Industrial policy update: The Biden administration is nearly finished allocating $39 billion in grants under the CHIPS and Science Act, the 2022 law aimed at revitalizing the US semiconductor manufacturing industry. What’s more, almost 100 companies have committed around $400 billion to building US facilities. The majority of this investment comes from three leading chipmakers—TSMC, Intel, and Samsung—planning multiple new fabs (semiconductor fabrication plants) for their most advanced technology.

Mission accomplished? Hardly. Not only is there more to do, but the hardest part remains: building the fabs and then making the most advanced chips in the world—and a lot of them. Success will be measured by whether the US increases domestic production of advanced chips from zero to 20 percent by 2030—not, say, good-paying jobs in electoral swing states—as targeted by the Biden administration. It’s a goal whose outcome won’t be known until well into the next presidential administration. 

Nothing here is assured. Among the potential obstacles highlighted in “With US Chips Act Money Mostly Divvied Up, the Real Test Begins” by Bloomberg reporter Mackenzie Hawkins:

• Companies need to find over 160,000 workers. There are projected shortages of both engineers and technicians in the semiconductor industry.
• Success largely depends on four companies—Intel, Micron, TSMC, and Samsung—which carries risks if any of them face significant issues. (By the way, Intel is facing significant issues.)
• Many chips will still need to be sent overseas for key steps like packaging, creating potential vulnerabilities, especially if there is trouble between China and Taiwan. And that, after all, is the main reason why the $39 billion of taxpayer dough is being spent.
• Projects face challenges with environmental reviews and compliance with regulations like the Clean Water Act.

In other words, Washington’s job isn’t done here. So you can add another obstacle: political uncertainty.  But I don’t think even the most effective lawmaking can deal with the problem identified in “What Works in Taiwan Doesn’t Always in Arizona, a Chip Making Giant Learns” by New York Times reporter John Liu: 

In recent interviews, 12 TSMC employees, including executives, said culture clashes between Taiwanese managers and American workers had led to frustration on both sides. TSMC is known for its rigorous working conditions. It’s not uncommon for people to be called into work for emergencies in the middle of the night. In Phoenix, some American employees quit after disagreements over expectations boiled over, according to the employees, some of whom asked not to be named because they were not authorized to speak publicly. The company, which has pushed back the plant’s start date, now says it expects to begin chip production in Arizona in the first half of 2025. … Jefferson Patz, an engineer fresh off a master’s degree from the University of California, San Diego, went to Tainan in 2021 for 18 months of training shortly after he joined the company. “Oh, my gosh, people work hard,” Mr. Patz said. He recalled that this initial impression had given him a strong sense of what it took to succeed in the industry.

The problem shouldn’t have been unexpected, given both the complexity of manufacturing the chips and a bit of American history. Back in the 1980s, there were stories about culture clashes in the Japanese auto plants that were built in the US. The 1986 film comedy Gung Ho, starring Michael Keaton, portrayed just such a conflict when a Japanese corporation takes over an American car plant. But things eventually work out in the movie, as described by Wikipedia:

As the end credits roll, the workers and management have compromised, with the latter agreeing to partially ease up on their requirements and pay the employees better while the workers agree to be more cooperative, such as participating in the morning calisthenics, which are now made more enjoyable with the addition of aerobics class-style American rock music.

Let’s hope this current experiment will have a similarly happy ending.

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