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$52B CHIPS Act a Boon for Construction, but Challenges Remain

August 3, 2022 | published in
Sebastian Obando | Reporter

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The White House announced Wednesday President Joe Biden will sign the $52 billion CHIPS Act, which subsidizes the semiconductor industry and provides a 25% tax credit for companies that build facilities in the U.S., on August 9.

Platitudes from construction pros started piling in as soon as Congress passed the bill last week.

Richard Branch, chief economist for Dodge Data & Analytics, said the CHIPS Act will “keep the construction sector on sure footing as the economy slows over the next year.” He added Dodge is currently tracking nearly $33 billion in semiconductor fabrication plants still in the planning stages.

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

Despite those accolades, challenges remain.

Labor shortage

For example, there are a limited number of specialty contractors with the skill and experience in the semiconductor space, said Jeffrey Gilmore, chair of Akerman’s construction practice, a law firm based in Miami.

“The current demand and shortage of skilled labor will present a substantial challenge for the teams selected to perform such projects,” said Gilmore. “Ultimately, successful project delivery will demand a nimble team prepared to perform very specialized design and construction services suited to the clean building environment necessary for a precision industrial chip facility.”

The pace and complexity of such projects will present additional challenges. These jobs typically require progressive design-build and engineering, procurement and construction approaches, Gilmore said, as well as heightened security.

“Access to a workforce with security clearances will likely provide a further complication that may limit the pool of qualified candidates,” said Gilmore. “Access to federal funds will also likely entail a unique set of compliance issues to address relevant requirements that will be mandated as a condition of the funding.”

Davis-Bacon questions

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

“Davis-Bacon expansion could have a devastating impact on an industry facing a workforce shortage of 650,000 in 2022 and put the 87% of nonunion construction companies at a serious competitive disadvantage when it comes to winning contracts,” said Comstock in an email to Construction Dive. “[It will limit] the ability of many otherwise qualified small businesses and skilled construction workers and apprentices from participating in these projects.”

Timing of funds

Then there’s the question of how and when the dollars will actually flow. Funding from last year’s $1.2 trillion infrastructure act is just now beginning to trickle out to actual projects, nine months after it was passed.

Rick White, former congressman and current board member at Alliantgroup, a Houston-based consulting and management engineering firm, raised concerns on how the funding will be distributed.

“The main point of this act is to promote manufacturing of silicon chips in the United States,” said White. “In a perfect world, we would facilitate that manufacturing staying here, but also try to make sure that funding goes to places where you’ll have the most innovation, the most efficient use of the money. And I think that’s a little unclear.”

Plenty of positives

These concerns aside, others noted there is still a tremendous opportunity for construction firms.

That’s particularly true for those who have done these types of projects already, said Larry Prosen, government contracts and construction litigation attorney at Cozen O’Connor, a law firm headquartered in Philadelphia.

“There’s been a whole bunch of issues about new chip plants coming online with delays, what the market is doing, inflation, labor, material escalation,” said Prosen. “So, the front end on actual construction should be very good. I would expect we’re going to see a significant uptick.”

Some noteworthy projects that are poised to benefit from the CHIPS Act via subsidies and tax credits include:

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