$52B CHIPS Trading A Boon For Construction, But Challenges Remain

0

The White House announced on Wednesday that President Joe Biden would sign it $52 billion CHIPS Actwhich subsidizes the semiconductor industry and gives a 25% tax credit to companies setting up plants in the US, on August 9th.

Platitudes from construction professionals began to pile up as soon as Congress passed the law last week.

Richard Branch, chief economist at Dodge Data & Analytics, said the CHIPS bill will “keep the construction sector on a secure footing as the economy slows next year.” He added that Dodge is currently pursuing nearly $33 billion worth of semiconductor fabs that are still in the planning stages.

James Christianson, vice president of government relations at the Associated General Contractors of America, said in a letter praising the passage of the CHIPS bill that the bill will “spur broader economic development and new, long-term jobs in the construction industry.”

Despite these accolades, challenges remain.

labor shortage

For example, there is a limited number of specialized contractors with the semiconductor skills and experience, said Jeffrey Gilmore, chairman of the construction practice of Akerman, a Miami-based law firm.

“Current demand and shortages of skilled labor will pose a significant challenge to the teams selected to undertake such projects,” Gilmore said. “Ultimately, successful project delivery requires a flexible team prepared to deliver highly specialized design and construction services suited to the clean building environment required for an industrial precision chip facility.”

The pace and complexity of such projects pose additional challenges. These jobs typically require advanced design-build and engineering, procurement and construction approaches, Gilmore said, as well as increased security.

“Access to a security-cleared workforce is likely to present another complication that may limit the pool of qualified candidates,” Gilmore said. “Access to federal funding is also likely to introduce a number of unique compliance issues to meet relevant requirements that will be mandated as a condition of funding.”

Davis Bacon Questions

Peter Comstock, senior director of legislative affairs at Associated Builders and Contractors, also raised concerns about how the Davis-Bacon regulations, which set prevailing wages for federal projects, will be incorporated into private construction contracts.

“Davis-Bacon’s expansion could have a devastating impact on an industry facing a 650,000 labor shortage in 2022, putting 87% of non-union construction companies at a serious competitive disadvantage when it comes to winning contracts ‘ Comstock said in an email to Construction Diving. “[It will limit] the ability of many otherwise skilled small businesses and construction workers and trainees to participate in these projects.”

timing of funds

Then there is the question of how and when the dollars will actually flow. Nine months after its passage, funds from last year’s $1.2 trillion infrastructure bill are just beginning to flow into concrete projects.

Rick White, a former congressman and current board member of Alliantgroup, a Houston-based consulting and management engineering firm, expressed concerns about the distribution of the funds.

“The primary purpose of this law is to encourage silicon chip manufacturing in the United States,” White said. “In a perfect world, we would allow manufacturing to stay here, but we’re also trying to make sure the funding goes where you have the most innovation and the most efficient use of the money. And I think that’s a little unclear.”

Lots of positives

Aside from these concerns, others noted that there are still tremendous opportunities for construction companies.

That’s especially true for those who have done these types of projects before, said Larry Prosen, state contract and construction attorney at Cozen O’Connor, a law firm headquartered in Philadelphia.

“There’s been a whole bunch of issues related to new chip fabs coming on with delays, what the market is doing, inflation, labor, material escalation,” Prosen said. “So the front end for the actual build should be very good. I would expect that we will see a clear uptrend.”

Some notable projects poised to benefit from the CHIPS Subsidies and Tax Credits Act are:

  • Samsung’s 11 chip factories worth $191 billion in Texas
  • Intel’s $20 billion facility in Licking County, Ohio.
  • Chip factory GlobalFoundries in Malta, New York.
  • Production expansion of Micron Technology in Boise, Idaho.
  • Taiwan Semiconductor Manufacturing Company’s $12 billion computer chip factory in Arizona.
Share.

Comments are closed.