Advocates Praise Requirement, Critics Call it Counterproductive
Computer chips and child care are being welded together as a condition for semiconductor producers to get a slice of the $40 billion in CHIPS Act funding. Major manufacturers like Intel seem fine with the requirement. Others worry it’s ‘woke’ social engineering that may keep domestic chip fabrication overly expensive.
President Biden announced the requirement last week, arguing child care is essential for chip makers to find enough workers, especially for 24/7 production schedules. His order would allow chip makers to devote some of their federal CHIPS funding to construct child care facilities or contract with local child care providers. The requirement applies to chipmakers receiving $150 million or more in CHIPS funding.
Critics note 90 percent of computer chip manufacturing occurs in Asia because it costs 44 percent more to produce chips in the United States, according to an analysis by Goldman Sachs. U.S. salaries are higher, building requirements are more burdensome and regulations are more costly.
CHIPS Act funding recipients will face other restrictions. Funds can’t be used for stock buybacks, companies must share excess profits and only U.S. goods and workers are allowed for construction. Biden tacked on the child care requirement after his unsuccessful effort in the last Congress to provide increased child care funding. Biden’s Build Back Better initiative called for $100 billion over three years to spur quality child care for children up to five years old.
The requirement is for affordable, accessible, reliable and high-quality child care.
Innovative or Counterproductive
Biden’s work-around provision in CHIPS Act implementation has been lauded as innovative and bashed as counterproductive.
- The absence of affordable and available child care is seen a major hole in the social safety net and blamed for keeping many workers, especially women, out of the workforce.
- Opponents say the goal is laudable but the child care mandate could force producers to charge higher prices and fail to regain market share from foreign producers.
Taiwan Semiconductor Manufacturing Company, the world’s largest chip maker, is building a new fab lab in Arizona. TSMC has an existing fab lab in Camas and design centers in Austin and San Jose. Intel has two fab facilities under construction – one in Arizona and the other in Ohio.
In addition to a manufacturing subsidy, chipmakers could qualify for 25 percent investment tax credit for newly constructed fab labs. Another $24 billion has been approved for the tax credit.
The U.S. Commerce Department announced it will begin accepting applications in late June. In its announcement, the agency specified child care “should be within reach for low- and medium-income households, be located at a convenient location with hours that meet workers’ needs, grant workers confidence that they will not need to miss work for unexpected child care issues, and provide a safe and healthy environment that families can trust.”
An agency spokesperson added, “The requirements are that the child care is affordable, accessible, reliable and high-quality. Within those parameters, companies will have a lot of flexibility to reflect the needs of their workforce and communities.” Childcare requirements will be in effect for construction workers as well as eventual fab lab employees.
WaferTech in Camas
TSMC’s effort to establish a manufacturing foothold in the United States serves as a microcosm of why chip fabrication has shifted abroad, especially to Taiwan. In a Brookings Institution podcast last year reported on by Mike Rogoway of The Oregonian, TSMC founder Morris Chang recalled his company’s troubled expansion on a 260-acre campus in Camas in 1998.
Envisioned at a multi-plant facility called WaferTech, Chang, 90 and now retired, said the project stumbled from the start. There was a down cycle in the chip industry, challenges working with local utilities and problems with funding the factory. However, the biggest miscalculation Change cited was cost.
“Initially it was chaos. It was just a series of ugly surprises because, when we first went in, we really expected the costs to be comparable to Taiwan. And that was extremely naive,” Chang said. Costs were actually 50 percent higher than in Taiwan.
While no additional fab labs were built on the Camas campus, Chang said the plant employs around 1,000 workers and is profitable.
In Chang’s podcast, which occurred before Congress approved the $52 billion CHIPS Act, he expressed doubt the amount would be enough to effect major shift in chip manufacturing. “The United States will increase onshore manufacturing of semiconductors somewhat. But all of that will be very high-cost increase, high unit cost,” Chang said. “It will be noncompetitive in the world markets where you compete with factories like TSMC.”
Chang’s assessment differs from Intel CEO Pat Gelsinger who is pursuing a plan of providing geographic alternatives to chip factories in Asia by investing an estimated $40 billion in two new U.S. fab labs and $20 billion on a new manufacturing facility in Germany. TSMC is also hedging its bet with a new manufacturing facility in Arizona.