Without immigration provisions CHIPS act ends up moving semiconductor jobs to India.

Semiconductor manufacturing is changing gears. Apple M1 and Google’s Tensor is followed by many large companies rolling out their own chips instead of relying on generic chips provided by Intel, AMD, Nvidia etc. 5G also opens up new door we had not been able to open before.

An average automobile use to have only 10-20% of its value in electronics, but it is expected that soon around 90% of value of automobiles (minus battery and motor) will come from electronics and around 5% from software.

We are going to see an EXPLOSIVE growth in semiconductor business. Ukraine use to be the country that provided neon gas for nearly all semiconductor manufacturing. Now India, China and USA are the only other countries that can generate enough neon for semiconductors of the world.

Chinese invasion of Taiwan will have consequences. Everyone sees this as real risk and is trying to move away as much away from China and Taiwan. India and USA remain two important destinations for semiconductor manufacturing as both these countries are already major hubs of semiconductor design.

Indian PM Narendra Modi hence tried to woo Intel, AMD, TSMC and Apple to setup semiconductor fab factories in India. I discussed this with my friends in the Indian government and the challenges seemed pretty big. From raw materials to labour laws.

Indian government is committed to invest around $12B to help these companies setup shop. In return the companies will get several tax breaks, free land, protection from labour disputes, one window clearance system and dedicated export support. The chickens were lined up.

The only problem was that these companies were worried to invest billions of dollars in India. They would rather invest that money in hiring more people in USA by bringing from from Taiwan or other places.

TSMC started its plant construction in Phoenix but then soon realized that it is unable to bring their engineers from Taiwan at all. The plant construction since then has nearly stalled. I think very likely the plant will also be abandoned.

The CHIPS act which the Congress pretends would magically create semiconductor fab factories in USA is the best gift Indian government could have asked for. The $50B or so corporate handout to these companies gives these companies pretty wide cushion to try risky investments in India.

Very likely Intel, AMD etc. will use this handout to create factories in USA but very likely much of this work will end up going to India because that is where the engineers are. Over time the factories will slowly rise in India.

As Senators like Bernie Sanders, Tom Cotton, Chuck Grassley etc. have pointed out Intel, AMD etc, do not need cash as they are very profitable companies. Then why are they not expanding in USA ? The real reason is immigration. Both GOP and Democratic party has destroyed US immigration system for skilled immigrants. Indian engineers face years of delays in processing of their visas and century old backlog for green cards. Taiwan faces similar problem as their engineers had to apply for H1B “lottery” which has like 20% chance of winning.

While tax credits may spur U.S. investment in equipment and facilities, firms still need to find thousands of workers with specialized skills to scale the industry—and they need to do so in time to compete with other countries’ efforts to do the same. Unfortunately, the long decline of the manufacturing labor force in the U.S. has eroded the country’s manufacturing base and redeveloping it could take years. But there is another possibility: Highly skilled immigrants could provide a substantial amount of this expertise immediately and could help retrain the domestic semiconductor workforce at the same time. [source]

 

 

 

What is the point of investing into Universities when foreign students are declining rapidly ?

How much of their own money American companies are putting into expanding their chips business ?

 

It turns out US semiconductor companies have been expanding for last 2 years at rapid pace. They are on track to invest 800B (yes 8×10 billions ) of their own money into expansion. Even if Congress does not do ANYTHING they will continue with this plan.

Why American companies will not invest in USA ?

Biden admin insists “unionized workforce” to get federal money. Workers unions are like cancer that kill innovation and dynamism. American companies would rather invest in India or South Korea.

Here WEIFENG ZHONG & CHRISTINE MCDANIEL write:

Even if the federal largess isn’t steered toward influential legislators’ districts or swing states, will government officials really dole out $52 billion to the “right” companies? Only  1 in 8 interventions change a company’s location choice. Any resulting new operations would still face deep-rooted issues hindering American manufacturing. Large-scale environmental assessments will be required, but over the years, the costs and delays have become excessive. Recent trends promoting or requiring unionized workers for federal contracts, combined with the current labor shortage, will hinder chipmakers’ ability to find talents and could exacerbate the cost of domestic production.

Semiconductor push does not require money but labor reform. Without that the jobs and manufacturing WILL move out of USA.

 

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