Chips Act Lore + a Department of Competitiveness

How things get done in DC

What does the future of industrial policy in America look like, and what state capacity investments are needed to get there? How does China factor into the future of the U.S. semiconductor industry? And what do government affairs offices actually do? To explore these questions, we’re concluding our CSIS Chip Chat series with Bruce Andrews. Bruce has had a long career on Capitol Hill, led government affairs for Ford, served as Deputy Secretary of Commerce under President Obama, and most recently headed up government affairs at Intel. He’s now a fellow at CSIS.

We discuss…

• How to bring expertise and legislating back to Capitol Hill,

• The case for a new “Department of Competitiveness”

• Industry’s role in policymaking and what it took to get semiconductor manufacturers on board with the CHIPS Act,

• Why Silicon Valley suddenly became interested in politics,

• How to optimize industrial policy in a stick-focused political environment.

Listen on Spotify, iTunes, or your favorite podcast app.

Biden tours an Intel factory with CEO Pat Gelsinger and factory manager Hugh Green, March 2024. Source.

Jordan Schneider: Bruce, you were intimately involved in the birth and execution of the CHIPS and Science Act. Throughout the discussion around the legislation and grant implementation, politicians and officials kept saying, “We haven’t done this in decades. We’re building this muscle again. We’re learning on the fly.” This is something America had done in the past, but the energy atrophied over time. Reflecting back, maybe let’s start with the legislation writing process. How did the fact that these policy tools hadn’t been worked out in so long impact the discussion and development of the legislation?

Bruce Andrews: The United States government is actually not set up well and is challenged in two ways when implementing big industrial policies. First, the executive branch is not organized properly — we really have a 20th-century cabinet structure for 21st-century problems. Second, we don’t have the muscle memory of how to effectively implement industrial policy.

We’ve been fortunate in the United States to have a robust private sector that, with government investment and R&D spending, has been successful. But the world has changed significantly. For Congress in particular, there’s not necessarily the expertise, and they often rely on dealing directly with the executive branch to identify issues and the lack of authority that the US Government has. In many cases, we don’t have statutory authorities for executive branch agencies to carry out these policies.

When writing legislation, there’s always a balance between being specific enough while also giving enough flexibility to the administration to execute those policies. The CHIPS and Science Act was actually a good example, and it was done in two parts. The first part was drafted in the second half of the Trump administration and passed at the beginning of the Biden administration. Then they had to provide the funding because you had the authorization, but needed to appropriate the dollars that would actually be spent.

This was a huge legislative lift, and Congress added many new requirements during the funding legislation phase.

Jordan Schneider: You started your career in the early 90s and ended up as general counsel to Senate Commerce in the early 2010s. Thinking back on the arc of legislative ambition, principal quality, and staff quality — what trends did you observe over that time?

Bruce Andrews: Things have changed significantly since the early and mid-90s. The quality of staff — and this is not to say there aren’t still tremendous staff on Capitol Hill — but there used to be really deep expertise. The growth of lobbying is partly to blame for this change, as it has deprived Capitol Hill of many good staff members.

I’ve always believed we need to pay congressional staff more. Frankly, we should pay executive branch career civil servants more as well. When you’re a young Hill staffer or even a very experienced one, and you see your colleagues in the private sector making two or three times what you’re making, your incentive to stay on Capitol Hill and develop deep expertise is diminished.

Jordan Schneider: Last year, I did a show with Philip Wallach, who wrote the book Why Congress?, which examined the post-war arc of congressional capacity and willingness to put itself center stage. We’re recording this on May 6, and Congress is currently in a situation where money it appropriated isn’t being spent because an executive feels like withholding it, and they’re not doing much about it.

We’ve seen this before. After Nixon, Congress regained a real sense of institutional pride and reasserted itself in a way it hadn’t for decades. Who knows if that’s the future Donald Trump will leave us with in 2028? But if you’re imagining a more ambitious and energetic legislative branch, where does that leave the institution? Where does that leave America? What would need to happen to bring about a new flourishing?

The CHIPS and Science Act was a perfect storm of COVID, bipartisanship, and an eager executive that allowed for a significant bill. But for a broader shift in congressional ambition and execution capacity, what ingredients would we need to see in the body politic or what incentives would enable more legislation like the CHIPS and Science Act?

Bruce Andrews: I think success does beget success, but I also think it’s both sides coming together and identifying what the issues are. There are really three things. One is agreement and bipartisan agreement on what the issue is that you’re trying to solve. In the CHIPS and Science Act, there was real clarity on trying to get particularly advanced logic, but also trying to move semiconductor production back to the United States.

Second is an agreement on what tools the government has, or should have, in order to do that. In the CHIPS and Science case, people looked and they said, “Taiwan, Korea, and China have spent the last 30 years providing incentives to help their industries be successful. The US has sat on the sidelines and let the private sector do it. And we now have watched the majority of Atlantic Advanced Logic production move overseas.” Second is seeing the problem, which is the need to close the cost gap between the US and Asia, and putting in a solution that was able to do that.

Third is bipartisan support. There were a number of heroes of the CHIPS Act on both sides of the aisle. On the Democratic side you had Ro Khanna and Chuck Schumer and Doris Matsui and people who said there’s a problem. And then on the Republican side, you had great senators like Todd Young and John Cornyn, Mike McCall in the House who said, “We agree with you, this is a big problem and let’s work together and work even over the politics."

As you’ll recall, at the end, the CHIPS Act sort of got caught up in a little bit of last-minute politics because of some other things that were going on unrelated to the CHIPS Act. To their credit, the champions on the Republican side, including Mike McCall, John Cornyns, and Todd Young, really helped push it through and helped to get it done. You need all three. You need clear identification of an issue, you need a clear government solution in a narrow and tailored way to provide the tools to do it, and you need bipartisan support to be successful.

Chuck Schumer celebrates Senate passage of the CHIPS and Science Act with a bipartisan group of the bill’s backers (left to right: Senators Roger Wicker, Mark Warner, Schumer, Todd Young, John Cornyn, and Maria Cantwell). Source.

Jordan Schneider: That’s nice to hear, but it seems like we have never been further away from that. When you have a president who’s blowing up the NIH because he feels like it’s too big, we’re going to need to have some big thermostatic response to what we have now, because this is not the glide path. This is the plane that crash-lands, and only then we become motivated to do something.

Bruce Andrews: That’s right. You’ve got to have an agreement that there are solutions we can put in place. When you get down to the member level, you actually get a lot of good thinking and a lot of good bipartisan agreement. But then translating that — unfortunately, if I were going to have one critique of Congress right now, it would be that often we’re not legislating big issues. We’re more legislating when there’s a crisis.

There are lots of really important issues out there every single day that we need to be addressing. Unfortunately, it seems that we get to the level of a crisis, and then it’s easier to pass legislation. We need to get back to the old days — real bipartisan agreement and the ability to work in a bipartisan way, and not to be pressed by your colleagues in either party to say, “Why are you working with those people of the other party? Let’s just win the next election, and then we can do it our way.”

That’s been going on for a long time, where both sides have thought, “If we just wait until the next election, we’ll win — we’ll be in charge of the House, Senate, and the White House, and then we can get our package.” The reality is that it doesn’t work. With the filibuster in the Senate, with the need for getting things done in the close margins of the House, and with the nature of the White House, it’s a mistake to put off our problems because, “Oh, if we just win the next election, we’ll solve them.” It’s never that easy.

Beefing Up The Executive

Jordan Schneider: Let’s turn to the executive branch. The CHIPS and Science Act basically got to hire the pick of the litter because they had special hiring authorities and were able to really bring together this crack team from some government vets, but a lot of folks from Wall Street and a little bit from the semiconductor industry, too. Recently, Dan Kim said that in 2015, there were only two people who were thinking about the commercial semiconductor industry in government. What does good look like here? What are the institutions you would have loved to have had that were building that commercial understanding and institutional muscle for whenever we have to do this the next time, so it’s not from such a dead start?

Bruce Andrews: First of all, I don’t think the answer is just taking a chainsaw and eliminating agencies, but I do think having some flexibility to reorganize government for the 21st century and for the digital world would help. We still have a very 20th-century analog model that was built mostly post-World War II and over the second half of the 20th century for a very different world.

If I were king for the day, I would start by reorganizing the government to be much more focused and move some things around so that they made more sense. President Obama tried to do that or talked about doing that with government reorganization.

The Commerce Department is a perfect example. I would meet with counterparts from METI in Japan, or Ministry of Commerce in China, or the European Union. Counterparts would have a much clearer set of mandates and authorities and a clearer set of responsibilities, and would have basically all of the business-related functions within the country within one agency. Organizing government in the right way is important, but I don’t know if that’s going to happen anytime soon.

Jordan Schneider: No, let’s stay here. Let’s do a little more fan fiction. What are you pulling in and putting out?

Bruce Andrews: If it were up to me, I would pull all business-related economic development and competitive stuff into the department. I actually would rename it the Department of Competitiveness. I would focus on the economic tools, the commerce tools, the trade tools, the industry tools and give the authority for real industrial policy to work with public-private partnerships with the business community to make sure that we’re making these smart investments in R&D and building the future.

Second, I would set up a set of programs that help the Commerce Department, or hopefully the new Department of Competitiveness, have a set of tools that it can use to support industry. China, Japan, Korea, and Taiwan have all for the last 30 years had very focused policies, and they’ve been successful at encouraging certain industries.

We can criticize some of the competitive practices the Chinese used, but they put in a Made in China 2025 plan and set out key industries that they wanted to successfully dominate. If you look at those industries that they identified, they’ve actually done pretty well.

You need the magic of the private sector. A huge advantage that the United States has is our robust private sector. But you also need public-private partnerships in order for that leadership to take place. The world is too complicated right now for companies to just go at it alone.

When I was at Intel, I would always say, “We’re not just competing with companies, we’re competing with countries.” That’s the case — many US companies are going at it alone, competing not just against their foreign competitors, but the tools and resources of their foreign competitors’ governments as well. We don’t want to recreate that. We don’t want to copy, but we need to establish our own model that works.

Secretary Lutnick has proposed what I would call “SelectUSA on steroids.” During the Obama administration, we created the SelectUSA office to attract foreign investment. To Secretary Lutnick’s credit, I think he’s identified that there are investments and then there are what I would call the mega investments.

Having an office within the Department of Competitiveness that would help facilitate both US companies and foreign companies making those investments in the United States would be fantastic. Giving the US Government some more flexible tools to help incentivize those investments and to help those investments be successful is important for us to be competitive.

For 30 years, there were reasons why globalization was a good economic theory, and there was a lot that was good for consumers and a lot of other things. But we also live in a very different world now. We need to have a structure and tools that allow the US Government to be competitive and the US to be competitive in this very different world.

Jordan Schneider: Not to be your assignment editor, but I think this should be your first CSIS piece — what authorities you want to be here. It’s a fun future-casting exercise where you don’t really have to engage with the present messiness. But can we do one more pass on this? What do you give up? The Commerce is already a giant mess. What do you slough off it? I guess there are three buckets — what do you slough off, what do you take from other agencies, and aside from SelectUSA, what’s on your wish list for new authorities and power?

Bruce Andrews: First of all, I would point out that the Commerce Department is perfect. I would probably change nothing. But if I had to change something — Obama made a proposal, for example, to move NOAA (National Oceanic and Atmospheric Administration). I could argue that that’s important to business and that things like the National Weather Service and others actually are key facilitators of public goods that help business.

There was talk of moving the Small Business Administration into the Department of Commerce. It doesn’t necessarily make sense that we have SBA, we have SBIR programs around the government, we have Economic Development Administration in Commerce, and that we have the Minority Business Development Administration.

1. I would consolidate all of these different economic and small business minority business programs into one part of the Department of Competitiveness for it to be successful.

2. I would also take all the technology agencies around the government. We have NTIA, we have NIST, we have various technology programs, rural broadband at the Department of Agriculture. We have all these different programs around different agencies. I would consolidate them together and say the Department of Competitiveness has an economic development piece, it has a technology piece, and it has an international trade piece.

One of the things that was very controversial, and I could argue this both ways, is moving USTR within the Department of Commerce and having the International Trade Administration and the US Trade Representative’s Office be one super trade organization.

Government statistics — why are the Bureau of Labor Statistics, the Bureau of Economic Analysis, and the Census all separate organizations throughout the government? Take all government statistics and put them in one place.

I think there are a bunch of things that you could do to rationalize all this and to help the US really be supercharged and competitive. Frankly, one of the reasons that Obama ran into trying to get this consolidation authority was Congress didn’t want to give up the various committee jurisdictions. When I was at the Commerce Department, we had, I think, eight full committees and 79 subcommittees that had jurisdiction over the Department of Commerce. That doesn’t really make a whole lot of sense.

Jordan Schneider: Within this context, let’s do a little history lesson on how CHIPS and Science came to be.

Bruce Andrews: The interesting thing — you mentioned something that’s really important, in 2015, there were only two people within the US government who were experts on semiconductors. I learned that in November of 2015, when I spoke as the Deputy Secretary of the Commerce Department to the Semiconductor Industry Association.

Interestingly, at that time, the SIA (Semiconductor Industry Association) CEOs, who previously had all been very confident of “government stay out of our way, we don’t need your help, we’ve got this, we’re 10 years ahead of China, we don’t really need government assistance” — when I spoke to them in November of 2015, I saw what I would almost describe as a sense of fear in their eyes about the Made in China 2025 program and what was called “The Big Fund,” the $250 billion fund that the Chinese government had set up to help facilitate their semiconductor industry.

I took that back and sat down with my then-boss, Secretary Penny Pritzker. Penny and I said, “Let’s put a plan together to help the US Semiconductor industry. What would that look like to help the US semiconductor industry compete with Made in China 2025?”

What’s funny is I called the Assistant Secretary of the International Trade Administration for Industry and Analysis. I said, “Okay, we need to put together a semiconductor plan.” He said, “Okay, I’ll bring my one guy up and let’s talk about it.” We only had one guy doing this. Now, the good news is there’s a guy named Travis Mosier who is super talented, super smart, and knew these issues quite well.

We put together a plan, a playbook, and we said, “Okay, what can the US Government do?” Interestingly, we initially got some pushback because people said to us, “Why are semiconductors special?” Secondly, we got some pushback because people said, “Well, if we help the semiconductor industry, won’t other industries be unhappy and feel like we should help them too?” My response was, “Well, yes, but that doesn’t make it any less important.”

We spent several months working with the White House team and the interagency team. Interestingly, Paul Selva, who was the Vice Chair of the Joint Chiefs of Staff, was also really interested in microelectronics. Paul and I got together and pushed through the NSC process a plan to start having much more focus and attention on semiconductors.

We had none of the tools. Those came later. Eventually, Penny Pritzker gave a big speech that really helped define the challenge. We had a PCAST report, which is the President’s Committee of Advisors on Science and Technology, which for the first time made a series of recommendations. That was right at the end of Obama, but it then carried into the Trump administration, and all of that attention and focus eventually became the CHIPS and Science Act.

It shows two things. One is you need to identify a problem and start talking about the solutions to those problems. Two, you need focused energy and intensity because nothing happens fast, either in the federal government or in Congress. Even though it took several years for all of this stuff to come together, we were successful at both putting focus on the attention, setting a set of tools, and then enacting a program that represents by far and away the biggest piece of industrial policy we’ve seen, at least in the last 50 years.

The Policymaking Ecosystem

Jordan Schneider: Let’s continue the story from the perspective of an Intel executive. What is Government Affairs? And maybe using this story as a case study, what can and can’t — or what is easy and what is hard — for industry to do to make things happen in the legislative and executive branch?

Bruce Andrews: Government affairs is really about education. It is bringing information to government policymakers to help understand the challenges that the private sector is facing and then also help to start having a discussion about what the solutions look like.

The irony of the CHIPS Act is that it was actually not started by Intel, although Intel will be the biggest beneficiary. Where it started was actually Mike Pompeo trying to recruit TSMC to come to Arizona. What TSMC said to Pompeo was, “We have a huge cost gap. We get incentives in Taiwan to build. We need something in the United States."

Ironically, when I was Deputy Secretary of the Commerce Department, I met with Terry Gou, the chairman and CEO of Foxconn, who basically said to me, “I want to build in the United States, but you need to give me big federal incentives.” I said, “Well, here’s the problem. We don’t have federal incentive programs in the United States. It doesn’t work the same way it does in China and Taiwan.” Terry eventually did start that project, but it ended up not working.

People were starting to realize that if we wanted to bring manufacturing back — and I give Secretary Pompeo a lot of credit because I think he recognized that was the way to get TSMC back. Interestingly, when Pat Gelsinger came in as the Intel CEO, he recognized that Intel needed to become a contract manufacturer for other companies. Foundry would provide more competition to TSMC and Samsung. The CHIPS and Science Act allowed Intel to do the construction in the United States. It allowed Intel to really make a fundamental change to its business model, moving manufacturing or building manufacturing in the United States.

It’s often forgotten that the CHIPS Act started in the Trump administration. It didn’t get passed, but when Biden came in, it got passed quite quickly. That set off the debate for funding the CHIPS and Science Act, which was eventually passed in July of 2022.

Jordan Schneider: Coming back again to — what does education mean? How does one educate? Is it easier or harder today versus back in the day where you have more or less sophisticated staffers and all the stuff we were talking about?

Bruce Andrews: In the same way that you did not have expertise within the Commerce Department, I’m not sure there was a single person who had any level of expertise on semiconductors in the Congress. Someone’s probably going to call me and say, “Hey, I was that person. You’re wrong.” But let’s just say for the purposes of argument, there really was not a deep level of expertise.

The good thing about a company like Intel is it’s got a huge number of very smart experts who are thinking about understanding the global industry. Being able to present a picture through data — and I will say the Semiconductor Industry Association is actually really good at providing data and information that gives a very full and complete picture to help educate lawmakers.

Generally you’ve got to assume lawmakers start at a relatively low level of understanding just because they’re not experts. You do get some members who come in as experts or you get a guy like Todd Young who really learns about the semiconductor industry and has a state like Indiana and a university like Purdue that want to focus on how to be effective and successful in the semiconductor space. You generally start with not a huge amount of information, but you start with an interest.

I give Doris Matsui and Mike McCall credit in the House. As I mentioned, you had Young, Cornyn, and Schumer in the Senate who said, “This is really important.” They then turned to industry and said, “Help educate us on two things. First, what is the status of the global industry? What’s the problem we want to solve? Second, what tools do you need to help us?”

In the case of the CHIPS Act, it was identifying that there was a 30-55% cost gap between manufacturing in the United States and manufacturing in Asia. The CHIPS Act — including the grants, but also the 25% investment tax credit — was all about filling that gap and helping US manufacturing to be competitive. That’s not necessarily something that members of Congress or the people in the administration would totally understand well on their own. That’s where private sector actors can come in and help educate them as to what those tools would look like to be the most successful.

Jordan Schneider: That is a nice story. Perhaps your average American — or maybe your average independent tech policy podcaster — would see this and see something wrong here. The fact that the US government had one guy, the fact that Congress, the executive branch had one guy, the fact that Congress had no one, and that there were not think tanks — we can debate how independent they are from corporate money — academics, we can also debate how they are from corporate money, particularly when you’re talking about these high technology industries where there’s a lot of university to industry connection.

As a big fan of the CHIPS Act, it was kind of concerning to me seeing that every voice in this debate was funded or connected to industry. If we end up doing more and more industrial policy, it would be nice to have voices whose paychecks are not necessarily connected to these outcomes to also be able to inform legislators.

Bruce Andrews: I would say two things to that. The American people had a real crash course in the importance of the semiconductor industry during COVID when they couldn’t buy products because there was not an availability of semiconductors because they were all being sourced out of Asia.

I hear you, and obviously this is why I think bipartisanship is so important. You bring members from both sides who have different constituencies, but they come to the table and they say, “Let’s get the best policy we can and reflect a lot of views.”

The semiconductor industry has never been a particularly big or politically active industry. They don’t have big PACs. It’s not like a lot of industries where there’s a huge amount of money flowing through. It’s actually been relatively unsophisticated in Washington.

That’s where the identification of the problem was so important. I think there were two voices that were critical. One was actual consumers. I’ll never forget when we went to meet with a very senior senator, and he told us that he had autos sitting on lots in his state waiting for semiconductors to be put in so that they could go out to dealers. One senator told us he actually bought a Ford F150, but it didn’t have the heated seat yet because the chip that would heat his seat was not available. This is a guy who lived in a really northern state that was super cold. I felt bad for him.

The second piece of this is the voice of the national security community. What also makes semiconductors kind of unique is the national security implications. As I mentioned, Paul Selva, the Vice Chair of the Joint Chiefs, was very focused on microelectronics and having a trustworthy supply of microelectronics in the United States.

You saw a lot of leading members of the national security community and the committees in Congress. Mark Warner is a great example — both a tech guy and a national security leader, as the chair of the Senate Intelligence Committee — is one of the most vocal voices for the CHIPS Act. Not because Virginia is a big semiconductor manufacturing state, although I think Mark would like that. It was more out of a recognition that this is a huge national security imperative that he was very supportive of.

There’s no doubt that there’s lots of stuff where there needs to be public scrutiny, there needs to be public debate. You need to hear all kinds of voices to make sure that special interests don’t just take advantage of a process. But I think in this case there were two pieces. One was the passage of the congressional legislation, and then the second was the implementation by the CHIPS Program Office to try to make sure that this was done in the way that was most focused on the national interest.

Jordan Schneider: Do you have any thoughts about think tanks as institutions and what they can and can’t do and what their purpose is?

Bruce Andrews: I think think tanks are actually very important. I should have mentioned them earlier. My experience with think tanks is, yes, they need money to run and some do take corporate and other types of money. It’s not just corporate — there’s all kinds of money that help fund think tanks. But in my experience, people tend to be very independent because their reputation is on the line. They’re very focused on doing the highest quality work.

Think tanks are really important because they do provide an independent perspective and sometimes an independent validation. Sometimes they can do studies that a company can’t do. I’ll give you an example. I just saw this morning that the Rhodium Group came out with a study about the China Made in 2025 plan’s effectiveness. That’s not something that a single company could do.

There are a lot of good think tanks with a lot of really smart, thoughtful people who are adding to the debate.

When I was a policymaker, both in Congress at the Senate Commerce Committee as a very senior staffer and general counsel, but also as the Deputy Secretary of the Commerce Department, everybody who came in had their self-interest. Part of my job was to get enough voices to make sure that someone’s self-interest was validated, to try to incorporate other perspectives.

My rule when I was in government was always I would meet with anybody and listen to you. I might tell you no and I might tell you that I think you’re completely wrong. But that’s okay. That’s actually how the system works. It should be a dialogue and it should be a back-and-forth. It should be a really robust public debate and we should have hearings in Congress and we should have lots of different perspectives aired. And then you’ve got people who in the end are going to have to make decisions, but at least you’ve had a broad set of opinions and views and data put on the table.

Policymakers have to be able to sort through all that. That’s one of the reasons both policymakers having expertise, but also having staff with expertise, helps to sort through this massive amount of information that comes in. I’ve many times seen think tank reports that really help to shape legislation or help to shape either the identification of problems or identification of solutions and frankly sometimes bring bipartisanship — my three components for what you need to be successful. Think tanks play a very important part in that.

Jordan Schneider: You mentioned America or senators getting lessons in the semiconductor industry from cold butts. America’s also about to get a whole lot of lessons in trade policy thanks to what’s been happening over the past few months. What do you want to say about this stuff? We can do chip specific economy in general.

Bruce Andrews: No, I mean, look, this is obviously a very complicated topic. You know, I get that. What President Trump has said, I agree with him on two things. One is that we need to identify strategic sectors where we need to be investing as a country in manufacturing. I wouldn’t say that it’s everything because there are a lot of things that we just can’t do. But one level should be what can we do strategically, both out of our own economic interest, national security interest, and where we can be successful.

Second is how do we work with allies? When I was at the Commerce Department, there was a lot of discussion about NAFTA and Mexico because a good that was made in Mexico had 46% US content. A good that was made in China had 4% US content. Everybody realized — this light bulb went off to people with that data — basically saying, “Hey, for things that we can’t economically or cost effectively do in the United States, it’s actually in our interest to have them be done in Mexico or Canada.” You’ve seen a lot of work with various allies to try to have things manufactured in ways that are good for the United States.

Third is the availability for consumers. On one level, you’ve got to protect the workers. The story I told you earlier about when Penny Pritzker and I decided to make semiconductors a priority for the Department of Commerce, one of the reasons was I had met with the steel industry executives and the National Steel Workers union several days before. I literally said to Penny, “I don’t want to be in a position in 10 years,” and in meeting with the steel workers, I basically said, “Hey, look, we don’t have the tools to be able to be helpful to you. We want to help you, but the statutory tools and authorities we have will not allow us to be helpful to you here.”

Penny and I said, “Okay, let’s make sure that’s not the semiconductor industry in 10 years — the experience we’re having with the steel unions and the steel industry today.” I do think that’s important — identifying what is really in our core national interest, and what can we as a country be successful at.

Tariffing everything in sort of a broad way isn’t necessarily going to be effective. We’re already starting to see some of the economic effects of that. I’m hoping that the administration looks and says, “Okay, what are we trying to solve for here?” What are the authorities we have and how do we do it? Thus far it doesn’t feel like we have clarity on what problem we’re trying to solve or exactly what solutions we’re trying to enact to do that. I’m hoping that the administration, as they do these negotiations with other countries, will get more clarity on that. Otherwise, I do worry that this is going to be a trade war that isn’t successful for the United States, for American consumers, but also American companies.

I’ll give you an example. One of the things that really concerns me is if you are a US manufacturer, there are a lot of things that you have to import from overseas as inputs into machinery and all kinds of things. A great example is Intel and an Intel fab. There is a $450 million ASML EUV lithography machine. What happens if you put a 25% tariff on an EUV lithography machine coming from Europe? Intel has to buy with those tariffs, but their foreign competitors in Taiwan, Korea, China don’t. What happens fairly quickly is it makes US companies completely non-competitive as manufacturers.

If our goal is to be successful in manufacturing, which it should be — I think that’s actually really important — helping US manufacturers, then we need to be doing everything we can to help them be successful, not tariffing intermediate goods in a way that actually harms the competitiveness of US manufacturers.

Jordan Schneider: Anything else you want to say about the future of Intel? Your well wishes for the new squad over there?

Bruce Andrews: Intel is a very important company to the United States, and it was one of the reasons I went there when Pat Gelsinger laid out his vision for a third US competitor. TSMC is a remarkably impressive company. Samsung’s a great company as well, but having a not over-consolidated industry and having manufacturing in the United States is really important. Intel is actually a very important company to this country. I spent a lot of time there because I believe in the mission and American manufacturing, but also the importance of having a leading advanced logic manufacturing company who does its R&D and whose primary operations are in the United States.

Jordan Schneider: Ben Thompson of Stratechery’s diagnosis of the challenge of the CHIPS Act was that it focused too far on the supply side and not enough on the demand side. His vision of what Intel is going to need to succeed on the foundry side at least is designated customers. On one hand, Qualcomm, Nvidia, Apple — they’re not excited to live under a monopoly decade going forward where the only people who can supply them are TSMC. But it is hard to be the first mover to go in with Intel and work with them to get all the tooling right and be that sort of guinea pig when on the other hand, you have someone who can charge you a huge markup, but you know they’re going to deliver.

His vision is that you solve the collective action problem with the government stepping in and banging heads and forcing everyone to go in on Intel. That seems like a high degree of difficulty to put on Howard Lutnick. How would you work on the demand side from a policy perspective to give Intel Foundry a boost?

Bruce Andrews: I tend to be a carrot guy, not a stick guy. The stick can work in certain cases, but you’re better off having the carrots. One example is that a number of companies on the fabless side have talked about having a design tax credit for American fabless companies. During the CHIPS Act, they lobbied, but Congress did not add an investment design tax credit for the fabless industry.

I could see, and I know there are policymakers who would say, let’s give them a design tax credit, but let’s do it if they manufacture in the United States, because what we don’t want to do is give them a design tax credit to then go and manufacture in Korea or Taiwan or China. That’s one possibility.

There’s going to be a set of discussions because we have identified this as a national priority. Trying to find some tailored solutions is important — Intel’s got to do its piece to be competitive. On the other side, having some carrots to encourage companies to embrace manufacturing here in the United States would actually be a really good thing.

Jordan Schneider: Earlier you mentioned as Deputy Secretary of Commerce and in the Senate as well, you meet with everyone. I’m curious, thinking back to that, before you spent the past few years in the semiconductor industry, were there other industries where you’re just like, “Oh, man, these guys really get it. They’re super sharp?”

Bruce Andrews: It’s a really good question. The short answer is yes. There are a lot of really smart and talented companies out there. I was constantly surprised by the quality, and I think the tech space is one. There are a whole bunch of areas where you have really sharp, really talented leaders in those companies.

Tech was definitely one because tech, particularly since the late 90s, has attracted a lot of great talent. The people running these companies are actually very smart, talented people. When I meet them I go, “Wow, they are really smart.”

Every once in a while I would meet with people and I’d think, “God, your arguments suck. I could help you write your talking points better than you have written them.” But for the most part, I found most companies, particularly in areas that tended to be both technical but very competitive industries — I actually found people to be quite smart and impressive most of the time.

Jordan Schneider: There’s a story that Nvidia had like two government affairs officials before October 7, 2022. You were talking earlier about how the semiconductor industry was quite hands-off for a while. But even Robert Noyce in the 80s was like, “We’re going to do Sematech.” It’s this weird ebb and flow of caring about Washington, not caring about Washington, really realizing you have to care about Washington again. Is it a California thing? At what point, maybe for semiconductors and industries broadly, does the light bulb turn on that this place is really important to us and we’ve got to get serious about it?

Intel’s Andrew Grove, Robert Noyce, and Gordon Moore in 1978. Source.

Bruce Andrews: I think it’s been an evolution over the course, but particularly it’s accelerated in recent years. For manufacturing companies, they tend to get it more because they actually had physical locations. For a company like Intel or Global Foundries or Texas Instruments, you understand the importance of interrelationship with the government.

Nvidia is a good example where they didn’t have a PAC, they didn’t have any lobby, they didn’t have anybody registered to lobby probably until 2022. When I first met them when I was at SoftBank, they said, “Oh yeah, we have nobody registered to lobby in Washington. We don’t do lobbying.”

A couple things have happened. One is the world has become much more complicated. The geopolitics are driving a lot of the technology policies. Second is things like export controls which directly impact companies.

There has always been, particularly in Silicon Valley, but in a lot of other industries, a deep libertarian streak where it’s like, “Hey, we don’t need help from government. Leave us alone, we’ll compete, we’ll be successful, we can do this, we don’t need you.”

Other industries— pharmaceuticals is a good example where government health policies have always been very directly related because you have Medicare and Medicaid funding, or the auto industry where government policies on CAFE standards matter.

The semiconductor industry had not been particularly heavily regulated, particularly true on the fabless side — the companies that just did design but didn’t do their own manufacturing. The world has changed, and as the world changed, people realized, “Wow, we really have to engage here and we have to be in the game.”

That is not unusual of many other industries. The libertarian ‘leave us alone’ streak in Silicon Valley really tended to be much deeper than a lot of other places.

Jordan Schneider: Yeah, I think Trump trade policy is going to put that to bed for literally every industry probably.

Bruce Andrews: It has been a wake up call to a lot of companies, for sure.

Jordan Schneider: I’m curious for your reflections from a sort of GR corporate messaging perspective on how you bend to the prevailing winds in Washington. There have been a lot of examples, I think, over the first few months of the Trump administration, which almost show the extreme of this, with corporations really bending over backwards to kind of use the language and rhetoric of the Trump administration. But this is something that happens all the time. I’m curious, to what extent you see this as a disjuncture versus just kind of par for the course of trying to ingratiate yourself with the party in power.

Bruce Andrews: Look, I would say it’s a little of each. Historically, all players — it’s not just companies and corporate CEOs and lobbyists or whoever — have always tailored their message to how they think it will be best received by policymakers in power. I do think starting in 2017, but accelerating, China has become a much more used argument for almost every regulatory policy or whatever. When you see Meta saying ‘Oh, we need to not be regulated as much because we need to compete with China’, you realize that’s something probably because it actually appeals to policymakers. The speakers are always going to tailor their message to what they think is going to be most effective with the audiences. That’s one piece.

President Trump is very assertive. Companies have approached the administration carefully, wanting to get on their good side and understanding what those things are that President Trump sees as part of his priorities and his legacy. You have seen companies tailor their messaging as they have for pretty much every other administration. But they have definitely tailored that messaging as part of dealing with the administration.

Jordan Schneider: Can we reflect back a little bit on the PAT era? Because it was sort of remarkable, right, where he wouldn’t say China, he would say American national competitiveness or what have you. But then I remember he still had to go to China every once in a while because it was such an important market for Intel to sell into. Reflecting back as you guys were sort of managing that and then managing annoying podcasters like me whining that Intel is investing in Chinese chip design companies or whatever— how do you think through that calculus as you’re trying to maintain market access to a country that the US is not super happy you get so much revenue from?

Bruce Andrews: Well, I mean, I guess I would say two things. One is you’ve got to look at facts. For everybody in the semiconductor industry, and Intel is probably in the pack sort of average, but there are definitely companies that have a much higher amount of their revenue come from China. For American semiconductor companies to remain not just competitive, but to remain as leaders, the Chinese market is quite important because about anywhere from 30 to 40% of the market is in China.

That’s changing a little bit now that Apple’s moving phones out and Dell and HP are moving laptop production out. You’re seeing changes in the footprint, but you’re still going to see China be a very significant market for all these companies. The companies have a balance, right? Because on one hand, in order to continue investing in R&D and investing in factories and other things in the United States, you can’t drop your revenue 30%. If you lose 30% of your revenue, you’re dead. If you lose 30% of your revenue, you stop being competitive.

The question is how to find a balance which is to remain competitive and be successful while also respecting US national security concerns, which is a lot of what has driven the government to make policies that tend to reduce companies’ access to the Chinese market.

What’s interesting about this is each company has its own profile. They have to make a decision — how important is access to the Chinese market? What percentage of the revenues and then how are those revenues spent? What does it mean to their long-term and future competitiveness? It’s a very challenging calculation for any company to make.

For companies that want or need to be successful in the Chinese market to remain competitive, it is definitely a delicate process. How do you maintain that? I do think you see a lot of companies trying to do that because they recognize the importance of the Chinese market.

I don’t know if you’ve read Eric Schmidt’s piece in the New York Times, but there are a lot of very successful Chinese companies. Sometimes, if you go too far on export controls, what you actually end up doing is accelerating indigenous innovation in China. There are plenty of Chinese companies that would much rather buy, for example, Nvidia chips. But then you’ve got people in the United States government who are saying there are national security concerns.

It’s finding that balance and recognizing that there are really two pieces to this. One — how do we help American companies run faster to remain competitive and successful? Two, how do we balance the national security concerns?

Jake Sullivan called it the small yard and high fence. People in the industry always said, “Sure, but just keep the yard small and the fence low.” That is a constant balance. Industry is always going to prioritize self-interest, and they’ve got a fiduciary duty to their shareholders to try to maximize revenue. US government officials — there are plenty of people who’d say, “Oh, let’s just not sell anything to China,” which I don’t think is realistic because it will both undermine the long-term competitiveness of US companies, but also undermine the short-term competitiveness because of massive revenue loss where there’s not really a clear national security interest.

Jordan Schneider: I think that might be a nice place to end it. Bruce, thank you so much for being a part of ChinaTalk and looking forward to having you back once you’ve fleshed out your Department of Competitiveness.

Bruce Andrews: I’m excited for that. The Department of Competitiveness is actually very important — something that I used to spend a lot of time thinking about, I have thought less about. But it’s one of the things that has really struck me in reading about Ezra Klein’s new book, Abundance, is the need for having a government that works well. We are not organized for how the world exists today. We’re organized for how it used to exist.

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