Resolving the skills shortage in the semiconductor sector

In considering the trajectory of the semiconductor industry, it's noteworthy that the ongoing evolution of technology and the increasing integration of chips into various facets of our lives contribute to the sustained demand for skilled semiconductor professionals. The shift in demand from consumer-oriented chips to those used in automotive, factory equipment, and appliances underscores the industry's adaptability and resilience. While fluctuations in the chip market are a natural part of its cyclical nature, the long-term growth projections present a compelling narrative for the necessity of addressing the semiconductor talent shortage. Beyond the immediate challenges, the industry's rapid expansion by over 80% by 2030 indicates a need for strategic workforce planning, educational initiatives, and collaboration between industry and academia to cultivate and nurture the talent pool.

Moreover, the semiconductor sector's role in driving innovation across diverse industries cannot be overstated. As we witness advancements in areas such as artificial intelligence, Internet of Things (IoT), and electric vehicles, the demand for specialized skills in semiconductor design, manufacturing, and implementation is poised to escalate. This presents an opportune moment for stakeholders to invest in comprehensive talent development programs, fostering a workforce equipped to tackle the evolving demands of the semiconductor landscape. In navigating the intricate intersection of technology, market dynamics, and human capital, a forward-looking approach is imperative. Proactive measures, such as promoting diversity and inclusion in the semiconductor workforce and emphasizing sustainable business practices, can further fortify the industry for the challenges and opportunities ahead. Ultimately, addressing the semiconductor talent shortage is not just a response to current market conditions but a strategic imperative for ensuring the industry's enduring success in a rapidly evolving technological landscape.

Navigating the Semiconductor Talent Shortage Amid Industry Growth

While the chip shortage may be easing for certain types of chips, particularly those used in PCs, smartphones, and crypto mining, the semiconductor talent shortage persists. The decline in demand for these chips can be attributed to factors such as weakened consumer buying, fluctuations in stock markets, and slowing economies. However, the demand for chips in sectors like automotive, factory equipment, and appliances remains robust. Forecasts indicate a nearly 14% increase in global semiconductor sales for 2022.

It's crucial to recognize that the short-term fluctuations in the cyclical chip industry, currently experiencing its sixth cycle since 1990, may not be as significant as the overarching trend. The industry is expected to grow by more than 80% by 2030. Consequently, the focus should extend beyond the immediate market shifts to address the long-term trajectory and the corresponding need for a sustained talent boost to facilitate, achieve, and support this substantial growth.

Addressing the Shortage of Semiconductor Workers

The widely discussed semiconductor shortages have significantly impacted crucial industries, prompting substantial attention and investments from both the private and public sectors in research and development, manufacturing, talent development, and more. Examples of these efforts include the recently enacted CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act, as well as the pending EU Chips Act in Europe. In 2021, the global semiconductor industry generated revenues exceeding $550 billion, and projections indicate an anticipated surge of over 80% to surpass a trillion dollars by 2030.

Deloitte's estimate of more than two million direct employees worldwide in the semiconductor industry for 2021 signals a pressing need for an additional one million skilled workers by 2030, translating to over 100,000 annually. To put this into perspective, the annual enrollment of graduate students in electrical engineering and computer science in the United States is fewer than 100,000.

The semiconductor worker shortage is poised to intensify, exacerbated by the current global economic climate and persistent supply chain challenges faced by semiconductor companies. Despite these hurdles, there are viable solutions that companies and policymakers can implement to address the talent shortage. These solutions include investing in the development of new talent pipelines, leveraging advanced analytics and tools, forming strategic partnerships with educational and government institutions, placing a heightened emphasis on diversity, equity, and inclusion (DEI) and environmental, social, and governance (ESG) factors, and enhancing the overall employee experience.

The Semiconductor Shortage: Disruptions, Mitigation, and Systemic Insights in the Automotive Industry,

The semiconductor shortage, exacerbated by the COVID-19 pandemic in late 2020, particularly hit the automotive industry, with anticipated ramifications extending through 2023 or even 2024. This scarcity disrupted global auto manufacturers, leading to production halts and substantial backlogs. By May 2021, estimated annual worldwide production losses amounted to a staggering $110 billion.

In response to this crisis, the auto industry, chip manufacturers, and governments adopted various mitigation strategies. The US government, for instance, offered substantial incentives, totaling $50 billion, to tech giants like Intel, Samsung, and Taiwan Semiconductor Manufacturing Company (TSMC) to establish factories within the country. Simultaneously, automakers like BMW and Stellantis entered strategic semiconductor supply agreements with Inova Semiconductors, Global Foundries, and Foxconn to secure future supplies and address vulnerabilities in their supply chains. Conversely, some companies had to make tough decisions, with Ford temporarily shutting down factories and prioritizing specific models, Tesla omitting redundant backup units in certain regions, and Volkswagen reducing night shifts in 2022.

To comprehend the systemic disruptions in supply chains caused by the semiconductor shortage, the study employed a two-pronged approach. Firstly, a thematic analysis of news articles on the pandemic-induced semiconductor shortage was conducted, providing insights into the causes and effects of the scarcity. Secondly, a stylized linear-programming-based supply chain planning model was developed, offering a dynamic perspective on how shortages impact various industries and highlighting the challenges in modeling such disruptions.

The findings revealed that the interplay of external shocks, such as the COVID-19 pandemic, and the reactions of supply chain players prolonged the disruption, resulting in a "systemic" impact. Consumer demand for electronic goods during the work-from-home period prompted chip manufacturers to reallocate capacity, intensifying shortages in the automotive sector. The geographic concentration of chip manufacturing, long lead times, poor coordination in the auto industry's multi-tier structure, and over-ordering during shortages further exacerbated the crisis.

Mitigation efforts employed by the auto industry included short-term operational strategies like product and assembly line prioritization. In the long term, localization of sources, supplier consolidation, capacity planning through stockpiling, and capacity reservation emerged as key strategies. Governments played a critical role in supporting domestic manufacturing capacity through subsidies or direct investments. Chip manufacturers, on the other hand, responded with increased capacity investments and workforce training to expand their capabilities. The stylized model demonstrated that capacity increases by chip manufacturers and changes in the auto manufacturers' product mix could mitigate the impact of the semiconductor chip shortage. Overall, the study provides valuable insights into the complex dynamics of systemic disruptions in supply chains and offers lessons for addressing and preventing similar crises in the future.

In 2021, the semiconductor industry demonstrated remarkable efficiency, generating approximately $275,000 in revenue per worker globally. This efficiency was largely attributed to the concentrated nature of chip manufacturing and the subsequent assembly, testing, and packaging (ATP) processes. A staggering 80% of all chips were produced in four East Asian countries, with over 90% of ATP taking place in these nations or nearby.

However, the recent semiconductor supply chain crisis exposed vulnerabilities in this highly centralized approach. Governments, particularly in the United States and Europe, are responding by investing over $100 billion to enhance local manufacturing capabilities. The U.S. aims to increase its chip production share from 10% to 30% by 2030, while the European Union targets a growth from less than 10% to 20%. Collectively, these regions, currently contributing to about a fifth of all chips, aspire to control 50% of the market share by the end of the decade. While this decentralized strategy is advantageous for U.S. and European industries dependent on chips, it comes at the cost of reduced labor efficiency, necessitating a larger workforce across more locations to achieve the trillion-dollar chip production goal.

A notable aspect often overshadowed is the concentration of ATP capabilities, which constitutes approximately 15% of the global semiconductor workforce. While the focus often revolves around chip fabrication facilities (fabs), the critical role of ATP facilities in the semiconductor supply chain is undeniable. Despite the emphasis on local manufacturing, the disparity in the number of ATP facilities remains significant, with only 65 in the Americas and 24 in Europe out of nearly 500 worldwide. This indicates that, for regions aiming at increased self-sufficiency, not only must the manufacturing workforce expand, but there's a parallel need for substantial growth in the ATP workforce. The challenge lies in balancing the pursuit of self-sufficiency with the inherent complexity of global supply chains, especially if chips produced in one region undergo ATP processes in another before reaching end consumers. The quest for a diversified and resilient semiconductor supply chain is undoubtedly a multifaceted endeavor.

Now what can be done?

Rearchitect Work:

Future-State Capabilities: Organizations should conduct a comprehensive assessment of their current capabilities and envision their future-state capabilities. This involves embracing digitalization, artificial intelligence (AI), and machine learning to optimize operations and enhance productivity. Rearchitecting work entails leveraging technology to automate routine tasks, enabling human workers to focus on high-value, strategic activities. This transformation should be aligned with the evolving needs of the semiconductor industry and its position within the broader technology landscape.

Human-Technology Interaction: Redesigning the way humans and technology interact is essential for staying competitive. This includes integrating AI and automation into workflows, creating synergies between human and machine capabilities. Upskilling the existing workforce to adapt to these technological advancements is imperative. It involves providing training programs, fostering a culture of continuous learning, and ensuring that employees are equipped with the skills necessary to thrive in an increasingly digitized work environment.

Unleash the Workforce:

Identify, Access, and Develop Future Skills: Semiconductor organizations must proactively identify the skills needed for the future. This involves a thorough analysis of emerging trends in engineering and manufacturing, recognizing that the competition for talent extends beyond semiconductor companies. It is crucial to assess and identify the skills required not only within the semiconductor industry but also across the broader Technology, Media, and Telecommunications (TMT) sector. Companies should adopt a multifaceted approach—building talent internally, acquiring talent externally, and leveraging partnerships or collaborations to meet their workforce needs.

Global Talent Dynamics: With skills traditionally outsourced overseas, semiconductor companies are now faced with a shift in paradigm. They need to recalibrate their talent strategies to attract and retain skilled professionals. This involves understanding the changing dynamics of global talent distribution, creating competitive compensation and benefits packages, and fostering a work culture that appeals to a diverse workforce. Additionally, the industry may benefit from collaboration with educational institutions to bridge the skills gap and cultivate a pipeline of future talent.

Adapt the Workplace:

Navigate Transformative Changes: As organizations explore new or greenfield locations, they need to navigate transformative changes effectively. This involves understanding the local talent landscape, regulatory environment, and cultural nuances. Successful adaptation to new locations requires strategic planning, collaboration with local stakeholders, and the ability to integrate seamlessly into the existing ecosystem. It may also involve establishing training programs to align the local workforce with industry requirements.

Optimize Work Environment: Creating an attractive workplace involves optimizing the physical and virtual environments to maximize the potential of workers. This includes providing a conducive physical workspace, implementing flexible work arrangements, and investing in technologies that facilitate collaboration. Employee well-being and engagement are critical considerations, and organizations should focus on creating a positive and inclusive workplace culture. This optimization aligns with the broader goal of attracting and retaining top talent in a competitive market.

The CHIPS Act: Transformative Investments in U.S. Semiconductor Industry

Introduction:

The passage of the CHIPS Act marked a significant milestone in the United States' efforts to bolster its semiconductor industry, addressing both economic and strategic imperatives. With a notable allocation of $77 billion in subsidies and tax credits, the Act aims to stimulate domestic chip production and foster innovation. This article explores the key provisions of the CHIPS Act and examines how major semiconductor companies, including Intel, Micron, GlobalFoundries, and Samsung, are responding to the incentives, signaling a potential renaissance for the American semiconductor landscape.

Key Provisions of the CHIPS Act:

Direct Financial Assistance for Chip Manufacturing Plants: The Act allocates $39 billion in direct financial assistance to companies engaged in building chip manufacturing plants within the U.S. This financial injection serves as a catalyst for the establishment of cutting-edge semiconductor facilities, contributing to job creation and technological advancement.

Investment in Advanced Chip Manufacturing Research and Workforce Training: Recognizing the importance of research and skill development, $11 billion has been earmarked for advanced chip manufacturing research and workforce training. This investment aims to equip the American workforce with the necessary expertise to drive innovation in the semiconductor sector.

Lab Innovation for Military and Other Applications: The CHIPS Act allocates $2 billion to steer lab innovation into military and other applications. This strategic investment underscores the dual-use nature of semiconductor technology, emphasizing its significance in both commercial and defense domains.

Corporate Responses to CHIPS Act Incentives:

Intel's Ohio Expansion: Intel, a prominent player in the semiconductor industry, swiftly responded to the CHIPS Act by pledging to build a $20 billion chip plant near Columbus, Ohio. This facility is expected to accommodate 3,000 workers. However, recent reports suggest that Intel is contemplating expanding its investment in Ohio to a staggering $100 billion, highlighting the company's commitment to leveraging the Act's incentives for substantial growth and innovation.

Micron's Ambitious Plans: Micron, another major semiconductor player, outlined plans to invest $40 billion through 2030 in manufacturing facilities within the U.S. This ambitious investment aims to create up to 40,000 new American jobs, with a focus on generating approximately 5,000 highly paid technical and operational roles. Micron's commitment reflects a strategic alignment with the CHIPS Act's objectives.

GlobalFoundries' New York Expansion: GlobalFoundries announced its intention to expand a plant in New York, signaling a proactive response to the CHIPS Act. This expansion aligns with the Act's emphasis on bolstering domestic semiconductor manufacturing capabilities, contributing to economic growth and technological leadership.

Samsung's Consideration of Texas Plants: Samsung, a global technology giant, is exploring the possibility of building semiconductor plants in Texas, with an estimated investment of almost $200 billion. This potential venture underscores the attractiveness of the CHIPS Act incentives and reflects a broader trend of major companies contemplating substantial investments in the U.S. semiconductor sector.

The CHIPS Act has emerged as a pivotal catalyst for the rejuvenation of the American semiconductor industry, attracting significant investments from key players. As evidenced by Intel, Micron, GlobalFoundries, and Samsung, these companies are not only responding to the Act's incentives but also signaling a transformative era for domestic chip production. The Act's multifaceted approach, combining financial assistance, research and training investments, and military applications, underscores its comprehensive strategy to fortify the nation's semiconductor capabilities. The developments in response to the CHIPS Act present a promising outlook for the U.S. semiconductor industry, positioning it for sustained growth, innovation, and global competitiveness.