(OPINION) Smarter Immigration Policies Could Help Alleviate the Semiconductor Shortage

From semiconductors to infant formula, U.S. consumers are facing acute shortages of essential goods. Ironically, both global and anti-global forces are behind this current disruption in supply chain. On the one hand, the shortage of infant formula reflects a highly protectionist trade regime that has led to dramatic concentration in production—only four domestic firms produce 90 percent of infant formula consumed in the U.S. On the other hand, the ongoing shortage of semiconductors highlights a similar outcome for the opposite reason: Until the recent U.S.-China trade war, decades of free trade in semiconductors have resulted in the concentration of chip production in Taiwan, South Korea, and China. While free trade has generated low prices and substantial productivity gains for consumers and workers, in both cases the concentration of industry production among a few firms in a handful of locations has exposed consumers to supply chain risks that are now coming to bear.

These hardships have pushed policymakers to consider new ways to ensure a more diverse and resilient supply chain for the most critical products, while still protecting the gains that the country receives from international trade. For semiconductors this means bringing some portion of the industry back to the U.S., which Congress is attempting to do through the CHIPS for America Act. This legislation creates a $52 billion tax credit for semiconductor equipment or manufacturing facility investments in the U.S., which intends to grow the domestic semiconductor industry on the coattails of the rising global demand for chips. Even though this funding is unlikely to be enough to make the industry competitive in leading-edge chips, it is a good start.

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.

Greg Wright et al, Brookings, June 17, 2022
Read the Full Article