Until President Joe Biden signed the Chips and Science Act (CSA) last year, companies, such as Intel and Taiwan Semiconductor Manufacturing Company (TSMC), looked elsewhere to build plants costing well over $20 billion each.
Biden’s pitch to taxpayers was ultramodern manufacturers of miniature computer chips used in our sophisticated weapons, advanced manufacturing, cars and trucks, and high-tech equipment needed to move back to the USA.
Congress responded and passed CSA supplying $280 billion to encourage them to reposition even though our costs tend to be higher, and our regulations more shackling.
In the 1990s, the Vancouver-Portland area was “the place” for semiconductor investors. TSMC completed its one U.S. factory, the WaferTech facility, in Camas in 1998. However, while its 260-acre property was designed to hold several factories, TSMC didn’t expand here.
Intel invested heavily across the Columbia River in Hillsboro, but as did TSMC, it looked outside Oregon to focus investments. During the interim, Intel and TSCM built plants in China and started expanding in states with lower operating costs, better tax incentives, and good education and workforce development.
China’s latest aggressiveness — particularly towards Taiwan — heightened worries over security risks of advanced fabrication factories. America suddenly became a safety net.
Federal and some state elected officials seized the opportunity and are supplying tax breaks and other incentives. Now, Arizona is “the hot bed” for semiconductor manufacturing with TSMC and Intel investing billions in new plants.
High costs to comply with government regulations is a focus for all of our nation’s manufacturers.
The onslaught of new federal regulations is “chilling manufacturing investment, curtailing manufacturers’ ability to hire new workers and suppressing wage growth, especially for the small and medium-sized manufacturers that are the backbone of the supply chain,” National Association of Manufacturers (NAM) President Jay Timmons wrote a June letter to President Biden.
NAM which represents small, medium and large manufacturers in all 50 states, launched the Manufacturers for Sensible Regulations Coalition. Over 200 manufacturers signed a letter to Biden’s Chief of Staff Jeff Zients requesting the White House designate a senior-level advisor to work with agencies and manufacturers to streamline regulations.
“Regulations create tremendous uncertainty, which can stall or even prevent manufacturers from growing their workforce, purchasing equipment, conducting research and development and investing in their communities,” the coalition letter said. “This puts manufacturers in the U.S. at a competitive disadvantage with countries such as China, threatening America’s global leadership.”
In a recent analysis, NAM found manufacturers are feeling the time and financial consequences of these overwhelming regulations. “More than 63 percent of manufacturers reported spending over 2,000 hours per year complying with federal regulations, and more than 17 percent exceeded 10,000 hours.”
NAM finds the extent to which manufacturers bear a disproportionate share of the regulatory burden, and that burden is heaviest on small manufacturers because their compliance costs are often not affected by economies of scale.
Its analysis also determined the average U.S. company pays $9,991 per employee annually to follow federal regulations. The average manufacturer in the United States pays nearly double that amount—$19,564 per employee. Small manufacturers, or those with fewer than 50 employees, incur regulatory costs of $34,671 per worker which is more than three times the cost borne by the average U.S. company.
The point is new laws, such as the Chips and Science Act of 2022, are helpful if they are allowed to work and not buried under mountains of regulations.
The President would be wise to heed the recommendations in the manufacturers’ letter. Washington and Oregon elected officials should take a close look at the investments now landing in Arizona and Ohio and ask why they are not coming here.
Don C. Brunell is a business analyst, writer, and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.