The U.S. semiconductor industry is at a crossroads, facing both unprecedented opportunities and significant challenges. Recent legislative moves, such as the CHIPS and Science Act, aim to stimulate domestic manufacturing and lessen reliance on foreign chip supplies.
Despite the optimistic outlook, the sector is grappling with potential labor shortages, as highlighted by a McKinsey study. It predicts the U.S. semiconductor industry could be short up to 146,000 technicians and engineers by 2029, which could seriously hinder its growth.
The escalating demand for chips, driven by advancements such as artificial intelligence (AI), complicates this labor issue. The industry, which encompasses everything from smartphones to military weapons, requires skilled workers who are both trained and ready to meet this increasing demand.
The labor shortage threat is compounded by the findings of the McKinsey report, which explains how existing labor sources aren’t sufficient for the expected growth. Bill Wiseman, senior partner at McKinsey, noted, "The world’s semiconductor leaders are betting on the U.S. becoming a manufacturing hub... If we can’t achieve [high productivity], we’ve got a problem.”
Investment has surged since President Biden signed the CHIPS and Science Act, which allocated nearly $53 billion aimed at bolstering the U.S. semiconductor manufacturing sector. Major players, including TSMC, Intel, and Samsung, have announced massive expansions, aiming to create over 115,000 construction and manufacturing jobs.
But without enough trained technicians and engineers, these factories won't operate at full capacity. A labor shortfall could result not only in decreased productivity but also drive up the prices of consumer electronics, limiting accessibility for everyday consumers.
Additional challenges loom on the horizon as geopolitical tensions arise. The U.S. currently imports many of its chips from Taiwan, and as relations between the U.S. and China become strained, there are fears about potential disruptions to chip production and distribution.
The uncertainties have caused some experts to raise alarms. Taylor Roundtree, another McKinsey associate partner, mentioned, "We just want to make sure investment is used appropriately," recognizing the significant taxpayer dollars at stake.
Meanwhile, efforts to expand the semiconductor workforce are underway. Academic institutions and organizations are partnering to create targeted job training programs aimed at filling the skills gap.
Purdue University’s SCALE initiative, funded by the Department of Defense, stands out as it aims to train students across 22 universities to become experts in microelectronics. Similarly, the Maricopa County Community College District has teamed up with key industry players like Intel and TSMC to prepare students for high-demand roles.
Urgently needed are initiatives focused on youth, as about one-third of today’s semiconductor workforce is nearing retirement. Roundtree emphasizes the importance of building optimal training programs proliferated throughout the country, especially focusing on regions with heavy investment.
Hiring locally and attracting talent from underrepresented communities is another strategy the industry could use. The industry sees engineers as more likely to move for opportunities compared to technicians, who often prefer to remain closer to home.
To attract young talent, companies must improve the perception of semiconductor careers. Initiatives could include facility tours and outreach to schools to highlight the positive aspects of working within the semiconductor industry.
Simultaneously, various short- and long-term strategies can help bridge the labor gap. This includes hiring workers with transferable skills from other sectors, targeting outreach to veterans and immigrant communities, and boosting mobility through expanded transportation options.
Many companies are as well wrestling with project delays tied to recent legislation. The Financial Times recently reported on significant setbacks tied to the Inflation Reduction Act (IRA) and the CHIPS Act; nearly 40% of major announced investments have been paused or delayed.
Often, these delays stem from external economic conditions and political uncertainty surrounding upcoming elections. Notably, companies like TSMC are pushing back the operations of their new plants, as scope changes force reconsiderations of timetables.
Prominent projects on hold range from LG Energy Solution’s $2.3 billion battery plant to TSMC’s Arizona factory. Reports indicate these investment reductions are largely the result of lower demand, especially for electric vehicles.
Specific delays also relate to unclear regulations under the IRA, which have made firms hesitant to commit funds. Industry insiders warn about negative impacts on the U.S. goal to restore semiconductor manufacturing autonomy.
Simultaneously, international competitors, particularly from China, have ramped up their semiconductor production capabilities, presenting more pressure on the U.S. market. China's manufacturing surge may be bolstered by favorable government support, potentially displacing U.S. firms if radical policy changes do not occur here.
Investments to counter this competitive threat include new subsidies under the CHIPS Act. Yet, concerns remain about whether those funds will be effectively utilized, especially if projects continue to stall.
Some industry experts have suggested the need for new strategies so businesses can better navigate supply chain challenges. A more stable and foreseeable policy environment could help lessen uncertainties and encourage faster action on critical manufacturing expansions.
Among the companies experiencing challenges is SK Hynix, which has plans to broaden its high-bandwidth memory production facility backed by CHIPS Act funding. Despite government incentives, there’s uncertainty about future supply and demand dynamics impacting investment decisions.
TSMC's projected delays serve as illustrative of larger industry trends. If the United States is to regain its historical lead, it will need to overcome labor challenges and volatility presented by economic adjustments globally.
Continuous dialogue and efforts to adapt are critical as the semiconductor industry faces tight timelines and heavy expectations from stakeholders. Resilience is required now more than ever as every sector relies heavily on chips for their operation.
