The Chips Act Needs Immigration Reform or the U.S. Could Lose to China

Already, the U.K. and Canada smell weakness. The two countries have been enacting policies to recruit highly skilled foreigners away from the U.S. This week, Canada started offering work permits directly aimed at attracting America’s H-1B visa holders.

The U.S. shouldn’t be complacent on the issue. Immigration has been the lifeblood of the semiconductor industry’s rise. Hungarian immigrant Andy Grove shepherded
Intel
(ticker: INTC) into a chip giant. A duo of Taiwanese immigrants—
Nvidia
(NVDA) co-founder Jensen Huang and
Advanced Micro Devices
(AMD) CEO Lisa Su—have played pivotal roles in maintaining America’s technology leadership and its dominance of the world’s chip industry.

Recently, the government has realized Taiwan’s near monopoly for advanced chip manufacturing could become a national security risk if geopolitical tensions with China get worse. Policymakers decided the U.S. needed closer, reliable access to semiconductors required to keep military systems and the economy running. So, Republicans and Democrats cheered when President Joe Biden signed the CHIPS and Science Act last year, which included roughly $52 billion in funding to boost domestic chip manufacturing.

But the plan won’t work without reforming our archaic immigration system. For the Chips Act to succeed, the U.S. must bring in numerous foreign workers with the requisite science, technology, engineering, and mathematics (STEM) backgrounds. Intel has said just the initial phase of building two chip factories in Ohio will require 3,000 new skilled workers.

The primary avenue for science graduates, the H-1B system, needs to be better designed. Incredibly, it is based on a randomized lottery that isn’t merit-based while being capped at the same low 85,000 annual level for decades. Even though both sides of the aisle agree changes are needed, the current political atmosphere has paralyzed Congress from passing essential reforms.

Barron’s Tech talked to Senior Fellow Jeremy Neufeld at the Institute for Progress—a non-partisan Washington, D.C.-based think tank, about how to implement a wiser immigration policy and the risks of falling behind China if the U.S. doesn’t act.

Here are edited highlights of our conversation with Neufeld:

What’s the history of immigration talent in driving technology innovation in the U. S.?

Neufeld: International talent has been a critical ingredient for U.S. technological leadership in the post-World War II era. In semiconductors, specifically, they have been at the center of the story at a lot of firms, both on the manufacturing side and design side. If you look at the electronic component manufacturing industry in the Census Bureau data, well over 50% of the advanced STEM talent is foreign-born.

How important is immigration reform for whether the CHIPS Act will succeed or fail?

Many of these investments will not pay off unless Congress addresses the talent bottlenecks through immigration reform. Obviously, we want to train the next generation of semiconductor talent here in America, but they need to be trained by people with experience. Right now, by the nature of the global chip market, most of the people with that requisite experience do not live in the U. S.—especially for cutting-edge chips.

We are seeing on the ground some of the workforce staffing issues are starting, and that’s before a lot of the [Chips Act] investment has come on line. This is going to be an increasing problem.

What are the problems with the current system, specifically the H-1B visa rules?

The largest high-skilled talent immigration program is the H-1B. There are 85,000 visas available per year with 800,000 applicants. They are awarded through a random lottery. This creates a huge amount of uncertainty and risk.

The semiconductor industry has no way to be prioritized. The government can’t prioritize talent that is in the national interest. Many of the visas are eaten up by [less critical] firms that essentially use it as outsourcing for IT services.

There’s no way to prioritize the smartest people based on skills and merit?

Exactly. The lottery is an interesting area with support from both sides of the political aisle for getting rid of it. People who are very concerned about the competition U.S. workers face don’t like it. The Biden Administration and the progressive caucus is in favor of getting rid of it. People who are in favor of merit-based immigration want to get rid of it.

Why doesn’t it get reformed?

There is cross-partisan agreement. But it is entrenched because of a few reasons. There is concern about passing something narrowly on this without addressing other immigration issues. And there is vested interest from companies who benefit from the current (non-merit-based) system.

What policy changes would you advocate for?

Green card cap exemptions for STEM talent, especially Ph. Ds and masters, would be the critical first step. The idea of stapling a green card with a diploma would have been huge for the semiconductor industry.

Second, addressing the problems with H-1Bs [the lottery], so more of them could go to the chip industry. Finally, clarifying how “extraordinary ability” counts for the semiconductor space for uncapped visas.

If we don’t fix our system, what could happen?

The [current] U.S. immigration system isn’t designed to grow or scale. If we stay complacent, we run the serious risk of deterring a lot of the talent that makes the U.S. the world leader in science and innovation. It will also cripple the possibility of being a chip manufacturing leader.

Our science and technology leadership against China will suffer, and by extension, our security will suffer

Thanks for your time, Jeremy.

This Week in Barron’s Tech

Write to Tae Kim at [email protected] or follow him on Twitter at @firstadopter