The U.S. Department of Defense is using some funding granted under the CHIPS Act of 2022 to help boost 33 projects collected under the umbrella of the Microelectronics (ME) Commons. Focused on innovation, the ME Commons links eight regional tech hubs that unite the efforts of universities, nonprofits, and private firms. Hubs are not just researchers; they have manufacturing capabilities as well. Ultimately, the goal is to ensure the U.S. can domestically produce high-tech necessities, especially advanced microchips. These microchips are the base components for other technologies, such as artificial intelligence (AI).
Last week, the DoD announced it was granting $269 million in awards for many separate projects that could help the United States develop more advanced weapons systems. With current wars in the Middle East and eastern Europe, and a looming potential war between China and Taiwan, American weapons systems are in high demand among our regional allies. The Biden administration also posits that worker skills developed to create advanced weapons systems will be transferable to civilian projects, benefiting the tech sector in general.
Multiple Small Projects Considered Incubator of Innovation
The $269 million funding is split among multiple areas of innovation, including quantum computing, microchips, wireless communications, artificial intelligence, and others. By making many small grants, the government hopes to incubate innovation by helping with start-up costs rather than funding the entire project. One stated goal is to lower barriers to entry to help ambitious start-ups enter the high-tech market and compete.
Universities and nonprofits that are part of the ME Commons are supposed to provide neutral grounds for firms to conduct research, preventing established firms from locking new rivals out of the market. They also help facilitate collaborations between private firms working on complementary technologies or products. Members of the ME Commons can network with other firms, helping spur innovation through collaboration with less use of government subsidies or tax credits. Ultimately, this helps maximize taxpayer dollar value.
Smaller Grants Allow Market Forces to Bolster Competition
Unlike more comprehensive government funding, smaller grants to create public-private partnerships like the ME Commons allow market forces to ensure efficiency through competition. Firms still have to be productive to remain in business; the grants are not sufficient to “float” unproductive companies. The individual DoD awards and the networking and research benefits of the ME Commons can provide a critical mass of support to get a start-up off the ground and profitable, but firms that are inefficient will likely be forced to exit the market in the long run.
By spreading smaller grants to a larger number of start-ups, the government has a better chance of creating partnerships with more productive firms that can be profitable on their own accord instead of permanently subsidizing firms that do not create competitive products. Hopefully, this year’s round of funding will produce some tech start-ups that will bolster our national defense today and contribute to our nation’s tech industry tomorrow. And, by spreading the funding across the country, new tech jobs are being created in areas that need them and not simply in existing hubs like Silicon Valley, Austin, and the D.C. area.
