Throwing Spaghetti at the Wall Costing Americans
Recent Decisions and Lack of Planning by US Government Leaders is Putting the Country’s Economy and National Security at Greater Risk
By Willie J. Costa & Vinh Q. Vuong
The recent government order forcing Nvidia to halt exports of certain chips to China comes at the worst possible time, when the American economy is already teetering on the verge of a serious collapse and pipe dreams of a “soft landing” from inflation have become all but delusional fever dreams. Worse, this order ignores the economic realities that will be inflicted upon chipmakers as well as the harsh geopolitical actions at play.
Nvidia alone faces the threat of $400 million of business vanishing; to put this into perspective, this amount is about half of what the company invested last year into the purchase of intangibles (in the tech world, this usually translates as “intellectual property and brainpower that will provide a competitive advantage”) as well as property, plant, and equipment. The astute will recognize that in an industry which lives and dies on innovation and cutting-edge capabilities, this magnitude of a loss will severely hinder the company's ability to compete against the very adversaries upon whom we already rely for several tech products – the very reliance that the CHIPS and Science Act ostensibly aims to curtail. No matter the billions promised by the Biden administration, the economic benefits feebly dripped out by the government over years will not repair the damage the government has decided to cause with such unfortunate immediacy.
Yes, we must protect our national security. To suggest otherwise is nothing short of treason, full stop. The fears that US products would be either directly applied to military efforts and/or reverse-engineered by the Chinese are completely valid; unfortunately, worrying about these fears is also completely pointless: there is no such thing as technology in China that is not subverted to the will of the state, nor is there any line that Beijing will not cross to maintain an edge, even if it means using an app that accounts for 20% of all internet users to steal personal data. In China’s eyes, “The Rules” are only applicable to others. Ignoring this reality is nothing short of democratic heresy.
China has no qualms engaging in actions that we as Americans would find reprehensible, if not illegal. The alleged heist of US technology to support the Made in China 2025 initiative, as well as more recent industrial espionage, are simply the most recent reminders of this fact. "Made in China, stolen from everywhere" is a punchline that spans decades of the communists "paying homage" to the hard-fought technological victories enabled by more honest economies. China is also notorious for flowing around legislative hurdles like water flows around rocks, suggesting that current regulatory guardrails will be found wholly insufficient in the near future. This is not a cherished opinion in the modern, more sensitive era, but objective truth transcends personal taste. Meanwhile the White House seeks to employ hawkish policies with dovish resolve.
The one difference between previous efforts to curtail sales of chip manufacturing equipment to China and the Nvidia order is akin to the difference between a scalpel and a chainsaw: when dealing with the Dutch and the Japanese, in an attempt to prevent the sale of vital chipmaking equipment to China, the US government had the decency to ask; when dealing with Nvidia, the government decided to flirt with what amounts to the start of a command economy in all but name, albeit without acknowledging the consequences of its actions. This lack of foresight was only highlighted by the US government scaling back some aspects of the ban, albeit after the sudden announcement had already stunned the markets and sent Nvidia stock tumbling – whipsawing corporate stability and strategy in service of poorly-conceived and horribly-executed political initiatives the price that lately the government seems all too willing to pay.
Leadership requires three things:
1. The will to act, without which government is a rudderless sloop adrift on the seas.
2. The will to accept consequences, without which we as a country are no better than the communists we outlasted.
3. The appropriate sense of timing, without which even a masterpiece of legislation will be mutated into a hellscape of economic misery.
No rational person would expect an investment effort as complex and massive as the CHIPS Act to immediately go into effect, but few rational people would support kneecapping one of the country’s most important companies – that just so happens to make one of the cornerstones of our entire economy – when we’re still reeling from the supply chain shocks of 2020 while simultaneously teetering on the verge of an economic meltdown.
Should we decrease our reliance on foreign chipmakers? Absolutely.
Should we reduce the amount of incidental assistance that a hostile state can enjoy by simply buying and repurposing and/or re-engineering our technology? Of course – it would be dangerously naive to do otherwise.
Should we wantonly strike at a company that’s actively helping us accomplish these same goals while only offering the remedy of a government dole that will likely take years to fully execute? Sadly, the government believes the answer is “yes.”
Losing $400 million in business might not sound like a death knell for a company that closed out its previous year with $9.7 billion in net profit, but that attitude ignores the larger picture: Nvidia were not provided with an alternative market from which to instantly reclaim the $400 million in sales that the government caused the company to instantly lose. A $400 million loss is not a line item on an income statement: it represents a threat to the livelihoods of thousands of employees; the loss of tens of millions of dollars in revenue for vendors, subcontractors, and logistics providers; and the loss of trillions of dollars in global GDP, as Nvidia’s customers – which include some of the largest names in tech – stand by to suffer the effects as the fallout of the government’s order ebbs and flows throughout Nvidia’s operating budgets, R&D spend, capex schedules, and project investment decisions. It also creates a massive logistical imposition for the company to relocate its operations and personnel to continue development elsewhere thanks to the administration’s latest tantrum, forced upon Nvidia at the worst possible time economically (as we’re on the verge of recession) and with apparently little regard for how such disturbances affect the overall chips supply chain – a problem that remains unresolved, and from which will issue forth continued misery for hundreds of millions of Americans, as we wait for the machinery of legislation to slowly churn promises into results.
The lost $400 million must be recouped from somewhere. If it can’t come from laissez-faire, we must hope that it doesn’t instead come from taxpayers.
Our government’s continued lack of foresight, poor planning, shortsighted decisions, and one-ply like solutions are hurting every American’s pocketbook and our sense of security in this violate world.
The recent government order forcing Nvidia to halt exports of certain chips to China comes at the worst possible time, when the American economy is already teetering on the verge of a serious collapse and pipe dreams of a “soft landing” from inflation have become all but delusional fever dreams. Worse, this order ignores the economic realities that will be inflicted upon chipmakers as well as the harsh geopolitical actions at play.
Nvidia alone faces the threat of $400 million of business vanishing; to put this into perspective, this amount is about half of what the company invested last year into the purchase of intangibles (in the tech world, this usually translates as “intellectual property and brainpower that will provide a competitive advantage”) as well as property, plant, and equipment. The astute will recognize that in an industry which lives and dies on innovation and cutting-edge capabilities, this magnitude of a loss will severely hinder the company's ability to compete against the very adversaries upon whom we already rely for several tech products – the very reliance that the CHIPS and Science Act ostensibly aims to curtail. No matter the billions promised by the Biden administration, the economic benefits feebly dripped out by the government over years will not repair the damage the government has decided to cause with such unfortunate immediacy.
Yes, we must protect our national security. To suggest otherwise is nothing short of treason, full stop. The fears that US products would be either directly applied to military efforts and/or reverse-engineered by the Chinese are completely valid; unfortunately, worrying about these fears is also completely pointless: there is no such thing as technology in China that is not subverted to the will of the state, nor is there any line that Beijing will not cross to maintain an edge, even if it means using an app that accounts for 20% of all internet users to steal personal data. In China’s eyes, “The Rules” are only applicable to others. Ignoring this reality is nothing short of democratic heresy.
China has no qualms engaging in actions that we as Americans would find reprehensible, if not illegal. The alleged heist of US technology to support the Made in China 2025 initiative, as well as more recent industrial espionage, are simply the most recent reminders of this fact. "Made in China, stolen from everywhere" is a punchline that spans decades of the communists "paying homage" to the hard-fought technological victories enabled by more honest economies. China is also notorious for flowing around legislative hurdles like water flows around rocks, suggesting that current regulatory guardrails will be found wholly insufficient in the near future. This is not a cherished opinion in the modern, more sensitive era, but objective truth transcends personal taste. Meanwhile the White House seeks to employ hawkish policies with dovish resolve.
The one difference between previous efforts to curtail sales of chip manufacturing equipment to China and the Nvidia order is akin to the difference between a scalpel and a chainsaw: when dealing with the Dutch and the Japanese, in an attempt to prevent the sale of vital chipmaking equipment to China, the US government had the decency to ask; when dealing with Nvidia, the government decided to flirt with what amounts to the start of a command economy in all but name, albeit without acknowledging the consequences of its actions. This lack of foresight was only highlighted by the US government scaling back some aspects of the ban, albeit after the sudden announcement had already stunned the markets and sent Nvidia stock tumbling – whipsawing corporate stability and strategy in service of poorly-conceived and horribly-executed political initiatives the price that lately the government seems all too willing to pay.
Leadership requires three things:
1. The will to act, without which government is a rudderless sloop adrift on the seas.
2. The will to accept consequences, without which we as a country are no better than the communists we outlasted.
3. The appropriate sense of timing, without which even a masterpiece of legislation will be mutated into a hellscape of economic misery.
No rational person would expect an investment effort as complex and massive as the CHIPS Act to immediately go into effect, but few rational people would support kneecapping one of the country’s most important companies – that just so happens to make one of the cornerstones of our entire economy – when we’re still reeling from the supply chain shocks of 2020 while simultaneously teetering on the verge of an economic meltdown.
Should we decrease our reliance on foreign chipmakers? Absolutely.
Should we reduce the amount of incidental assistance that a hostile state can enjoy by simply buying and repurposing and/or re-engineering our technology? Of course – it would be dangerously naive to do otherwise.
Should we wantonly strike at a company that’s actively helping us accomplish these same goals while only offering the remedy of a government dole that will likely take years to fully execute? Sadly, the government believes the answer is “yes.”
Losing $400 million in business might not sound like a death knell for a company that closed out its previous year with $9.7 billion in net profit, but that attitude ignores the larger picture: Nvidia were not provided with an alternative market from which to instantly reclaim the $400 million in sales that the government caused the company to instantly lose. A $400 million loss is not a line item on an income statement: it represents a threat to the livelihoods of thousands of employees; the loss of tens of millions of dollars in revenue for vendors, subcontractors, and logistics providers; and the loss of trillions of dollars in global GDP, as Nvidia’s customers – which include some of the largest names in tech – stand by to suffer the effects as the fallout of the government’s order ebbs and flows throughout Nvidia’s operating budgets, R&D spend, capex schedules, and project investment decisions. It also creates a massive logistical imposition for the company to relocate its operations and personnel to continue development elsewhere thanks to the administration’s latest tantrum, forced upon Nvidia at the worst possible time economically (as we’re on the verge of recession) and with apparently little regard for how such disturbances affect the overall chips supply chain – a problem that remains unresolved, and from which will issue forth continued misery for hundreds of millions of Americans, as we wait for the machinery of legislation to slowly churn promises into results.
The lost $400 million must be recouped from somewhere. If it can’t come from laissez-faire, we must hope that it doesn’t instead come from taxpayers.
Our government’s continued lack of foresight, poor planning, shortsighted decisions, and one-ply like solutions are hurting every American’s pocketbook and our sense of security in this violate world.
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