- The US is witnessing a mounting wave of mega investment and FDI projects announced across the country.
- Their implementation faces many bottlenecks.
- Austin, Texas, and other cities are already dealing with talent shortages and fast-rising house prices.
The US Congress passed two landmark industrial policy packages in August, channelling tens of billions of dollars into the already booming semiconductor and electric vehicle (EV) manufacturing sectors.
With the CHIPS and Science Act committing $39bn towards semiconductor makers and the Inflation Reduction Act including $20bn in loans for EV manufacturers, attention has shifted away from funding mega-projects towards the potential supply bottlenecks they face.
Such concerns are front and centre in Austin, Texas. EV giant Tesla moved its headquarters there last year and opened a ‘gigafactory’ in April, while Samsung is building a $17bn semiconductor fabrication plant, or fab, in nearby Taylor. It is the largest foreign investment project in Texan history.
“You could legitimately see $80bn invested in semiconductor manufacturing in the next 15 years,” says Ed Latson, the CEO of the Austin Regional Manufacturers Association (ARMA). “And on top of that, to go from no major automotive presence to being the headquarters of the top EV company in the world; it’s a pretty extraordinary leap.”
But with thousands of skilled jobs to fill, and rapidly rising housing prices, Austin faces the same challenges that await regions across the US as semiconductor and EV mega-projects get underway.
The missing middle
“We’ve done a great job of providing high-quality workers to businesses that demand skill positions,” Mr Latson tells fDi. “But it is stretched thin; there is a scarcity of talent.”
The talent problem is not unique to Austin. According to Shari Liss, who leads workforce development initiatives at Semi, a semiconductor industry association, the CHIPS Act will create 40,000 to 50,000 job vacancies in fabs across the country, and more in the wider supplier ecosystem.
The EV industry is similarly affected. The Austin Chamber of Commerce found that every job created by Tesla — more than 5000 so far — has created four jobs in the local supply chain. In both industries, the greatest need is in middle-skill roles, which were largely offshored to Asia while advanced engineering and research remained in the US.
“The focus is on technicians and operators because that growth really hadn't been happening in the US,” Ms Liss tells fDi. “And now that we're bringing all of these fabs back, we have to recreate programmes to support that need, whereas the masters and PhD levels all still exist in this country.”
Both Tesla and Samsung have established apprenticeship and training programmes with the Austin Community College district, marking a shift in industries that have historically required four-year degrees. “We have this mindset where we see four-year degrees as being the only path, and I think we have to be open to this alternative pathway as we open up more and more roles across the country,” Ms Liss says.
While workforce development programmes across Austin ramp up the local skills supply, Mark Thomas at the Taylor Economic Development Corporation says he expects Samsung to recruit across the US. “These will be very desirable jobs,” he says. “[Samsung] can cast a very wide net.”
As new workers arrive in Taylor, they will face strong competition for housing, with data from affordable housing advocacy group HousingWorks Austin showing a population growth of 33% over the last decade.
Housing prices have risen even faster, jumping 36% in just one year across the five-county region. Williamson County, where Taylor is located, was the county with the highest price hike: 43% from 2020 to 2021.
“Housing affordability has become a big issue, particularly in the areas these big plants are coming into,” says Nora Linares-Moeller, the executive director of HousingWorks. “It’s great that you're going to have all these workers, but you have to find a place [for them] to live.”
Taylor EDC’s Mr Thomas stresses that supply is rising to meet demand, with residential developers considering building master-planned communities in Taylor for the first time. “I don’t think Taylor would have been on the map without Samsung,” he adds.
Compared to places like the San Francisco Bay Area and Greater Boston, the Austin Region remains more affordable, despite its shared history as a technology and semiconductor hub. ARMA’s Mr Latson says: “When you look at the intellectual talent, the access to research and the advanced manufacturing workforce, I still think we have some of the best quality of life and affordability out of any really competing area.”
As billions of dollars pour into EV factories and semiconductor fabs across the US, more and more competing areas are entering the ring, most of them with lower housing costs but also less technological prowess than Austin.
The CHIPS Act earmarks $10bn for the creation of 20 dispersed “regional technology and innovation hubs” in “areas that are not leading technology sectors”, promoting sectors such as semiconductors, artificial intelligence (AI) and clean energy across the country.
While new semiconductor fabs are concentrated in Arizona, New York, Ohio and Texas, the wave of EV battery plants is already spreading across the US: plants have been announced in Georgia, Kansas, Kentucky, North Carolina, Ohio and Tennessee.
Panasonic — for years Tesla’s only battery supplier and the co-builder of its Nevada gigafactory — recently considered the Austin area for its second US plant but ultimately decided to build the $4bn factory in De Soto, Kansas. “We chose Kansas for its skilled workforce, reliable infrastructure, and central location in North America,” a Panasonic representative told fDi.
The combination of federal funds and the pace of growth means new plants are being built in places with no history of semiconductor or automotive manufacturing — Intel, for example, is hiring 7000 workers at a new $20bn fab near Columbus, Ohio.
To fill those jobs, these locations may ultimately target the talent that Austin is now working to cultivate. Semi’s Ms Liss says: “When I was in Austin a couple of weeks ago, there were billboards all over the highways pulling people to Ohio, saying that housing is cheaper [and] that there are more jobs.”
Now that jobs are coming back to the US, will Americans answer the call?
This article first appeared in the October/November 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.