Chipmakers have plans for new US factories. But not enough workers to run them.
Intel, TSMC, and others have invested $231 billion alongside Biden's signature semiconductor law but face a headwind: "The workforce issues are real."
Chipmakers are rebuilding the US semiconductor industry with $231 billion in new investments spurred by the enactment of the landmark CHIPS and Science Act a year ago.
But even as Biden officials celebrate the anniversary of that legislation this week, there are mounting concerns about whether enough skilled workers will be there to run these factories once they are online.
Labor shortages have already affected the construction of one major project in Phoenix. Meanwhile, a possible national shortfall could also complicate efforts in the year ahead by Intel (INTC) in central Ohio, Micron (MU) in upstate New York, as well as other new projects from Texas to Utah.
The issue could prove a headwind for America's efforts to reverse a decades-long decline in semiconductor manufacturing and also complicate a key tenet of Biden's case for re-election.
"The workforce issues are real," said Jennifer Harris, a former White House special assistant who focused on China and the labor market at the National Security Council.
She said chipmakers and other companies building factories this year could be in for challenges in the years ahead when more dramatic policy solutions could become unavoidable. Many of the current efforts are "not making much of a dent in the overall problem of getting a skilled workforce on time and on budget.”
The stakes are high. The 2022 law was designed to help America compete with China to control the supply of these crucial components for modern life. The US role in semiconductor manufacturing has fallen so far that 100% of the world’s most advanced semiconductors were manufactured overseas in recent years, according to the Semiconductor Industry Association.
The Biden administration has set aside $200 million for workforce development efforts and is also pushing companies to do their own training but it's unclear whether that will be enough. The US unemployment rate is already at a rock-bottom rate of 3.6%.
The future labor pool could get even shallower as these new factory jobs become available. Estimates from Deloitte and McKinsey peg the coming semiconductor worker shortfall at hundreds of thousands by 2030.
Challenges in Phoenix’s effort to be a semiconductor 'hub'
The workforce challenges are on no greater display than in Arizona, with Phoenix Mayor Kate Gallego in the thick of efforts to untangle the dilemma.
"I love the idea of Phoenix being the hub for supplying the entire United States," she said in a recent interview. Her city and state have positioned themselves aggressively, with Arizona in line for $61 billion in new semiconductor investments representing over a quarter of the national total.
But they've already faced some bumps in the road.
Taiwan Semiconductor Manufacturing Company (TSMC) has been building a flagship fabrication plant in northern Phoenix since 2021 and recently announced a delay in the plant’s full-scale launch from 2024 to 2025. A key reason: the worker shortage.
Mark Liu, the company’s chairman, said that delays became inevitable as the company progressed to more advanced construction work in Arizona. TSMC is currently importing workers from Taiwan to close the gap and offer training for American workers. The company promises that these foreign experts will only be in Arizona "for a short period of time."
To try and ensure that these workers are indeed temporary, Mayor Gallego spends much of her time these days visiting area high schools, community fairs, and basically anywhere else she can drum up applicants for the industry.
It’s an effort echoed at all levels of government, from Commerce Secretary Gina Raimondo focusing on Gen Z workers to President Biden traveling to groundbreaking after groundbreaking to highlight the opportunities.
Gallego acknowledged there have been challenges in getting Arizonans without a previous connection to the industry to realize the opportunities. She actively promotes programs like one at Maricopa Community College that advertises training for certain jobs in as little as 10 days.
But it remains to be seen if enough Arizonans take advantage of that program or more advanced offerings that can take a year. Mayor Gallego also pointed out that some jobs require training with overseas travel which "is not doable for everyone."
The White House says across the country over 45 community colleges have announced new or expanded semiconductor workforce programs to try and close the labor gap.
More aggressive measures that may be needed
Mayor Gallego and other government officials said they remain confident that the job market will gradually stabilize, with a Commerce Department official adding: "We're confident the workforce will be there."
The official also emphasized that companies themselves are being put on the hook for training as a condition for their piece of more than $50 billion in CHIPS Act funding earmarked for the sector. Conditions around that money are still being negotiated but the funds are set to begin heading out the door in the months ahead.
If this mix of various efforts ends up proving insufficient, it could offer new urgency to Washington’s immigration debate and controversial efforts to allow more foreign workers into the US.
Of particular interest for the semiconductor sector will be the H-1B visa program that allows employers to employ foreign workers for specialty occupations. But the program currently has strict caps on how many people can take advantage.
For Harris, she said, "we need to look at some more ambitious, more structural fixes and quickly," noting both the immigration conversation as well as policies elsewhere that put even more onus on companies to shoulder the training burden.
In Germany, for example, a company can face additional taxes if they don't offer training up to a certain standard.
Such ideas would surely face fierce debate in Washington, but the question is whether, at some point in the near future, lawmakers will have no other choice.
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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