​​Chip plants are moving in— are local communities ready?

In a bid to build up the American chip industry, the Commerce Department plans to hand out billions so that semiconductor manufacturers will locate their next factories in the United States. But while federal officials—and the companies that could win massive grants—are keen to the idea, states and local communities will need to play a role, too.



In order to win some of the $39 billion allocated by the CHIPS Act, the semiconductor legislation that President Joe Biden signed last year, chip companies will need to convince local and state leaders to support these plants as well, potentially through incentives, tax benefits, or other programs. Proponents of these fabrication plant (also called fabs) argue that the facilities would create new jobs—and draw significant economic investment—to surrounding communities.



Some experts, however, have raised a wide range of questions about what the American chip renaissance will ultimately mean for local neighborhoods, including factories’ potential impact on rental prices, property values, workforce availability, and ecosystems.



“So much depends on local regions, supply chains, and labor market,” says Mark Muro, a senior fellow at Brookings who focuses on the technology industry’s impact on local economies. “State and local leaders need to know about this because a lot is riding on it. And a lot of how they benefit or don’t depends on how it is implemented.”



The fight to reclaim Silicon Valley goes through the states



Given that the U.S. currently manufactures just 12 percent of the world’s total chip supply, it’s little wonder the federal government is interested in jump-starting the domestic semiconductor industry.



The urgency of that shortfall was put under a microscope during the pandemic, when supply chain woes put a stop on semiconductor exports from Taiwan, a blip that in turn held up production of everything from computers and cars to advanced artificial intelligence systems. Even more alarmingly, some foreign policy experts fear that should China invade Taiwan—something that looks increasingly possible—that chip pipeline could be more permanently damaged.



As a result, local governments in the U.S. will play a part in boosting the geopolitical stability of the world’s technology supply chain. Ohio, for example, offered Intel several billion in incentives to push the company to build its upcoming chip mega site in New Albany, a city right outside of Columbus. Similarly, New York State offered Micron, which could spend up to $100 million to build a chip plant in the Syracuse suburbs, $5.5 billion in incentives for its new facility. New York also spent about $500 million to woo Wolfspeed, a chip company that focuses on the power conversion semiconductors used in cars, to build its newest factory just outside Utica.



Beyond financial assistance, states need space to accommodate these facilities—and the businesses that want to be located near them. To build its Ohio chip sites, Intel purchased hundreds of acres of land outside the Columbus area. Other technology companies followed suit, with Amazon Data Services alone spending more than $100 million to buy the plots that surround the future Intel facility. Finding enough room for these fabs isn’t necessarily easy. Oregon’s land use laws mean there are currently no sites that are large enough to support one of these factories.



Chip fabs also use an enormous amount of water, and upcoming projects will require new water recycling facilities—that need to be permitted—so that they don’t strain local utilities. Semiconductor factories use an enormous amount of electricity,​ too. The Vermont Public Utility Commission recently allowed GlobalFoundries, a chip plant based in New York, to create its own electric utility to power its operations. (The plan will allow the company to save on energy costs, but was only approved after local officials ensured the company would stick to environmental goals and a payment transition plan.)



Then there’s the challenge of finding people to work at these fabs. The Semiconductor Industry Association, a trade group that heavily pushed for the CHIPS Act, says that the 10 new fabs could lead to as many as 42,000 new positions in the chip industry. The Micron plant in Syracuse, for example, is supposed to create up to 9,000 jobs. (In a bid to boost gender equity, the Biden administration has required any chip company that receives more than $150 million in grants to provide childcare for workers.)



“While there are some people who are having anxiety about some of this growth, the majority of people are excited and proud of what’s occurring and the opportunities that are being created,” says Kenny McDonald, the president and CEO of the Columbus Partnership, an organization that’s pushed for the Intel plant in Ohio. “Your sons, your daughters, your grandkids have an opportunity to stay here and build a life here.”



The chip industry will create tradeoffs



But there are reasons to doubt that chip plants will be the massive job boom that proponents promise.



To keep chip facilities clean, the actual manufacturing of chips is mostly handled by automation, not assembly workers. As a result, chipmaking doesn’t produce as many jobs as some other forms of manufacturing. And as the pandemic chip shortage has abated—and demand for consumer tech has declined—some chip companies, including Micron and GlobalFoundries, have already turned to layoffs.



At the same time, the chip manufacturing jobs that do exist are highly specialized, and the U.S. is still looking to build up its supply of qualified workers. If the U.S. builds eight new fabs, the country will need about 3,500 workers with specialized skill sets from abroad, according to Georgetown’s Center for Security and Emerging Technology (CSET) analysis.



“If I was in the position of a local official working in one of these towns where a fab is going to be located, I would be working to make sure that the company knows who to talk to,” says Jacob Feldgoise, a data research analyst at CSET. “In terms of local community colleges, technical colleges, maybe four-year degree colleges as well, to make sure that they don’t run into workforce problems.”



It’s not just jobs directly in chip manufacturing that could raise challenges for local communities. In Columbus, about 40 percent of the workers needed for building Intel’s facility, including electricians and pipe-fitters, may need to come from beyond the nearby area, according to Bloomberg.



The chip industry also has an enormous carbon footprint, and state and local governments welcoming these facilities risk releasing pollutants into the local environment, which will require new permits and oversight from environmental regulators. Meanwhile, the Semiconductor Industry Association, a trade group that represents the chip industry, has pushed for exemptions to the National Environmental Policy Act, which would necessitate additional environmental review for federally funded semiconductor projects.



“The plants can be environmentally polluting. The process of receiving the permit is long and difficult. There are lots of potential conflicts,” Feldgoise says. “That could become difficult for local leaders or will require them to make trade-offs and decide where to prioritize their constituents and where to prioritize the economic development that comes from these facilities.”