Answer to the Lithuanian authorities to the question of whether it is realistic for us to milk Taiwan

"The tiny computer chips that run everything from smartphones to satellites to missile defense systems, are often called the “oil” of the 21st century. Maintaining U.S. economic and military might depend on a reliable supply. Semiconductor shortages during the pandemic brought some car assembly lines to a halt and left showrooms of home appliances barren, providing a glimpse of what would happen to the American economy if those chips ever ran out.

Like energy, the semiconductor industry is so important that it factors into decisions about war and peace. About 92 percent of the world’s most advanced chips are made in Taiwan. The rest come from South Korea. Repeated warnings by President Xi Jinping of China that he is willing to use force if necessary to reassert control over Taiwan have forced U.S. policymakers to contemplate what would happen if the American military were ever cut off from the chips that it needs.

Since the Trump administration cut off certain chips from going to China, chips have became fodder for public debate. Now Americans are worrying about our own chip supply, and the need for the United States to be less dependent on chips from Asia has become one of the few areas of bipartisan agreement in Washington. The CHIPS Act, which would give $39 billion to subsidize the construction of semiconductor factories in the United States, plus $11 billion for research and development initiatives into chip innovation, is the centerpiece of a bill to increase U.S. competitiveness that is expected to move forward in Congress this summer.

Is it corporate welfare for an industry that is already profitable? Of course. But places that make chips — including Taiwan, South Korea, India, Germany and China — offset the enormous capital costs with gobs of public money. Reasonable people can disagree about whether that’s a good thing. But there is little doubt that, if the United States wants to compete in this game, subsidies are the price of admission.

And yet, money alone is no guarantee of success. Paying off companies won’t get us very far unless we also invest in people who can make the industry thrive. Semiconductor supremacy isn’t something we can buy. It’s something we must build, starting with a thoughtful, long-term strategy to create a pipeline of talent, both domestically and abroad.

That’s why it’s good news that Purdue University just started what it calls the nation’s first comprehensive “semiconductor degrees” program, and that Intel — which is building a new complex of “fabs,” as semiconductor factories are called, in Ohio — has pledged to partner with Ohio universities to create programs that emphasize innovation in semiconductor manufacturing.

“The semiconductor game is a long game; it’s not about making fabs but who can innovate and cultivate talent,” Jason Hsu, who served as a representative of the tech industry in Taiwan’s legislature, told me. Mr. Hsu, who is now a senior fellow at the Harvard Kennedy School focused on building industry collaborations between the United States and both Taiwan and South Korea, lamented that American lawmakers seemed intent on trying to take the industry from Taiwan without fully understanding how to make it succeed. “They are only interested in ‘How do we counteract China?’” he said. “The discussion is very limited.”

One of the biggest obstacles to making more chips in the United States is the lack of experienced workers. Part of the problem is structural, Mr. Hsu said. Facebook and Google pay astronomically higher salaries than the chip manufacturing industry. Even in Taiwan, Mr. Hsu told me, it has been hard to attract younger people to this work.

If the American semiconductor industry expands as expected with the passage of the CHIPS Act, about 13,000 new engineers and software developers will be needed in short order, and some 3,500 positions could go unfilled, according to a report by the Center for Security and Emerging Technology.

Part of the reason for this skills gap is that people in the United States who already work in the semiconductor industry tend to have experience in chip design, not manufacturing. For years, many U.S. companies ordered chips from contract manufacturers overseas, like the Taiwan Semiconductor Manufacturing Company, instead of embarking on the extremely expensive process of producing, testing and packaging chips themselves. But as geopolitical tensions with China ramped up, American leaders began to push to build some capacity to make advanced chips in the United States as an insurance policy in the event of a breakdown of trade.

To prepare for that day, the Trump administration pressured the Taiwan Semiconductor Manufacturing Company to build a fab on U. S. soil capable of mass producing advanced chips. But finding people in Arizona, where the fab will be built, with the same skills and work ethic as exist at the company’s factory in Hsinchu has been a challenge, the company’s founder, Morris Chang, told a told a symposium last year.

Attracting highly skilled foreigners who can help train an American work force is essential to success, at least in the short term, according to the Center for Security and Emerging Technology report, which estimated that “at least 3,500 foreign-born workers will be required” to staff the new American fabs. Some could come from American universities, it said, but many would need to be recruited from Taiwan and South Korea.

The state of higher education in the field is also worrying. The number of American graduate students studying in semiconductor-related fields has remained almost flat since 1990, while foreigners enrolled in those fields at American universities have tripled. According to “Winning the Tech Talent Competition,” a report by the Center for Strategic and International Studies, only 23,000 Americans are expected to graduate with Ph.D.s in science, math, engineering and technology-related fields in 2025, while 17,000 foreign students in those areas will graduate from American universities.

It’s great that noncitizens are helping to close the yawning gap with China, which is estimated to graduate 77,000 Ph.D.s that year. But we can’t take foreign talent for granted. Since 2016, overall foreign enrollment in American universities has fallen every year, leading some to worry that foreign enrollment in semiconductor-related fields might also be at risk in the future.

Philip Wong, a professor of electrical engineering at Stanford University, told me that the pull of the United States isn’t what it once was. Although bright students from Asia continue to flock to Stanford, he said, some of them pass up the chance to stay in America in favor of working in the vibrant tech industries closer to home. “They don’t need to come to the U.S. to get a good career,” Mr. Wong told me. “If you look back several decades, the reasons for students to come to the U.S. are starting to go away.”

Reforming our outdated immigration system would help. Right now, many foreigners who graduate from our universities must find companies willing to sponsor employment-based visas, a paperwork-laden process that requires employers to prove that they are paying the prevailing wage and can’t find an American to fill the job. Foreign nurses and physical therapists are allowed to bypass this process, since they work in fields that are deemed to suffer from a labor shortage. Many semiconductor engineers have no such luck. Adding them to the list of specialized occupations that can dodge this element of immigration red tape would be a boon to the industry, Graham Allison, a Harvard Kennedy School professor, and Eric Schmidt, a former Google executive chairman, argued, in a recent article in Foreign Policy magazine.

The design of the U.S. immigration system also makes it harder to develop a pipeline for tech talent. Roughly 140,000 employment-based green cards are typically given out every year for all industries — but no more than 7 percent of employment-based and family-sponsored green cards can go to any single country in a given year. That means that people from tech powerhouses such as China and India face far longer backlogs than those from smaller countries. That makes no sense. Removing the per-country cap for highly skilled people in semiconductor-related fields would get rid of a self-imposed obstacle to recruitment.

Other countries have gone even further to lure tech talent. Britain just established a special visa for graduates from top universities outside the United Kingdom that would let them live and work inside the country for two or three years without a company sponsor. Australian officials actively promote their global talent visa program at semiconductor career expos around the world. If Americans want to really compete in this vital industry, we’re going to have to step up our game."

 

Lithuania has neither money nor personnel for this. And in-demand, well-paid specialists from abroad will not come to us.