The US is experiencing a boom in semiconductor production following the passage of the CHIPS Act, but this progress could be hampered by a severe labor shortage in the industry.
There will be 85,000 new technical jobs in the industry by 2030, according to a July report from the Semiconductor Industry Association, an industry and trade group, and Oxford Economics. However, the report’s projections suggest that nearly 80% of those jobs could remain unfilled.
And crucially, a third of the semiconductor industry’s workforce is foreign-born – meaning immigration barriers are exacerbating the shortage.
In July, Taiwan’s TSMC (TSM), which was set to open its first factory in Arizona in 2024, announced that the semiconductor giant’s production would be delayed for another year due to a shortage of skilled workers.
“While we are working to improve the situation, including sending experienced technicians from Taiwan to train the local skilled workers for a short period of time, we expect the production schedule of the N4 process technology to be postponed to 2025,” said TSMC- Chairman Mark Liu said on the company’s second-quarter earnings conference call.
The U.S. semiconductor industry workforce was 33% foreign in 2021. (Graphic: Brookings)
Many foreign-born professionals are already studying in the United States, but current immigration laws make it difficult for them to stay.
“It is incredibly, incredibly difficult to imagine that we will be able to build the semiconductor industry in the future if we do not reform our immigration law,” Todd Schulte, president of the immigration and criminal justice reform advocacy group FWD.us, told Yahoo Finance.
A new analysis from FWD.us found that about 5,000 international students in the U.S. will pursue advanced degrees in semiconductor-related computer science and engineering in the next academic year. At least 4,000 of these students have expressed interest in coming to the United States.
“If you have to build these semiconductor factories, you need a certain group of workers,” Schulte said. “You can have it in the United States, or you can have it in other places here. The idea that jobs are a fixed entity – that they exist for another person when they don’t exist for one person – is simply not true.”
The story goes on
“I think you see that,” he continued. “You’ve seen chipmakers say, ‘We need this workforce.’ We want to build in the United States for many reasons, but we need an immigration system that is not only built from the middle of the 20th century, that is, an immigration system that allows our country to respond to the economic needs of the middle of the 21st century .century.”
An immigration system “designed in the 1950s”
The work permit is a key challenge. For example, the U.S. government grants H-1B visas to approximately 65,000 qualified individuals each year, plus an additional 20,000 individuals with master’s degrees. This cap has been in effect since 2006.
According to the American Immigration Council, if the U.S. Citizenship and Immigration Services (USCIS) “receives more registrations than visa numbers are available,” the agency will hold a lottery to determine who can file an H-1B petition. … The agency selects more registrations than visa numbers are available based on its projections of how many selected employers will submit applications and receive USCIS approval.”
In addition to limited spaces, other immigration hurdles include slow processing times, regulations and paperwork, and the cost of applying for a visa. A March 2023 report from Envoy Global, a global immigration services provider, found that 94% of companies would be willing to grant work visas to foreign nationals if they faced fewer challenges, while 80% of companies relocated employees to work outside the United States Working remotely due to visa issues.
“Last time we had a really major update to our legal immigration system [was] in 1990,” Schulte said. “That was before the end of the Cold War. It was before the advent of the World Wide Web. It was before the rise of China and India and in many ways a global middle class here. We have an immigration system that was basically like this.” It was designed in the 1950s and 1960s and tweaked in 1990, before so many of the economic needs we have today were clear.
‘No Option other than relaxing immigration policies
An overhaul of the U.S. immigration system wouldn’t just help the semiconductor industry: Research shows it would also be a boon for the entire U.S. economy.
According to Boundless, an immigration technology company, immigrants paid more than $330.7 billion in federal income taxes in the U.S. in 2019 and over $492 billion in taxes overall.
“The larger story is that the only reason the U.S. population has grown over the last decade has been immigration,” Greg Wright, a non-resident fellow at Brookings and associate professor of economics at the University of California, Merced, told Yahoo Finance.
He added: “Population declines are occurring across the developed world, particularly in southern Europe and Japan. There are countries that really have problems with population decline and the inversion of the population pyramid. You could call it population aging. The US hasn’t really had this problem, but that’s just because of immigration.”
President Biden speaks with workers during a visit to TSMC AZ’s first semiconductor manufacturing facility in Phoenix, December 6, 2022. (Jonathan Ernst/Portal) (Jonathan Ernst / Portal)
According to the US Census Bureau, the immigrant population in the US grew by almost 30% between 2005 and 2022 to over 46 million people. In 2022, foreign-born Americans make up 13.9% of the total population.
Meanwhile, native-born Americans are having fewer children while many older people are dropping out of the workforce, further widening the country’s labor force gap.
“It’s already coming to a head, but people will realize there’s probably no choice but to loosen immigration policies,” Wright said.
Talent retention and the CHIPS Act
Without an overhaul of the immigration system, FWD.us’ Schulte warned that potential talent will choose places other than the U.S., particularly in semiconductors, an industry that is increasingly in demand.
After the bipartisan CHIPS Act became law last August, companies invested $210 billion in more than 50 new semiconductor projects by the end of last year.
“We will no longer be able to attract top talent from around the world by default,” he said. “It was like that for a very long time. But if you look at what other of our economic competitors have done in many cases, they’ve modernized their immigration laws, their immigration system, to try to compete with the United States.”
The United States is home to seven of the world’s ten largest semiconductor companies by market capitalization, including leader Nvidia (NVDA). Taiwan’s TSMC (TSM) is in second place, while South Korea’s Samsung is in fourth place.
“We are clearly at the forefront of a number of really potentially revolutionary scientific endeavors right now – artificial intelligence, biomedical research building, clean energy, decarbonized economy,” Schulte said. “These are things that, in different ways, have the ability to change the world for decades to come.”
For Schulte, the key question is whether the U.S. can design a system that “allows us to have a workforce capable of being a world leader in education and innovation in these areas.”
“I think that’s what we really want to focus on and emphasize that this isn’t going to happen by default,” he said.
Adriana Belmonte is a reporter and politics and health policy editor at Yahoo Finance. You can follow her on Twitter @adrianambells and reach her at [email protected].
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