America is undertaking one of its largest industrial policy efforts since World War II: a massive, multibillion dollar effort to reshore semiconductor manufacturing, through the bipartisan 2022 CHIPS and Science Act . A recent conference hosted by Chips Communities United, and held at Arizona State University’s Center for Work and Democracy assessed the early results, highlighting the both the promise of renewed American industrial capacity, but also serious concerns over environmental risks and whether workers and communities will benefit from these unprecedented government investments.
Reshoring Semiconductors: Aligning Public Funding With Jobs And Community Benefits
The bipartisan 2022 CHIPS and Science Act is the basis for billions of federal dollars going into reshoring semiconductor production. Passed in significant part due to national security concerns around outsourcing of this key technology, the Act authorized over $50 billion for semiconductor-related activities, along with a 25% refundable investment tax credit to private firms for projects starting by the end of 2026 that could cost from $24 billion to over $50 billion.
The program is a dramatic government intervention in industrial strategy, after years of globalization that hollowed out U.S. manufacturing capacity. Two years after the law’s passage, the Department of Commerce has announced over $30 billion in grants and loans to major (and highly profitable) semiconductor firms, including Intel, TSMC, Samsung, and Micron, with projects underway in Arizona, Texas, New York, and other states, and billions more in tax credits being claimed. And state and local governments also are adding subsidies in the form of infrastructure, worker training, and other supports.
As I’ve written previously in Forbes, it’s unclear if this effort will revive domestic manufacturing while also benefitting workers and communities, or just further enrich already highly profitable firms and well-paid executives and stockholders.
Todd Tucker of the Roosevelt Institute, one of the nation’s top experts on industrial policy, says positive and negative lessons from other countries can be adapted to democratizing the benefits of America’s industrial policy. But Tucker notes it’s very challenging in our political culture, which is heavily influenced by “a state-enabled yet non-state-checked billionaire class and the history of racial exclusion leading to an uneven trust” of governmental economic interventions. The ASU conference provided an update on both the progress towards and challenges of creating a more democratic and economically shared semiconductor policy.
The CHIPS Act: Progress And Challenges In Semiconductors
Judith Barish, director of the Chips and Communities United coalition, told the conference that overall the CHIPS Act has been “enormously successful” on some measures, showing America can do industrial policy with large investments and incentivizing over 100 projects in 28 states around the country. But Barish also warned of a potential “dark side” to the policy, highlighting its less-discussed tradeoffs and risks.
On the environmental side, chip fabrication is extremely resource-intensive, demanding huge—and expensive–amounts of water, power, and chemicals, capable of driving up electricity bills, depleting water supplies, and producing significant amounts of toxic waste that can endanger both workers and communities.
On jobs, Barish noted the plants are sold as major job creators. And there are projected major booms in construction jobs for building these plants. But once a plant goes into production, fabrication is highly capital intensive, so direct production-line jobs may be limited. And many semiconductor companies are international in scope and fiercely anti-union, so prospects for worker’s gaining a fair share of the benefits will likely be a struggle.
Barish called for broader, more transparent assessment and governance of the public investments fueling our semiconductor growth. Rigorous and democratic oversight through unionization, strong and enforceable community benefits agreements, and governmental environmental and labor oversight, should be central to these investments, not an afterthought.
Biden Versus Trump—Shifting Federal Rules And Goals In Semiconductors
The CHIPS Act was a signature accomplishment for the Biden Administration, passed with bipartisan support. It was significantly influenced by concerns over China’s growing semiconductor research and production, and national security concerns about America’s international outsourcing of everything from rare earth metals to final products, vulnerability of foreign producers to Chinese pressure, a loss of scientific leadership, to outright industrial espionage.
Biden’s regulatory framework for the law’s implementation emphasized a “place-based” focus, including economic development concerns for troubled areas as one factor in location decisions. He also required strong labor, equitable subcontracting, and environmental standards, along with community benefits such as workforce training and child care. Critics included then-Senator Mitt Romney (R-UT), who said Biden was “jamming woke and green agenda terms” into the bipartisan law.
In contrast, President Trump also embraces manufacturing reshoring and semiconductor investment and production in particular, but prioritizes businesses and investors while reducing or eliminating labor, environmental, and community concerns. Trump called for a 100% tariff on imported semiconductors, up from 50% levels under Biden, but then opened negotiations with specific firms like Apple and TSMC to reduce tariffs or other restrictions in return for promised actions and benefits. Trump also has taken the unprecedented step of direct federal equity stakes in technology firms, including a 9.9% stake in Intel.
Trump’s Secretary of Commerce, Howard Lutnick, is renegotiating existing CHIPS Act contracts, applying the administration’s bans on diversity, equity, and inclusion, and questioning Biden’s environmental and labor policies. He fired 42 workers at the National Institutes of Standards and Technology (NIST) hired under the Act, and voided a contract to the nonprofit Natcast for administering up to $7.4 billion in CHIPS Act funds, calling it a “semiconductor slush fund that did nothing but line the pockets of Biden loyalists.”
State and Local Governments As CHIPS Policy Levers
The ASU conference participants noted state and local governments also can play a major role in democratizing benefits from CHIPS Act investments. Economic development projects of this scale include separate state and local commitments to infrastructure development, workforce training, tax abatements, and regulatory oversight.
In Arizona, the City of Phoenix has invested over $200 million in infrastructure improvements for the plant, and will be taking on significant new water, power, and waste disposal commitments, including toxic wastes. There are large workforce development, job training , and scientific commitments from local community colleges and Arizona State. And there are property tax abatements and relief structured for the companies through foreign trade zones and semiconductor-related facilities.
Micron’s facility in central New York State is set to receive over $250 million in local government property tax abatements, along with state green manufacturing tax credits and other sales tax exemptions. Electric power will be provided through low-cost state allocations, and the state is helping finance a “community investment fund” for workforce development and housing.
These state and local investment often are overlooked when analyzing semiconductor plants, but they underscore a potential leverage point for advocates of greater transparency and shared economic benefits. (For example, Micron’s plant construction is governed by a Project Labor Agreement with unionized building trades.) Once the plants are under construction, they will represent major sunk capital costs that can’t easily be abandoned, and labor and community advocates can try to leverage that corporate presence to negotiate better benefits.
From Investment To Impacts: What’s Next
The Arizona State conference underscored that the CHIPS Act’ ultimate success depends not only on federal policy, but state and local actions and community and labor engagement. The rapid industrial expansion of semiconductor fabrication will create jobs and economic benefits, but also exposes vulnerabilities in water and power management, environmental oversight, and job access and quality, which depend on unionization and worker voice.
Ultimately, a successful American industrial policy must not only reshore our key manufacturing sectors, but benefit workers and communities and continuing aiding the nation’s scientific leadership. As Xavier de Sousa Briggs and Madeline Janis argued in The American Prospect, it is “indispensable” to have “clear, consistently enforced expectations” for public investments to get broadly shared prosperity for these multibillion dollar public investments.
Barish and others at the ASU conference underscored that billions are now flowing into the reshoring and rebuilding of the semiconductor industry, and that’s very unlikely to be reversed. The challenge now is sharing the prosperity and managing the risks from these unprecedented government investments.