lead the world in artificial intelligence. You can't do that unless you have the chips that run these big models. You have said american businesses are expressing their frustration to you about the lack of a level playing field in China, how do you negotiate that? Right? You have to have that trading relationship, but you have to fend them off somehow with one hand.

At the same time, american businesses say, listen, we need in there, but we need it to be fair. What do you do? You do exactly that. You have to do both. You have to call China out.

Gina Raimondo
Every time we see that they are treating american companies unfairly, which is what I did when I was in China. I didn't pull any punches. I met with the premier, the vice premier, my counterpart. I said, look, when you go into american businesses unannounced, raid those businesses, demand consumer data. That's not fair.

That's not right. We can't operate there. When you put restrictions on us, companies that favor chinese companies, hospitals, for example, and government buying products favoring their companies over ours, that's not fair. So, you know, look, my approach is just be matter of fact. You don't have to be escalatory.

Just say, look, these are the facts and you need to knock it off if you want us to do business there. Is this what you signed up for when you became commerce secretary? I'm not sure I knew what I signed up for. I just loved the president, loved my country, so I took the job. The one thing I did sign up for was to revitalize american manufacturing.

I believe it's so. It's core to who I am, and we're doing that. And so I love that. We were out in Phoenix, as I mentioned a minute ago, and one of the things we did was we went to the local pipefitters union, where they are bursting at the seams, no pun intended, with trainees and new journeymen and people coming in to help build those factories that TSMC is building. Talk to me about labor force for a minute.

I know you're not the secretary of labor, but it's a huge component of how we get from here to there. Are we ready for that, do you think? We're getting ready? You know, I'll be very, very honest with you. Are we ready today?

Gina Raimondo
Probably not. Do we need to go as fast as we can to get ready and build the pipeline and build new training programs and create new apprenticeship programs for pipefitters and welders? We have to do it. You know, just what you said before. The size of these facilities, you can't realize it until you see it yourself.

I was at Samsung in Texas. They're building one building. One building. That's eleven football fields in length. It will take probably 5000 construction workers for that one building.

They don't exist today. So we need to put on steroids, apprenticeship programs, community college programs, vocational tech in high schools if we're going to meet the need. I like our chances. We're building the pipeline. Some of the money that we're giving to these chip companies, they have to spend on workforce.

So we're telling intel, TSMC, you know, tens of millions of dollars, we're saying you need to invest this. Working with local colleges, universities, high schools, labor unions, child care. We talked about this last year, childcare, same thing. Like if you're going to meet the need and have the workers, you got to find the people, men and women alike, and train them for the jobs. So one of the other projects we're working on is broadband and what's going on in the central states, in this country.

And I guess the question is, when you think about supply chains for higher tech products like fiber optics, like those things, how do you get us there when that's not traditionally been a strength of ours? Yes, this is a great question. So one of my jobs is to make sure every american has the Internet. You know, we're investing $40 billion. And I sat down with my team at the very beginning and I said, map out for me the whole supply chain, the fiber optic cables, the electronics, etcetera.

Gina Raimondo
So much of it is not made in America a vulnerability. So I said to the team, how do we fix it? And we are fixing it by not giving waivers to companies. Just let me explain this for a second. So us company will come to us, say a us company that makes the fiber optic cable that they run to your house, so you have the Internet.

Much of that is made in China. And they come to us and say, we want a waiver to be able to continue to make it in China because it's not cost effective to make it in America. And I said, no, waiver denied. Figure out a way to make it in America and guess what? They have.

Turns out when you pressure these american companies and tell them if you want to participate and get taxpayer money to do this, you must make it in America, they figure out a way to do it. You said, I forget if it was C spaN or 60 minutes the other day, we're going to make building hardware sexy again. I did. My children have not let me live that day. I was just going to say, so maybe I should get your kids in here because, come on, really?

You sound like my son. He's like, mom, don't ever use that word again in public. And yet here you are. And yet here I am. I mean it.

You know, look, my dad, I grew up in a manufacturing family, okay? Like he made watches for a living and he loved it. He would come home at night and like his hands were grizzly and he loved making things for a living. I think people like to design. You have a cool watch I'm looking at.

You have a cool iPad. It's fun to design things. It's fun to make things with your hands. It's fun to see what you've made instead of just coding all day. Software.

So yeah, I'm sticking by what I said. Madam secretary, thanks for your time. Thank you.

Kai Rizdal
This final note on the way out today, in which the economy, stupid, works as a campaign slogan over in the UK, just like it works over here, the Office for National Statistics in the UK said today the british economy grew six tenths percent in the first quarter of the year, thus pulling the UK out of the mild recession it had been in since the second half of last year. No date yet because of the way british politics works, but an election is going to happen over there by the end of the year, January 2025. Technically speaking, our theme music was composed by BJ Lederman. Marketplaces executive producer is Nancy Fargali, Donna Tam is the executive editor, Neal Scarborough is the vice president and general manager. And I'm Kyle Rizdal.

Have a great weekend everybody. We will see you back here on Monday. Alright, this is 08:00 p.m. Hey everyone. It'S Rima Grace, host of this is uncomfortable.

Rima Grace
If you're looking for some good recommendations on books to read, well, you should join. This is uncomfortable's summer book club. Every other week in our newsletter, we'll share a new book that'll make you rethink your relationship to money, class and work, while also featuring an interview with the author or an expert on the topic. Plus, when you join, you'll be entered in a giveaway where you could win some this is uncomfortable merch. Be sure to check it out.

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