Global Technology - Feb 3, 2017

February 3, 2017
The H-1B Visa Debate:

A Global FAQ for Investors
Equity Research
The H-1B Visa Debate: A Global FAQ for Investors

US election: Catalyzing renewed debate on role of H1B visas
The US election has catalyzed a renewed debate on potential changes to James Schneider, Ph.D.
(917) 343-3149 james.schneider@gs.com
the H-1B visa system. We provide a global FAQ for investors to frame the Goldman, Sachs & Co.
range of potential outcomes and the impact on the global tech industry.
Alec Phillips
What is an H-1B visa, and how does it work? (202) 637-3746 alec.phillips@gs.com
Goldman, Sachs & Co.
First instituted in 1991, the H-1B visa system was designed to provide US
companies with increased access to highly qualified talent overseas. Under
Heather Bellini, CFA
the current system, a maximum of 85k visas are granted annually for a (212) 357-7710 heather.bellini@gs.com
period of 3 years (with renewals for additional 3 year periods) and potential Goldman, Sachs & Co.
for a green card thereafter. The minimum H-1B salary is $60k (unchanged
Heath P. Terry, CFA
since 1991), and holders can apply for a qualified spouse to work in the US. (212) 357-1849 heath.terry@gs.com
We estimate that 900k - 1mn H-1B visa holders currently reside in the US. Goldman, Sachs & Co.
What potential changes to the system are on the table? Simona Jankowski, CFA
Newly introduced legislation in Congress, as well as other reported memos (415) 249-7437 simona.jankowski@gs.com
on the table from the Trump Administration, proposes several changes to
the existing H-1B program. These proposals could: (1) increase minimum Mohammed Moawalla
salary requirements for H-1B visa applicants; (2) impose a bidding +44(20)7774-1726 mohammed.moawalla@gs.com
Goldman Sachs International
system whereby employers sponsoring an H-1B at higher salary levels
would have preference over bidders at lower salaries; (3) place caps on the Lara Fourman
number of US workers employed by a company who are on an H-1B visa. (917) 343-7293 lara.fourman@gs.com
What can be done with executive orders vs. legislation?
The President is authorized to make limited administrative changes to the Julia McCrimlisk
(917) 343-2456 julia.mccrimlisk@gs.com
H-1B system via the Department of Homeland Security, including the Goldman, Sachs & Co.
application process and the ability of spouses to seek work in the US.
However, any increase in the number of visas offered or broad changes to Love Ghotra
(801) 741-5441 love.ghotra@gs.com
allocation policy must be made in Congress with the legislative process. Goldman, Sachs & Co.
What impact could potential changes have on the industry?
Potential changes to the H-1B system could have significant impact across
Tech including: (1) Lower margins for IT Services companies: We calculate
total costs for IT Services companies could rise by 3%-14% (with a larger
EPS drop), depending on the reforms. Among larger firms, we see the biggest
impact for Cognizant, TCS, Infosys and Wipro; (2) Higher wages for US
tech workers, and higher labor costs for employers: Companies may opt to
hire more American tech workers at higher salaries given the reduced wage
gap, with increased labor costs across Tech; (3) Increased talent availability
for Software and Internet: A salary-based allocation process could be
favorable for Software & Internet companies given higher average salaries.
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors
should consider this report as only a single factor in making their investment decision. For Reg AC certification and other
important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by
non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc. Global Investment Research

February 3, 2017 Global: Technology
THE H-1B VISA PROGRAM in numbers

SHARE OF WORKFORCE SUPPLY/DEMAND MISMATCH
The number of H-1B visa The maximum number of new H-

900,000+ holders working in the US
today, roughly 0.7% of the 85,000
1B visas the US can grant per year
(not including renewals). Congress
labor force. (p. 4) initially set this cap at 65k in 1991
and raised it as high as 195k in the
late 90s. (p. 4)
The share of US tech-
12%-13% related jobs filled by H-1B
visa holders. (p. 4) The percentage of H-1B visas
24% reserved for applicants with
advanced degrees from US
universities. (p. 4)
BIG TEN
The share of new H-1B visas held
by the top 10 awarded companies H-1B applications received in
34% in 2014, which included Tata

Consultancy, Infosys, Cognizant,
236,000 2016nearly three times the
annual quota. (p. 4)
IBM and Accenture. (p. 6)
LIONS SHARE
Prof. services
6% Other
14% Other
18%
Percentage of
Ed 6%
65%
H-1B issuance for China 70% 2015 H-1B visas
computer-related
jobs in 2015. (p. 7).
12% 70% issued to Indian
citizens. (p. 10).
Architecture &
engineering 9%
A HIGHER FLOOR
The minimum required salary

$60k $75k
The average salary for H-1B
for H-1B visa holders employees at IT service firms.
unchanged since 1991. (p. 4) (p. 12)
$100k/ Minimum H-1B salaries

Estimated increase (GSe) in
proposed by two different
3%-14% costs for IT service firms
assuming some change in the
$130k Congressional bills. (p. 7)
minimum salary rules. (p. 9)
Goldman Sachs Global Investment Research 2

The H-1B Visa Debate: A Global FAQ for Investors
How the visa system works today

Question 1: What is the H-1B visa program? How does it compare to other visas?
For more on potential
policy actions under a
H-1B visas have been issued under the authority of the Immigration Act of 1990 since 1991.
Trump administration, According to the US Citizenship and Immigration Services (USCIS), You may be eligible
see our GS360 for an H-1B visa if you are planning to work...in the United States in an occupation that
webpage. Our normally requires a bachelors degree or higher in a related field of study (e.g., engineers,
economists and scientists or mathematicians), and you have at least a bachelors degree or equivalent in a
strategists explore the field related to the position. The visa was introduced to provide US companies with
implications of tax
increased access to highly qualified talent overseas.
reform, protectionist
trade policies, and H-1B visas grant an initial period of stay in the United States of up to three years.
more. Extensions are possible in up to three-year increments. The H-1B visa is considered a dual
intent visa, meaning an H-1B holder can have legal immigration intentand apply for and
obtain a green cardwhile still holding an H-1B visa.
The H-1B visa is one of many types of work visas in the US. In Exhibit 1, we summarize the
different US work visas, the requirements, and the period of stay. While much of the recent
political news has been around H-1B visa reform, L-1 and EB-5 visas have also come under
scrutiny. L-1 visas are granted to foreign workers that have worked for the corporation for
at least one year prior to getting the visa. The EB-5 visa is for individuals that invest at least
$1mn to create ten new US jobs, commonly achieved through real estate development.
Exhibit 1: H-1B is the most commonly issued work visa in the US

Types of US work visas; duration considers maximum initial stay, not opportunity for renewals; visas issued includes new visas
and renewals issued in 2015
U.S. Work Visas
H-1B L-1A L-1B O-1A EB-2 EB-5 E-2 B-1
For those with

For those with
achievements Temporary
For those with extraordinary For foreign For treaty
For inter-office transfers in the arts, business
job offers ability or investors investors
sciences, or visa
achievement
business
Duration 3 years 1 year 3 years 3 years Permanent 2 years 1-6 months
Visas issued 172,748 78,537 23,680* n/a n/a 41,289 43,421
*Broader category than O-1A, which includes O-1, O-2, and O-3 visas
Source: US Citizenship and Immigration Services, Goldman Sachs Global Investment Research.

Question 2: How are H-1B visas allocated by the government?

In order to apply for an H-1B visa, employers must first submit a Labor Condition
Application (LCA) to the Department of Labor before the H-1B petition is submitted. The
LCA describes the position, rate of pay, proposed period of employment, and work location.
In addition, an employer must attest that: (1) it will provide the H-1B employee the same
benefits offered to US workers and pay the H-1B employee the higher of: the actual wage
paid others with similar experience and qualifications, or the prevailing wage for the
occupation; (2) it will provide the employee with working conditions that will not adversely
affect the working conditions of similar workers; (3) there is no strike or labor dispute at the
place of employment in the same occupation; (4) it has advertised the position for at least
10 business days. The Department of Labor certifies the validity of the LCA, and the H-1B
petition is then entered into a lottery system organized by the United States Citizenship and
Immigration Services (USCIS), which is part of the Department of Homeland Security.
H-1B visas are allocated by USCIS through random lottery based on the number of
applications. The USCIS employs a first-come, first-served, random computer lottery
system to select applicants up to the legal quota. USCIS first conducts a lottery for
advanced degree applications (20k quota). Any requests not selected are put back into the
general pool in a second lottery (65k quota). There is no limit on the number of applications
a company can submit. Once selected, based on DHS policy, the spouse of an H-1B visa
holder may also be eligible to seek work in the US.
The number of H-1B applications consistently outstrips the number of visas available.
USCIS received 236k H-1B visa applications in 2016, roughly three times the 85k annual
quota (Exhibits 2 and 3). Congress initially set the cap at 65k in 1990. After the visa cap was
first reached in 1997, Congress temporarily raised the cap to 115k in 1999 and 2000 and
195k from 2001-2003. The cap was lowered to 65k in 2004-2005 before settling at its current
level of 85k (with 20k allocated for applicants with graduate degrees from US universities).
The H-1B visa requires a minimum salary of $60k.
Exhibit 2: There have been no changes to the H-1B visa Exhibit 3: H-1B visa issuance has continued to increase
cap over the last decade New H-1B visa issuance and renewals, 1990-2015
Annual H-1B visa cap by year, 1991-present
250,000 200,000 172,748 H-1B visas

were issued in 2015
180,000
200,000 195k 160,000
140,000
150,000 120,000
115k 100,000
65k + 20k with graduate degrees
100,000 from U.S. universities 80,000 Visa caps were first
reached in 1997
65k 60,000
50,000 40,000
20,000 794 H-1B visas were

issued in 1990
0 0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: US Department of State. Source: US Government Accountability Office, US Chamber of Commerce.
Question 3: How big an impact are H-1B visas in terms of the US labor force?
We estimate that 900k to 1mn individuals are working under H-1B visas in the US today,
based on the assumption that most existing visas are renewed for a second term, and that
about two-thirds of qualified H-1B visa holders eventually apply for a green card (based on
average wait times and green card quotas for countries affected). While H-1B visa holders
comprise only 0.6%-0.7% of total US jobs, we estimate they comprise about 12%-13%

of tech-related jobs (Exhibit 4). Employment penetration figures would be slightly higher
when including spouses of H-1B visa holders (which could be as many as 500k people
based on prevailing marriage rates of roughly 50% across countries).
Exhibit 4: US H-1B visas at a glance
US jobs ('000s) Total jobs Tech-related jobs

US 144,314 4,988
H-1B 900-1,000 600-670
% H-1B 0.6%-0.7% 12.1%-13.4%
Source: USCIS, Bureau of Labor Statistics, Haver, Goldman Sachs Global Investment Research.
Framing the debate around H-1B visas

Question 4: What are the arguments in favor of the program as it stands today?
Many corporate tech industry leaders and politicians (including President Obama), have
been strongly in favor of the H-1B program and have even advocated for its expansion. We
highlight three arguments that are generally cited in favor of the H-1B visa program:
(1) H-1B workers help fill critical labor shortages. The National Association of
Software and Services Companies (NASSCOM), the Indian trade association,
estimates that the US will face a shortage of just over a million IT engineers by
2018. The association also argues that nearly half of the students enrolled in STEM
(Science, Technology, Engineering, and Mathematics) programs in US universities
are foreign nationals. Bureau of Labor Statistics data shows that unemployment
rates are lower for occupations that use a large number of H-1B visas than the
overall US (Exhibit 5), and a CIO Survey conducted by Harvey Nash/KPMG shows
that 65% of CIOs reported a technology skills shortage in 2016 (Exhibit 6).
(2) H-1B visas promote entrepreneurship and long-term job creation in the US.
Although there are no hard figures on the topic, proponents of H-1B visas argue
that foreign-born technologists who enter the US on educational or H-1B visas are
particularly entrepreneurial, and often go on to form their own ventures which
eventually add significantly to US job creation. A National Foundation for
American Policy study noted that 51% of startups with $1bn or greater market cap
in 2016 had at least one immigrant founder. In addition, technology startup
companies with limited startup funding can source talented individuals and
compete more easily for talent with larger firms (which is an explicit part of Rep.
Lofgrens proposed reforms; see below).
(3) H-1B workers are additive to US GDP and consumption. H-1B workers are well-
educated and command high wages, some of which would be reinvested back into
the US economy. In 2013, the Hoover Institution at Stanford University evaluated
the potential GDP benefit from a Senate bill to raise the cap on H-1B workers to a
minimum of 110k and a maximum of 180k (compared to 85k today). The
researchers found that these new H-1B workers would add an estimated $456bn to
GDP over the next ten years, over half of which would accrue to current US
citizens and residents.

Exhibit 5: Unemployment rate for H-1B-related jobs is Exhibit 6: 65% of CIOs report a technology skills shortage
lower than that of the overall US today, a figure on the rise since the recession
US unemployment rate and professional and related % of CIOs reporting technology skills shortage, 2005-2016
occupations unemployment rate
12% 100%
85%
% of CIOs reporting tech skills shortage

90%
10% 78%
80% 73% 71%
Unemployment rate
8% 70% 65%
58% 60% 59%
60% 54%
6%
47% 45%
50% 42%
4%
40%
2% 30%
20%
0%
10%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
National Professional and Related Occupations
Source: Bureau of Labor Statistics, Haver. Source: Harvey Nash/KPMG CIO Survey 2016.
Question 5: What is the motivation to change the current program?

Opponents of the H-1B program, as well as various members of Congress, have raised a
number of objections to the existing H-1B visa program, including:
(1) H-1B visa holders take jobs away from qualified Americans. Even though H-1B
visas are intended to fill labor shortages for skilled labor, there have been reported
incidents (and subsequent investigations) of companies such as Disney and
Southern California Edison that have allegedly laid off hundreds of employees and
replaced them with foreign workers brought to the US by outsourcing firms.
In a Senate Judiciary Committee hearing in 2015, Senator Grassley noted that

most employers are not required to prove to the Department of Labor that they
tried to find an American to fill the job first. And, if there is an equally or even
better qualified US worker available, the company does not have to offer him or
her the job. Some research has even questioned if there is a STEM shortage at all,
with a study by Georgetown University noting that only about half of those
graduating with undergraduate STEM degrees actually work in STEM-related fields
after college.
(2) H-1B visas depress wages for American technology workers. Some studies
have found that H-1B visa holders are often paid less than their US counterparts,
which runs counter to the requirements of the H-1B visa petition process (workers
are supposed to be paid the prevailing wage). According to analysis by Ron Hira, a
professor at Howard University who testified before Congress on high-skilled
immigration, foreign workers can be paid 20% to 40% less than the average wage
paid to Americans.
(3) The H-1B visa program favors certain industries over others. A
disproportionate share of H-1B visas are granted to IT outsourcing companies.
About two-thirds of H-1B petitions approved were for computer-related jobs, and
the ten employers that received the most H-1B visa approvals, which comprised
34% of total new visas issued, were all consulting and outsourcing companies
(Exhibits 7 and 8).

Exhibit 7: Consulting and outsourcing companies are Exhibit 8: H-1B visas are concentrated among tech jobs
frequent users of H-1B visas H-1B visa issuance by occupation, 2015
Top 20 employers by H-1B visa approvals, 2014
Company H-1B visas % of total*

Tata Consultancy Services 7,149 8.4%
Cognizant Technology Solutions 5,228 6.2%
Infosys Limited 4,022 4.7% Other
Wipro Limited 3,246 3.8% 14%
Accenture 2,376 2.8%
Tech Mahindra 1,850 2.2%
IBM 1,513 1.8% Education
Capgemini** 1,422 1.7% 6%
L&T Infotech 1,298 1.5%
HCL Technologies 927 1.1% Professional
Amazon 877 1.0% services
Computer Sciences Corporation 873 1.0% 6%
Computer-related
Microsoft 850 1.0% 65%
Google 728 0.9% Architecture &
Intel 700 0.8% Engineering
Deloitte 559 0.7% 9%
Mindtree 487 0.6%
Apple 443 0.5%
UST Global 421 0.5%
Mphasis 405 0.5%
Top 20 35,374 41.6%
*Assumes 85k new visas issued.
**Capgemini includes iGate H-1B visa data.
Source: Computerworld. Source: US Citizenship and Immigration Services.
Question 6: What potential changes to the system are on the table?

Over the past five years, a number of bills have been proposed in Congress seeking to
change the existing H-1B system in one or more ways (Exhibit 9). In addition, recent press
reports (Bloomberg and Vox) suggest that President Trump may also introduce his own
proposal. Most existing policy proposals have taken one of the following dimensions:
(1) Increase in minimum salaries: Several bills propose raising the minimum salary
for H-1B visa workers from the current minimum of $60k (which has not changed
since 1991) to minimize wage arbitrage with local US workers. Reps. Issa and
Lofgren have proposed increasing salary minimums to $100k and $130k,
respectively.
(2) Salary bid vs. first-come, first-served lottery: Several proposals would change
the H-1B allocation process to a salary bidding system, where companies would
bid for the salary at which they are willing to sponsor someone. This compares to
the random lottery system today, where there is no limit on the number of
applications a company can submit. Trump policy advisors have reportedly
discussed a bid process (Bloomberg), although no formal proposal has surfaced.
(3) Capping the proportion of US workers on H-1Bs: Local employees (non-visa US

onsite workers) must comprise a minimum percentage of a companys US-based
headcount. Sens. Grassley and Durbin have proposed a bill with a 50% on-site cap.
We summarize the details of the most recent visa proposals in Exhibit 9.

Exhibit 9: Summary of H-1B policy proposals
Sens. Grassley/Durbin Rep. Issa Rep. Lofgren President Trump

Current system H-1B and L-1 Visa Protect and Grow High-Skilled Integrity and
No formal proposal
Reform Act American Jobs Act Fairness Act of 2017
Minimum salary $60,000 $60,000 $100,000 $130,000
Allocation process Lottery Lottery Lottery Bid Bid

50% onsite cap for H-1B
Employee cap None None None
and L-1 visas
Source: Goldman Sachs Global Investment Research.
H-1B and L-1 Visa Reform Act (Sens. Grassley and Durbin): This bill prioritizes students
educated at US institutions and advanced degree holders when allocating visas, and
prevents companies with over 50 employees from hiring additional H-1B employees if H-1B
and L-1 workers represent over 50% of the companys US workforce. It also introduces
reforms to the L-1 visa program including a wage floor for L-1 workers. The bill was first
introduced in 2007, and was reintroduced in January 2017.
Protect and Grow American Jobs Act (Rep. Issa): This bill raises the minimum salary to
$100k (from $60k) and removes the exemption for workers with masters degrees. The bill
was first introduced in July 2016 and was reintroduced in January 2017.
High-Skilled Integrity and Fairness Act of 2017 (Rep. Lofgren): Eliminates the lowest
wage category, increases the prevailing wage requirements, and raises the minimum
salary at which employers are exempt from recruiting in the US to over $130k. The bill also
prioritizes employers willing to pay a higher wage (200% of the prevailing wage at the
given level), and sets aside 20% of annual H-1B visas for start-ups (50 or fewer workers).
This bill was first introduced in January 2017.
Question 7: What can be done with executive orders outside legislation?

Substantial changes to the H-1B visa program would very likely require Congressional
action to change the existing statute, as the existing law is specific about:
- The maximum number of H-1B visas that may be allocated;
- The principle of a first come, first served process for allocating H-1B visas.
However, executive action could conceivably be used to:
- Increase rigidity of enforcement for the existing certification process at an agency

level;
- Reduce H-1B visa quotas (existing law is specific about the maximum, but does
not set minimums);
- Potentially modify the LCA process (used to certify employer petitions for specific
open positions) to require employers to provide proof that they have tried to fill a
position with an American first;
- Potentially modify the LCA process to restrict lower-wage applicants (this point is
unclear given the level of specificity of the LCA process as codified in law).
We will continue to monitor the ongoing legislative process on immigration policy, as well
as forthcoming policy pronouncements from the Trump administration.

Potential implications of H-1B visa reform

Question 8: What industries and companies would be most impacted by
changes?
We believe that IT Consulting and Outsourcing companies, which tend to pay H-1B
employees lower salaries relative to other industries, are at greatest risk given the
proposed reforms. Our analysis suggests that total costs could increase by 3% - 14%
for a range of IT Consulting and Outsourcing companies (with a correspondingly
larger drop in earnings), depending on what reforms might be enacted. More broadly, we
believe technology companies (which employ roughly two-thirds of H-1B visa holders)
could see a modest negative impact although we believe some changes (for example, a
bidding system) could also bring increased talent availability to certain industries such as
Software and Internet given the higher average salaries in these sectors.
Exhibit 10 illustrates that a higher minimum salary could increase operating costs across
the tech industry either minimally or significantly, depending on a companys H-1B
exposure and prevailing salary rates. The available data suggests that public IT Services
companies currently run at an average salary of $75k for H-1B employees, which is below
the minimum salaries in Rep. Issas proposal ($100k) and Rep. Lofgrens proposal ($130k).
Alternatively, if the allocation process switched from a first-come, first-served lottery
system to a salary bidding system, we would expect Consulting and Outsourcing
companies to be regularly outbid by Software, Internet, and Hardware companies, unless
they raise their salaries substantially.
Exhibit 10: Public consulting and outsourcing companies would be most at risk if higher minimum salaries are enacted
Incremental operating costs assuming higher minimum salary for H-1B employees
$80,000 salary minimum $100,000 salary minimum $130,000 salary minimum

Avg. salary
Company Industry H-1B visas* Salary chg. Incremental % Cost Salary chg. Incremental % Cost Salary chg. Incremental % Cost
($)
($) Cost ($mn) Increase ($) Cost ($mn) Increase ($) Cost ($mn) Increase
Public companies - meaningful impact
Mindtree IT Services 1,461 72,822 7,178 10 1.7% 27,178 40 6.5% 57,178 84 13.7%
Cognizant IT Services 23,790 72,559 7,441 177 1.7% 27,441 653 6.2% 57,441 1,367 12.9%
Mphasis IT Services 1,591 74,947 5,053 8 NM 25,053 40 5.0% 55,053 88 10.9%
TCS IT Services 20,973 69,648 10,352 217 1.9% 30,352 637 5.4% 60,352 1,266 10.8%
Infosys IT Services 14,659 79,201 799 12 NM 20,799 305 4.3% 50,799 745 10.4%
HCL Technologies IT Services 5,828 82,132 -- -- -- 17,868 104 2.8% 47,868 279 7.4%
Wipro IT Services 7,500 70,306 9,694 73 1.1% 29,694 223 3.5% 59,694 448 7.0%
Tech Mahindra IT Services 4,200 75,044 4,956 21 NM 24,956 105 3.0% 54,956 231 6.6%
Accenture IT Services 21,352 77,953 2,047 44 NM 22,047 471 1.7% 52,047 1,111 4.0%
Capgemini** IT Services 9,834 90,756 -- -- -- 9,244 91 NM 39,244 386 3.1%
L&T Infotech IT Services 6,897 74,064 5,936 41 NM 25,936 179 1.3% 55,936 386 2.8%
Public companies - no meaningful impact
CSC IT Services 500 60,736 19,264 10 NM 39,264 20 NM 69,264 35 NM
IBM IT Services 9,934 83,248 -- -- -- 16,752 166 NM 46,752 464 NM
Microsoft Software 5,694 122,641 -- -- -- -- -- -- 7,359 42 NM
Oracle Software 2,520 118,624 -- -- -- -- -- -- 11,376 29 NM
Amazon Internet 5,274 117,351 -- -- -- -- -- -- 12,649 67 NM
Google Internet 4,443 127,898 -- -- -- -- -- -- 2,102 9 NM
Intel Hardware 4,416 105,105 -- -- -- -- -- -- 24,895 110 NM
Qualcomm Hardware 3,381 116,343 -- -- -- -- -- -- 13,657 46 NM
Cisco Hardware 1,875 123,059 -- -- -- -- -- -- 6,941 13 NM
Apple Hardware 1,329 136,876 -- -- -- -- -- -- -- -- --
Private companies
Deloitte IT Services 6,150 95,371
UST Global IT Services 2,688 68,158
PwC IT Services 1,761 95,707
EY IT Services 1,119 92,297
*H-1B visa assumptions: for US-heritage IT Services companies, TCS, Infosys, Wipro, HCL Technologies, and Tech Mahindra, estimate based on company data, management
conversations, and GS analyst estimates; for Mphasis, assume two-thirds of US headcount is on H-1B visas; for other companies, estimate based on Computerworld's citing of
Freedom of Information Act data from 2013 and 2014 and assumes employees on H-1B visas remain with the company for six years.
**Capgemini visa estimates incorporate iGate H-1B visa data.
Source: Computerworld, myvisajobs.com, company data, Goldman Sachs Global Investment Research.

Question 9: What countries are most likely to be affected?

We believe India is most likely to be affected in the event of any changes to H-1B visa
policy. About 70% of H-1B visas were issued to people of Indian origin in 2015 (Exhibit 11).
This implies that about 60k of the new H-1B visas (70% of the 85k quota) are issued to
Indian citizens. To put this into context, about 1.3mn people graduate with a Bachelors in
Science or Bachelors in Technology from Indian universities each year. If H-1B visas were
only sourced from this cohort, this implies that about 4.6% of technical undergraduates
are employed through H-1B visas.
Exhibit 11: About 70% of H-1B visas are issued to Indian citizens
H-1B visa issuance by country, 2015
South Philippines,
Germany, 1,432
Korea,
1,091
2,526
Brazil, 1,258 Other, 18,781
France, 1,594
Japan, 1,146
Mexico, 2,894
UK, 2,111
China, 19,963
India, 119,952
Source: US Department of State, Bureau of Consular Affairs.
We believe the impact to Indian H-1B applicants depends greatly on whether the number of
H-1B applications continues to exceed the 85k cap.
(+) Applications still exceed the cap: Indian H-1B visa holders would likely work at higher-
paying companies (more concentrated in Software, Internet, and Hardware positions vs.
Consulting positions under a bid system) or have higher salaries (given higher minimum
salary requirements). Given higher salaries on average, this would increase remittance
volumes from the US to India.
(-) Applications do not exceed the cap: More stringent requirements could significantly
limit demand for workers on H-1B visas. Foreign workers might be deemed less attractive
to US employers as a result of a narrower wage gap between them and their US
counterparts. This could lead to oversupply of technically skilled labor in India, which could
negatively impact both the domestic job market and current account balances. We believe
this could have a significant negative impact for Indian-heritage IT Services companies, as
their cost competitiveness vs. more US-focused peers could be diminished.

Question 10: What are the longer-term implications of H-1B visa reform?
We highlight three major longer-term implications of H-1B visa reform:
(1) Lower margins for IT consulting and outsourcing companies: We calculate that
total costs could increase by 3% - 14% for public IT Consulting and Outsourcing
companies (with a correspondingly larger drop in earnings), depending on what
reforms might be enacted under a range of scenarios resulting from higher salary
minimums. We believe that such changes could potentially result in the hiring of more
American workers, especially considering the increased administrative and overhead
costs associated with the H-1B visa process. In some cases, we believe Indian-heritage
firms have already begun to adjust their hiring practices and anecdotal statistics from
some companies suggest that they have already started to submit fewer H-1B
applications over the past year vs. prior years (although little data is available).
However, we acknowledge that talent supply disruptions in the domestic labor force
are likely to persist for a period of years after the enactment of any such change given
the educational and career tracks of new university students and graduates.
(2) Salaries move higher with increased jobs for American tech workers, but
higher labor costs for tech employers: Companies may opt to hire more American
tech workers at higher salaries given the reduced wage gap, with increases in labor
costs across Tech. We would expect the biggest uplift to come at the low end of the
H-1B wage spectrum (especially for the IT Consulting and Outsourcing companies),
with a modest impact in Software, Internet, and Hardware, as these prevailing salary
levels are already close to the highest caps proposed in the legislation surveyed
(Exhibit 12). Importantly, we believe the direct impact to larger US tech companies
may be somewhat mitigated by the use of L-1 (intra-company transfer) visas used by
many, which may or may not be included in any potential rule changes. We would
expect overall labor costs to increase across the tech universe, with the potential
structural change in how the IT Consulting and Outsourcing industry approaches its
labor pyramid in terms of both seniority and onshore/offshore mix.
(3) Increased talent availability for Software and Internet: The technology industry,
particularly companies based in Silicon Valley, has consistently provided
anecdotal evidence of labor shortages to fill qualifying high-skilled positions. We
believe this may be due in part to a limited allocation of H-1B visas under the
current volume-based lottery process. We believe a salary-based bidding process
could be favorable for Software and Internet companies, potentially alleviating
some wage pressure at the higher end of the spectrum.

Exhibit 12: Companies with lower H-1B salary rates are at greatest risk under proposed
changes, particularly IT Services companies
Average H-1B visa salary by type of tech company
140,000
122,625 120,633 120,346
120,000
100,000
Average salary
80,000 75,172
60,000
40,000
20,000
-
Internet Software Hardware IT Services
Note: Services includes Accenture, Capgemini, Cognizant, IBM, HCL, Infosys, L&T Infotech,
Mindtree, Mphasis, Syntel, TCS, Tech Mahindra, Wipro; Hardware includes Apple, Cisco, Intel,
Qualcomm; Software includes Microsoft, Oracle; and Internet includes Amazon, Google.
Source: myvisajobs.com, Goldman Sachs Global Investment Research.

Disclosure Appendix
Reg AC
We, James Schneider, Ph.D., Heather Bellini, CFA, Heath P. Terry, CFA, Simona Jankowski, CFA, Mohammed Moawalla, Lara Fourman, Julia
McCrimlisk and Love Ghotra, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject
company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to
the specific recommendations or views expressed in this report.
I, Alec Phillips, hereby certify that all of the views expressed in this report accurately reflect my personal views, which have not been influenced by
considerations of the firm's business or client relationships.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.
Investment Profile
The Goldman Sachs Investment Profile provides investment context for a security by comparing key attributes of that security to its peer group and
market. The four key attributes depicted are: growth, returns, multiple and volatility. Growth, returns and multiple are indexed based on composites
of several methodologies to determine the stocks percentile ranking within the region's coverage universe.
The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:
Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate
of various return on capital measures, e.g. CROCI, ROACE, and ROE. Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend
yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Volatility is measured as trailing twelve-month volatility adjusted for dividends.
Quantum
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in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.
GS SUSTAIN
GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list
includes leaders our analysis shows to be well positioned to deliver long term outperformance through sustained competitive advantage and
superior returns on capital relative to their global industry peers. Leaders are identified based on quantifiable analysis of three aspects of corporate
performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the
environmental, social and governance issues facing their industry).
Disclosures
Coverage group(s) of stocks by primary analyst(s)
James Schneider, Ph.D.: America-ATM/POS and Self-Service, America-IT Consulting and Outsourcing, America-Transaction Processors. Heather
Bellini, CFA: America-Software. Heath P. Terry, CFA: America-Internet. Simona Jankowski, CFA: America-Consumer Hardware & Mobility, America-IT
Hardware, America-Telecom Equipment. Mohammed Moawalla: Europe-IT Services, Europe-Software.
America-ATM/POS and Self-Service: CPI Card Group, CPI Card Group, VeriFone Systems Inc..
America-Consumer Hardware & Mobility: Apple Inc., BlackBerry Ltd., BlackBerry Ltd., Corning Inc., Garmin Ltd., GoPro Inc., Qualcomm Inc..
America-IT Consulting and Outsourcing: Accenture Plc, Black Knight Financial Services Inc., CGI Group, CGI Group, Cognizant Technology Solutions,
Computer Sciences Corp., Fidelity National Information Services, Fiserv Inc., International Business Machines, Sabre Corp., West Corp..
America-IT Hardware: 3D Systems Corp., Aerohive Networks Inc., Arista Networks Inc., Brocade Communications Systems, CDW Corp., Cisco
Systems Inc., F5 Networks Inc., Hewlett Packard Enterprise Co., HP Inc., Motorola Solutions Inc., NetApp Inc., Nimble Storage Inc., Nutanix Inc., Pure
Storage Inc., Stratasys Ltd., Xerox Corp., Zebra Technologies Corp.
America-Internet: Amazon.com Inc., Bankrate Inc., Criteo SA, eBay Inc., Endurance International Group, Etsy Inc., Expedia Inc., Groupon Inc.,
GrubHub Inc., IAC/InterActiveCorp, LendingClub Corp., Match Group, Netflix Inc., Pandora Media Inc., PayPal Holdings, Priceline.com Inc., Shutterfly
Inc., TripAdvisor Inc., Trivago N.V., TrueCar, Twitter Inc., WebMD Health Corp., Yahoo! Inc., Yelp Inc., Zillow Group, Zynga Inc..
America-Software: Adobe Systems Inc., Akamai Technologies Inc., Alphabet Inc., ANSYS Inc., Atlassian Corp., Autodesk Inc., Citrix Systems Inc.,
Facebook Inc., Microsoft Corp., MobileIron Inc., Oracle Corp., PTC Inc., Red Hat Inc., RingCentral, Salesforce.com Inc., Twilio, VMware Inc., Workday
Inc..
America-Telecom Equipment: Acacia Communications Inc., ADTRAN Inc., ARRIS International Plc, Ciena Corp., Finisar Corp., Infinera Corp., Juniper
Networks Inc., Lumentum Holdings.
America-Transaction Processors: Automatic Data Processing Inc., Blackhawk Network Holdings, Evertec Inc., First Data Corp., FleetCor Technologies
Inc., Global Payments Inc., MasterCard Inc., MoneyGram International Inc., Paychex Inc., Square Inc., Total System Services Inc., Vantiv Inc., Visa Inc.,
Western Union Co., WEX Inc..
Europe-IT Services: Atos, Capgemini, Indra, Wirecard, Worldline, Worldpay Group.
Europe-Software: Aveva, Dassault Systemes, Hexagon AB, Sage Group, SAP, SAP, Software AG, Temenos.
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Compendium report: please see disclosures at http://www.gs.com/research/hedge.html. Disclosures applicable to the companies included in this
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February 3, 2017

The H-1B Visa Debate:

The H-1B Visa Debate: A Global FAQ for Investors

The Goldman Sachs Group, Inc. Global Investment Research

THE H-1B VISA PROGRAM in numbers

The number of H-1B visa The maximum number of new H-

34% in 2014, which included Tata

The minimum required salary

$100k/ Minimum H-1B salaries

Goldman Sachs Global Investment Research 2

The H-1B Visa Debate: A Global FAQ for Investors

How the visa system works today

Exhibit 1: H-1B is the most commonly issued work visa in the US

U.S. Work Visas

H-1B L-1A L-1B O-1A EB-2 EB-5 E-2 B-1

For those with

Duration 3 years 1 year 3 years 3 years Permanent 2 years 1-6 months

Visas issued 172,748 78,537 23,680* n/a n/a 41,289 43,421

Goldman Sachs Global Investment Research 3

Question 2: How are H-1B visas allocated by the government?

250,000 200,000 172,748 H-1B visas

200,000 195k 160,000

20,000 794 H-1B visas were

Source: US Department of State. Source: US Government Accountability Office, US Chamber of Commerce.

Goldman Sachs Global Investment Research 4

Exhibit 4: US H-1B visas at a glance

US jobs ('000s) Total jobs Tech-related jobs

Framing the debate around H-1B visas

Goldman Sachs Global Investment Research 5

% of CIOs reporting tech skills shortage

Question 5: What is the motivation to change the current program?

In a Senate Judiciary Committee hearing in 2015, Senator Grassley noted that

Goldman Sachs Global Investment Research 6

Company H-1B visas % of total*

Source: Computerworld. Source: US Citizenship and Immigration Services.

Question 6: What potential changes to the system are on the table?

(3) Capping the proportion of US workers on H-1Bs: Local employees (non-visa US

We summarize the details of the most recent visa proposals in Exhibit 9.

Goldman Sachs Global Investment Research 7

Exhibit 9: Summary of H-1B policy proposals

Sens. Grassley/Durbin Rep. Issa Rep. Lofgren President Trump

Allocation process Lottery Lottery Lottery Bid Bid

Source: Goldman Sachs Global Investment Research.

Question 7: What can be done with executive orders outside legislation?

- The maximum number of H-1B visas that may be allocated;

However, executive action could conceivably be used to:

- Increase rigidity of enforcement for the existing certification process at an agency

Goldman Sachs Global Investment Research 8

Potential implications of H-1B visa reform

$80,000 salary minimum $100,000 salary minimum $130,000 salary minimum

Goldman Sachs Global Investment Research 9

Question 9: What countries are most likely to be affected?

Source: US Department of State, Bureau of Consular Affairs.

Goldman Sachs Global Investment Research 10

Goldman Sachs Global Investment Research 11

Source: myvisajobs.com, Goldman Sachs Global Investment Research.

Goldman Sachs Global Investment Research 12

Company-specific regulatory disclosures

Distribution of ratings/investment banking relationships

Goldman Sachs Global Investment Research 13

Buy Hold Sell Buy Hold Sell

Price target and rating history chart(s)

Goldman Sachs Global Investment Research 14

Ratings, coverage groups and views and related definitions