skip to Main Content
CHIPS Act May Benefit Biden, But US Should Prioritize Tech Skills Over General Skilled Labor

CHIPS Act may benefit Biden, but US should prioritize tech skills over general skilled labor

CHIPS Act may benefit Biden, but US should prioritize tech skills over general skilled labor

As part of the CHIPS Act 2022, President Joe Biden has endeavored to advance initiatives aimed at reshoring semiconductor fabrication activities to the United States. This decision is rationalized by the anticipation of a growing demand for semiconductors, coupled with the observed decline in the United States’ share of production—from 37 percent in 1990 to 12 percent at present. Furthermore, with the majority of semiconductors originating from Asia, the United States has been exposed to risks associated with disruptions in the global supply chain, particularly during the Covid-19 period. Given that chip shortages have become a significant impediment, especially in the post-Covid period where demand has risen steeply, the U.S. is concerned that offshoring most of the production may work against its strategic interests. The presence of Taiwan and TSMC has long been a matter of concern for the United States. The leading country that has championed the virtue of markets and been highly critical of government support has now shown generosity through fiscal incentives, subsidies, and investment tax credits to encourage the reshoring of semiconductor fabs to the United States. Wasn’t it the same country that took India to the WTO when the latter insisted on domestic content requirements in the solar cells dispute? Didn’t the state in China play a role in promoting state-owned enterprises, a significant source of tension in its relationship with the same country? Homeland economics, as observed in a recent issue of The Economist, is back in action across countries. The days of neomercantilism are here again. Needless to say, President Biden’s initial efforts have successfully attracted investments in the semiconductor fab sector to various parts of the United States. The Taiwanese multinational, TSMC, has initiated one of the largest semiconductor fab investments ever in Phoenix, Arizona. Work is already underway, and Ohio is poised to receive its largest investment of $20 billion from Intel. Samsung, with its $26 billion investment in Texas, and Global Foundries, with $1 billion in New York, have all expressed their support for the Biden-Harris administration with these significant moves. From Ohio to Oklahoma, from New York to Texas, the tax credits and subsidies-based CHIPS Act has achieved its intended goals. Moreover, by addressing the concerns of the low-middle classes in the USA who felt neglected, it has also served as a significant political accommodation. That said, does this policy make sense? Given its advantage in highly skilled labor, it’s logical that U.S. firms like Intel and AMD have thrived by handling the fabless part of semiconductor production — designing the chip within the United States and offshoring the remaining production to low-cost destinations abroad. The question is, will the President’s move be sustainable? If the guiding factor is strategic threats associated with Taiwan, then why not consider relocating to another destination instead of reshoring? This is where the reported operations of TSMC, as covered by various news agencies, become crucial. It has been reported that the cost of fabrication in Arizona is at least 50 percent higher than in Taiwan. The shortage of essential skills has raised concerns, prompting the need to send engineers to Taiwan for skill acquisition. It’s possible that the government will maintain these policies until the next elections; afterward, there might be a return to fabless designs in the United States and fabs from Asia. To make matters worse, the government would likely avoid implementing a liberal H1B regime. This implies that most of these jobs would be taken by foreign workers. With a liberal H-1B policy, there might not be political benefits, but without it, labor costs are sure to rise. Notably, 60 percent of fresh STEM Ph.D. graduates in the United States are first-generation Indians or Chinese. If conditions become unfavorable, they might reluctantly return to their home countries and contribute to semiconductor fabs there. In trade literature, when wage costs increase, there is often a relocation of such activities to even lower-cost destinations, known as the flying geese effect. Interestingly, in this case, instead of flying to typical South Asian or African destinations, the “goose” is heading to a high-cost destination, enticed by a plethora of fiscal incentives provided by the leading country. Politically, the CHIPS Act would undoubtedly benefit the Democrats. However, in the choice between prioritizing tech skills over general skilled labor, shouldn’t the U.S. be concentrating on the former? Despite the ambitious goal set by the Chinese Communist Party for intelligent manufacturing, it stands a good chance of realization if these STEM Ph.D.s decide to return to […]

Click here to view original web page at CHIPS Act may benefit Biden, but US should prioritize tech skills over general skilled labor

Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

Leave a Reply

Back To Top