What the Labor Shortage in Semiconductor Fabs Means for the US

In August 2022, the Biden Administration signed into law the Creating Helpful Incentives to Produce Semiconductors and Science Act, otherwise known as the CHIPS Act. The landmark legislation directed more than $50 billion to the US semiconductor industry, to be put toward semiconductor manufacturing, R&D, and workforce development (as well as billions more in tax incentives). 

At the time of the bill’s passage in the summer of 2022, much of the public was still reeling from the supply chain snarls caused by the coronavirus pandemic and the resulting semiconductor shortage, which wreaked devastating havoc on myriad industries. Many people assumed that this unprecedented financial injection by the federal government was going to provide a dynamic boost to our domestic semiconductor industry, promoting its competitiveness and enhancing its independence from a highly intricate global supply chain whose fragility had just been exposed in an all-too-costly fashion. With the undeniable potency of tens of billions of American tax dollars, the thinking went, the Biden administration was vaulting American companies back into the vanguard of the worldwide semiconductor field. 

Why The CHIPS Act Isn’t Enough To Invigorate America’s Semiconductor Industry

In the year-plus since the CHIPS Act was passed, however, a more complicated picture of semiconductor manufacturing has emerged. In short, it appears as though the domestic industry’s challenges are not going to be resolved through financial windfall alone. This past July—just short of a year since the CHIPS Act was signed into law—the Semiconductor Industry Association (SIA), in conjunction with Oxford Economics, published a study looking at how the industry was set to evolve over the remainder of the decade. The report, “Chipping Away: Assessing and Addressing the Labor Market Gap Facing the U.S. Semiconductor Industry,” projected the US semiconductor industry’s workforce to increase from 345,000 to around 460,000 by the end of the decade. This would represent a rather substantial 33 percent growth. 

On its face, this could be read as encouraging news, a sign that this highly specialized manufacturing field was set to experience substantial domestic growth over the next seven years. But the aspect of the study that seized so many headlines in the ensuing days and weeks after it was released was the statistic that followed. Given current degree completion rates in fields like electrical engineering and computer science, the US would be facing a labor shortage of nearly 70,000 jobs in the industry by 2030. According to the study, these include positions like technicians, engineers, and computer scientists. (In addition to SIA’s report, a recent study by Deloitte found that the labor shortage in the US semiconductor industry could reach up to 90,000 workers over the next few years.)

The fact that an industry research paper made headlines across national media speaks to just how vital semiconductor manufacturing has become in the American consciousness. “Closing the talent gap is of critical importance to the success of the U.S. economy and the semiconductor industry,” the report explains. “While the technology sector, broadly, needs to work together to address these challenges, semiconductors are foundational to virtually all the critical technologies of the future,” and addressing the labor shortage is essential to ensuring this industry's growth.

We’re Already Seeing A Skilled Workers Shortage With TSMC Arizona’s Fab

Although the study was projecting years into the future, we’re already seeing real, consequential manifestations of the semiconductor labor shortage in the US today. This past June, Taiwan Semiconductor Manufacturing Co. (TSMC) Chairman Mark Liu announced that the company would have to delay the opening of its fabrication facility in Arizona (often referred to as TSMC Arizona). “We are encountering certain challenges, as there is an insufficient amount of skilled workers with the specialized expertise required for equipment installation in a semiconductor-grade facility,” he said. Originally slated to start production in 2024, TSMC Arizona’s opening would be delayed until 2025, further underscoring the immediate impact of the semiconductor labor shortage.

Potential Reasons for Semiconductor Labor Shortage in the US

One question worth addressing is why such a substantial labor shortage in the US semiconductor industry is looming at all. After all, this is an industry with global revenue topping $550 billion as of 2021, with future growth projected to push that figure to somewhere in the staggering neighborhood of $1 trillion by 2030. Further, as President Biden has frequently noted during his efforts to tout the successful passage of the CHIPS Act, the sector is replete with very well-paying jobs (including technician positions that do not require four-year degrees). 

So, given the growing demand in the industry and the bevy of stable, lucrative jobs that populate it, why aren’t more Americans opting to pursue a career in semiconductor manufacturing? What exactly is driving the labor shortage if opportunities are rife?

A Lack of Visibility Around The Need for Semiconductor Jobs

There’s a few forces at play here. First, as the White House’s CHIPS implementation coordinator Ronnie Chatterji told The New York Times earlier this year, positions in the semiconductor industry simply haven’t “been on the radar” of many young people in STEM and other related fields. A lack of visibility, in other words, has played a part in preventing students with the appropriate skill-sets from entering semiconductor design, manufacturing, and the other subspecialties that contribute to chip-making. In addition, a significant percentage of students graduating from US universities with advanced degrees in engineering are foreign born. And because the nation’s immigration policy makes it difficult for many of these individuals to attain work visas, these graduates—who could, theoretically, take jobs at semiconductor manufacturing firms—are returning to their home countries. 

A Steep Learning Curve Compared to Other Engineering Fields

There is also the issue of just how steep the learning curve is for those entering the chip industry (especially when compared to related fields like software engineering). Semiconductor design and manufacturing often requires a superior command of multiple disciplines, including electrical engineering and statistics. And to gain proficiency in the industry, individuals may need to attain advanced degrees and undergo lengthy on-site training. Software engineering, on the other hand, is typically less demanding from an academic perspective, necessitates less rigorous professional training, and frequently offers higher salaries than positions in the semiconductor sector. The ratio of education and training to prospective future earnings in the chip industry is simply less enticing to many engineers than the propositions offered by other related career paths, exacerbating the semiconductor growing labor shortage the US is facing. 

What Are the Consequences of a Labor Shortage for Semiconductor Fabs? 

If the US does not find ways to strategically ramp up its workforce in the chip industry to meet the rising demand over the rest of the 2020s, the consequences will be multifaceted. First—though this almost goes without saying—are the economic ramifications. 

Lost Revenue & Lost Job Opportunities for Americans

If we cannot find the technicians, engineers, and computer scientists to fill the roles that will be proliferating at American semiconductor fabs in the coming years, the US will suffer billions in lost revenue and GDP. This will represent a serious waste at the level of individual opportunity, where the potential for tens of thousands of middle- and upper-middle class jobs will go unrealized. And at the collective level of a nation battling income inequality and clamoring for the resurrection of its manufacturing glory days, it would be an equally disappointing failure.

Supply Chains Vulnerable to Semiconductor Chip Shortages

Next, failing to meet the moment of an expanding semiconductor industry in the US leaves the nation vulnerable to future supply chain dysfunction and the downstream economic costs that come with it. The semiconductor shortages seen during the pandemic years hampered dozens of industries, triggered generational price spikes in the automotive industry, and led to hundreds of billions of dollars in lost revenue. 

A Crippled “Fab Renaissance” for the US

A major driving force behind the CHIPS Act and the subsequent “fab renaissance” in the US is the desire to achieve greater supply chain resilience and autonomy so that catastrophic disruptions of that kind don’t happen again. If the US does not take advantage of the extraordinary growth potential of its domestic chip industry over the next half-decade or so, it will be effectively leaving itself at the mercy of a fragile global supply chain. And during the next crisis, precarious choke points and an overreliance on a few Asian nations will reap similar consequences. 

Increased National Security Risk in the US-China “Chip Wars”

Finally, there is the matter of geopolitical implications. It’s hardly a secret that the US and China are in the midst of ever-escalating “chip wars.” While the US has continued to establish export restrictions that limit the types of semiconductors that China can purchase from American manufacturers, the Chinese Communist Party has imposed restrictions of its own, including a ban on chips made by US company Micron for key infrastructure projects in the country. The chip wars are a multidimensional conflict that touch on cybersecurity, national defense, military technology, and power dynamics between nations. Semiconductors are often referred to as the “new oil” for a reason. 

The countries that are able to develop and consolidate semiconductor technology over the next few decades will give themselves invaluable leverage and bargaining power in the feuds, tensions, and cold and hot wars that will inevitably transpire on the world stage. If the US fails to exploit the emerging opportunities to expand its domestic semiconductor industry over the next few years, it will be surrendering not just individual prosperity but also a great deal of global influence.  

We’re Not Alone: The Semiconductor Labor Shortage Is A European Problem, Too

It’s also worth briefly mentioning that other Western nations are facing similar struggles to expand their workforce as they attempt to ratchet up their chip-making capabilities. EU nations like Germany, where major chipmakers are beginning construction on massive semiconductor fabs, are scrambling to train university students to become engineers and technicians in the industry. And because the EU approved its own Chips Act, to the tune of $48 billion, its member nations are facing the same ticking clock to cultivate the professionals required to build and run facilities the government is subsidizing. 

How the US Can Address the Semiconductor Labor Shortage 

Fortunately, there are several strategies that stakeholders in this skilled workers shortage—including chipmakers, higher education institutions, and state and federal government agencies—can employ to start compensating for the impending shortfall. 

1. Develop Local Pipelines to Nurture Skilled Workers 

Perhaps the chief avenue to addressing the shortage in skilled workers is through having chipmakers cultivate strong relationships within the communities where semiconductor fabs are being built. Companies like Intel, TSMC, Samsung, and Texas Instruments are breaking ground on fabs in states like Arizona, Texas, and Ohio. If these corporations want to ensure that their plants hit their construction deadlines and reach full production capacity, they need to work with local universities, community colleges, and technical schools to groom a capable workforce. In practice, this may take the form of certificate programs and apprenticeships at the level of two-year institutions. For four-year colleges, firms should be advocating for the development of curricula that feature programs relevant to the semiconductor industry.

In general, these manufacturers should have a major presence in their respective communities. This means establishing the visibility, partnerships, and opportunities that are crucial for the development of a robust, enduring workforce pipeline. 

2. Incentivize STEM Graduates to Enter Semiconductor Industry

One of the key findings of the SIA’s report was how few graduates with STEM degrees are entering the semiconductor industry. While there are various reasons for this—some of which have already been explored in this article—the bottom line is that the US needs to develop and execute strategies to get more of these qualified students to start working as engineering professionals, circuit designers, and technicians in the field. 

The CHIPS Act has already taken significant steps to this end by establishing a number of initiatives intended to spread awareness and spur interest in the industry. These include the National Semiconductor Technology Center and the CHIPS For America Workforce and Education Fund. Through initiatives like these, the US can strengthen its workforce development programs and make a compelling argument to STEM graduates that the semiconductor industry can provide a stable, rewarding, and lucrative career trajectory. 

3. Develop Brand Awareness Around Semiconductor Companies in the US 

According to a 2022 report by McKinsey & Company, “Employer and student surveys reveal a tepid attitude toward semiconductor brands.” The consulting firm goes on to explain that many students and professionals simply do not perceive chipmakers the same way they think about big, consumer-facing brands like Apple, Amazon, and social media platforms. “Excitement levels, compensation, and development opportunities,” the report continues, “are all seen as higher at the world’s most recognizable brands.” 

Even the nation’s top semiconductor firms struggle to compete with the glittering, world-dominating tech companies from a brand awareness perspective. If these firms want to become more competitive in luring top talent from the engineering, software development, and technician pools, they need to raise their profile and develop some of the dazzle and prestige that make those technology careers so widely coveted. One simple way chipmakers can go about building better brand awareness is by showcasing their insignia on more end-user hardware, including laptops. The more US firms like Intel, Advanced Micro Devices, Inc., and Micron Technology can become “household names,” so to speak, the greater chance they’ll have at transforming themselves into the types of companies promising students aspire to work at. 

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