Dusty Old Industrial Policy Gets Dusted Off*

As Congress barrels toward an election that could see at least one house change hands, efforts to squeeze big bills into law are mounting. The one with the best chance (and better than I expected) would drop $52 billion in cash and a boatload of tax breaks on the semiconductor industry. Michael Ellis points out that this is industrial policy without apology, and a throwback to the 1980s, when the government organized SEMATECH, a name derived from “Semiconductor Manufacturing Technology” to shore up U.S. chipmaking. Thanks to a bipartisan consensus on the need to fight a Chinese challenge, and a trimming of provisions that tried to hitch a ride on the bill, there now looks to be a clear path to enactment for this bill. 

And if there were doubt about how serious the Chinese challenge in chips will be, an under-covered story revealed that China’s chipmaking champion, SMIC, has been making 7-nanometer chips for months without an announcement. That’s a diameter that Intel and GlobalFoundries, the main U.S. producers, have yet to reach in commercial production. 

The national security implications are plain. If commercial products from China are cheap enough to sweep the market, even security-minded agencies will be forced to buy them, as it turns out the FBI and Department of Homeland Security have both been doing with Chinese drones. Nick Weaver points to his Lawfare piece showing just how cheaply the United States (and Ukraine) could be making drones.

Responding to the growing political concern about Chinese products, TikTok’s owner ByteDance, has increased its U.S. lobbying spending to more than $8 million a year, Christina Ayiotis tells us—about what Google spends on lobbying. 

In the same vein, Nick and Michael question why the government hasn’t come up with the extra $3 billion to fund “rip and replace” for Chinese telecom gear. That effort will certainly get a boost from reports that Chinese telecom sales were offered on especially favorable terms to carriers who service America’s nuclear missile locations. I offer an answer: The Obama administration actually paid these same rural carriers to install Chinese equipment as part of the 2009 stimulus law. I cannot help thinking that the rural carriers ought to bear some of the cost of their imprudent investments and not ask U.S. taxpayers to pay them both for installing and ripping out the same gear.

In news not tied to China, Nick tells us about the House Energy and Commerce Committee’s serious progress on a compromise federal data privacy bill. It is still a doomed bill, given resistance from Dems and GOP in the Senate. I argue that that’s a good thing, given the effort to impose “disparate impact” quotas for race, color, religion, national origin, sex, and disability on every algorithm that processes even a little personal data. This is a transformative social engineering project that just one section (208) of  the “privacy” bill will impose without any serious debate. 

Christina grades Russian information warfare based on its latest exploit: hacking a Ukrainian radio broadcaster to spread fake news about Ukrainian President Volodymyr Zelenskyy’s health.  As a hack, it gets a passing grade, but as a believable bit of information warfare, it is a bust. 

Tina, Michael and I evaluate YouTube’s new policy on removing “misinformation” related to abortion, and the risk that this policy, like so many Silicon Valley speech suppression schemes, will start out sounding plausible and end in political correctness.  

Nick and I celebrate the Department of Justice's increasing success in sometimes seizing cryptocurrency from hackers and ransomware gangs. It may just be Darwin at work, but it’s nice to see.

Nick offers the recommended long read of the week—Brian Krebs’s takedown of the VPN malware supplier, 911.

And in updates and quick hits: 

• That Twitter worker arrested for spying on behalf of Saudi Arabia is going to trial.
• the United Kingdom’s Government Communications Headquarters’s cryptoskeptics have returned to ask how we can square end-to-end encryption with child safety. I think the answer is “Not well.”
• The General Data Protection Regulation has consequences: Turns out that schoolkids in Denmark won’t be able to use Chromebooks or Google Workspace.
• And Nick takes a moment to dunk on the Three Arrows founders, whose cryptocurrency company went under in the bust and who are now giving interviews from an undisclosed location.

*An obscure Rhode Island tribute to the Industrial Trust Building that was known to a generation of children as the ‘Dusty Old Trust” building until a new generation christened it the “Superman Building.”