Recommendation

Congress should establish an advanced manufacturing scale-up capital program.

Details

Hardware invented in the United States is scaled up here only infrequently because the financial system does not support it. U.S. venture capitalists prefer “capital-lite” firms, particularly in software and media, that scale at almost zero marginal cost, rather than capital-intensive businesses that need to build factories. As a result, many hardware technologies are “orphaned” in the United States and must therefore “grow up” abroad. To address this gap and compete more effectively with Chinese and other state-sponsored scale-up financial support programs, Congress should either create a modern-day Reconstruction Finance Corporation (RFC) or expand the mission of the Development Finance Corporation (DFC) to reduce scale-up risk in designated critical industries. Either way, the organization could provide project finance and associated assistance through grants, loans, loan guarantees, and other instruments. Doing so would use a one-time appropriation from Congress to finance investments in high-tech manufacturing. In addition, EXIM and the DFC should be tasked to provide guarantees and other financial assistance to leverage hardware companies that receive support to scale up globally.

Keep reading:

▪ Robert D. Atkinson et al., “A Techno-Economic Agenda for the Next Administration” (ITIF, June 2024), https://itif.org/publications/2024/06/10/a-techno-economic-agenda-for-the-next-administration/.