The semiconductor industry holds the key to the world’s economic prosperity and national security for nations involved in the design and production of semiconductors. It is also laden with geopolitical tensions owing to trade wars among nations. This blog looks at the industry’s challenges in the US — shortage of talent to unfriendly immigration policies to the unpopularity of working in hardware tech over software — and how the government, academia, and the industry can work in tandem to make the country into a semiconductor hub yet again and lower its dependence on other nations for the most critical technology of the century — the silicon chips.
Image licensed from Adobe Stock Images.
“You may be surprised to learn that microchips are the new oil–the scarce resource on which the modern world depends….Virtually everything — from missiles to microwaves, smartphones to the stock market–runs on chips,” writes Chris Miller in his book, Chip War.
.
Terry was very excited to go on a road trip after the lockdown, which took a toll on his family, especially his nine-year-old son. But before the trip, he wanted to get a new SUV. He went to the Ford showroom and was surprised when the agent told him he would need to wait at least a year to get his new car. The reason was a shortage of semiconductor chips in the automotive industry. “I called up several dealers, and they had the same answer. My old car was still running, so we hit the road without waiting,” recalls Terry, a California-based software engineer.
The world discovered how the interruption of chip supply can affect all manufacturing industries only when the global chip shortage came to the fore post-pandemic. During the global chip shortage, consumer electronics, wired communications, personal computer sectors, and servers were hard hit. But the repercussions were severe in the automotive industry, with the global revenue loss in 2021 alone hitting approximately $210 billion and production plummeting to 7.7 million units, according to a Statista report.
For instance, just like Terry had to wait for his new car for a year, the carmakers as well had a 52-week waiting list to get the chips needed for their entertainment and driving assistance systems.
“Over the course of 2021, as the world’s economy and the supply chains convulsed between pandemic-induced disruptions, people around the world began to understand just how much their lives, and often their livelihoods, depended on semiconductors,” notes Miller in Chip War.
.
Image licensed from Adobe Stock Images.
We know almost all our electronic devices with batteries and plugs need semiconductors, the fundamental material for making chips and integrated circuits (ICs), commonly known as microchips. ICs or chips are made with a semiconductor substance called silicon that forms the foundation of all present-day computers, phone processors, and electronic gadgets.
An IC or chip can contain billions of transistors. Think of a transistor as a tiny switch that gets ON and OFF. In digital circuits, ON means high state or 1, while OFF means low state or 0. All computing instructions and logics are built using these two binary bits- 0 and 1. This is the language that our digital machines understand. Billions of transistors that act as tiny switches on the chip form the foundation of our computers — from storage to memory to graphics to CPU performance cores. Did you know the latest Apple 17 Pro Chip packs 19 billion transistors?.
So everything that needs to process information or calculate, from our smartphones to personal computers and everyday appliances, have inbuilt silicon chips. Today with the increasing implementation of the Internet of Things, Artificial intelligence (AI), machine learning technologies, and wireless communications, we know that a reckoning is coming, and our future hinges on these tiny silicon chips.
However, making chips involves a long process and time. According to ASML, the global innovation leader and maker of machines that chipmakers use to mass produce microchips, “The microchip manufacturing process involves hundreds of steps and can take up to four months from design to mass production.”
Though the chip shortage was attributed to a high surge in demand for ICs, the semiconductor supply chain was already in the doldrums before the pandemic because of shifting consumer demands and the trade war between the US and China, which impacted distribution and commodity pricing.
“The semiconductor shortage is mostly a story of demand growth rather than supply issues. It’s driven by new PCs, 5G phones, A-I enabled data centers – and, ultimately, our insatiable demand for computing power,” writes Miller in Chip War.
.
Image licensed from Adobe Stock Images.
It’s been four years and running since the disruption due to the shortage, but the crisis is far from over. Demand continues to rise as manufacturers struggle to keep up with the industrý’s order for chips. An Investment U report suggests that East Asian countries like South Korea, China, and Taiwan are tackling the high production expenditure and shortage of materials and are able to produce 90 percent of their earlier capacity.
Regardless of the challenges, according to a Statista report, the global semiconductor market revenue exceeded $520 billion in 2023 and is projected to reach around $736.40 billion by 2027 and surpass $1 trillion by 2030.
Though the market revenue is going up, the biggest question that looms large today is: Is there enough workforce to support the semiconductor industry? A Deloitte report states that there will be a requirement of over one million added skilled workforce globally by 2030 as the global market is predicted to exceed a trillion dollars. McKinsey has also predicted a deficit of approximately 300,000 engineers and 90,000 experienced technicians in the US alone by 2030. The shortage includes production workers, and electrical and design engineers with a focus on very-large scale integration (VLSI).
Similarly according to a Deloitte report, in the UK the shortage is equally critical. The Royal Academy of Engineering and the Institute of Physics notified that the skills shortage that ranges from school-level physics to engineering post-graduates is grave and is hampering the growth of the UK’s semiconductor industry.
Ironically, the number of students opting for semiconductor-based courses has reduced substantially, aggravating the shortage of talent. Semiconductor manufacturers attribute this issue to a lack of knowledge of the industry. A study released by Oxford Economics and the Semiconductor Industry Association (SIA) shows that the US will require a manpower of 460,000 by the end of the decade, an increase from 345,000 in 2023. The study concludes that out of the vacancies in the industry, 39 percent will be that of technicians who operate, configure, install, and maintain the machinery in a fab.
In addition, with increased digitization and automation, the skill sets required are evolving. Skills like artificial intelligence (AI) cloud, and analytics are required in manufacturing and design all the more so today. While semiconductor manufacturers are continuously struggling to hire skilled workers due to the shortage, they also have to contend with bigger technology companies for engineers. Several graduates with advanced engineering degrees in the US are from other countries and the strict immigration laws make it even more difficult for skilled engineers and technicians to get visas and work in the US. A report shows that 50 percent of engineering postgraduates and 60 percent of doctorates are from other countries.
Image licensed from Adobe Stock Images.
Today as the crisis puts the semiconductor industry at risk, the government, industry, and academia are scurrying to grow the semiconductor ecosystem. The CHIPS and Science Act of 2022, is a step forward to transform the US into a semiconductor hub yet again and lower its dependence on other nations for microchips. “The CHIPS and Science Act provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development,” states a White House release. Out of the over $52 billion, around $39 billion was allocated as incentives and subsidies for semiconductor companies to establish fabs and expand across the US soil.
The academia, and industry on the other hand are working in tandem to address the workforce shortage, focusing on teaching and training. Purdue University has come up with a “comprehensive” degree program in semiconductors for graduates and undergraduates.
Intel gave away three grants amounting to $4.5 million to Ohio State University and several other partner institutes for research and education and to develop new curricula among other things. Intel is also working closely with the National Science Foundation to assist in expanding its talent pool. Intel and Arizona Maricopa Community College have come up with a 10-day certificate program to upskill students to work as technicians in fabrication facilities.
Micron Technology, specializing in DRAM, NAND, and NOR memory, has plans to build a new $15 billion memory chip fab in Boise, Idaho. The project will motivate the students to skill up and also help the workforce of the region fill up the vacancies at the facility. The Semiconductor Research Corporation (SRC) and Defense Advanced Research Projects Agency (DARPA) have jointly invested $65.7 million in Georgia Tech to run a program named the Joint University Microelectronics Program 2.0 (JUMP 2.0). The project will not only fund university research but also focus on boosting AI capabilities for several crucial applications.
According to SiliconAngle, GlobalFoundries, Inc. acquired funding of $1.5 billion through the CHIPS and Science Act to set up a new fab and enhance two current chip manufacturing amenities. Intel is likely to receive funding from the same program. Samsung Electronics and Micron are also setting up new fabs in the US and are vying for funds from the same program.
Meanwhile, the UK government is leaving no stone unturned to act upon the semiconductor crisis. In its effort to boost the country’s semiconductor industry, the government announced the National Semiconductor Strategy in May 2023. The strategy will help fund £200 million for the industry over 2023-2025 and £1 billion over the next decade. The strategy will help address the UK’s prowess in R&D and design among others. The UK’s key strengths are in compound semiconductors, R&D, and in IP and chip design. Compound semiconductors account for 20 percent of the chips sold globally.
Leading British semiconductor and software design company, Arm, and several industry leaders like Cadence, Arduino, Synopsys, the Semiconductor Research Corporation, Cornell University, and STMicroelectronics have come forward to manage the “skills shortage” and established the Semiconductor Education Alliance. Their purpose is to bring skilled professionals into the semiconductor industry besides upskilling the current workforce.
To boost the Indian semiconductor sector, the Indian government too is wooing semiconductor manufacturers from outside the country by giving out billions of dollars as incentives. Major companies like AMD and Foxconn have disclosed their investment schemes to set up facilities in India. The government had recently sanctioned an allocation of $15.2 billion to set up three new semiconductor plants and plans to take on Taiwan, China, and other nations.
Image licensed from Adobe Stock Images.
In the race for semiconductor supremacy, the US produces only a dismal 12 percent of the world’s chips, a decrease from 37 percent in the 1990s, states a Whitehouse release. Taiwan on the other hand manufactures 92 percent of the world’s chips. Thanks to Taiwan Semiconductor Manufacturing Company (TSMC), where the most advanced chips are made today. The fact that the US lags behind and does not make any advanced chips has made the government take stock of the crisis.
However, the biggest hurdle that the US needs to overcome today is talent. The country needs to focus more on STEM education both at the school and college levels to gain the upper hand. Intel and TSMC are building cutting-edge chip-making facilities in Arizona, which has been the center of semiconductor manufacturing for several decades now.
But the country does not have a skilled workforce to fill the vacancies in these facilities. The fabs will require thousands of people with fairly high technical skills over the next five to ten years from outside the US, meaning the country will need to facilitate the immigration of skilled workers. A study states that the US needs to come up with immigration reforms that are uncomplicated for immigrants to come and work in the country.
New chip production fabs are coming up across the US and these facilities will soon require a specialist workforce. According to the SIA report, in the next seven years, around 3.85 million new technical jobs will be generated across the country, but around 1.4 million vacancies will go unfilled due to a shortage of technical and engineering talent.
Labor shortages are already causing significant and consistent delays in the construction and opening of fab labs. TSMC had to delay the opening of its second fabrication facility in Arizona to 2028. This announcement is nothing new because the company also delayed opening its first 4 nm plant to 2025 due to talent shortages. The CEO of TSMC, Mark Liu, remarked at the company’s earnings call, “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”.
The United States plans to develop Vietnam as a chip hub, and has a hedge against China, but faces a major bottleneck of talent. There are around 5000-6000 hardware engineers available for the chip sector in the South-Asian country, standing against the demand of 20,000 in the next five years, and 50,000 in the next decade.
Image licensed from Adobe Stock Images.
The talent shortage in the semiconductor industry is not unique to the US or UK alone, finding skilled engineers is a huge problem that Taiwan and South Korea face. As semiconductor companies across the world compete for talent, due to a high demand for skilled workforce, they are doing their best to lure the best talent. Not only are they offering scholarships, mentorships, and internships to students but also dolling out competitive salaries to freshers and experienced candidates, states a report.
Samsung is catering to the students by working with four big universities in South Korea. It offers customized semiconductor curricula to upskill students in manufacturing and R&D. At the same time, the Taiwan government is also working collectively with semiconductor firms to upskill engineers in semiconductor-based courses in major universities.
“Taiwan’s government remains fiercely protective of its chip industry, which it recognizes as its greatest source of leverage on the international stage,” mentions Miller in Chip War.
.
As Taiwan increases its semiconductor engineering, it is also leveraging the fact that the US is more software-centric right now with its workforce leaning toward machine learning and artificial intelligence, making it fall behind in hardware.
Image licensed from Adobe Stock Images.
Though the United States lags behind in semiconductor production, the government has a tactical opportunity and can eventually turn the tide because almost all chips in the world use software from the three US-based companies, Synopsys, Cadence, and Mentor (owned by Siemens, but Oregon-based). The country also has its edge over other countries as it leads in:
The government is making every possible effort to push local semiconductor production by investing billions into the already troubled industry and working on policies to get an edge over its Asian competitors. It is also going all-out to slow down China’s semiconductor industry by imposing a “chip choke” on the country. According to a CSIS analysis, “Further integrating North America is key to complementing efforts to slow China’s semiconductor industry through its Made in China 2025 strategy, as outlined in groundbreaking new rules released by the Biden administration in 2022. The policy guidance seeks to leverage export controls to curtail China’s state-led semiconductor industry and array a group of industry-leading countries, such as Japan and the Netherlands, to form a multinational coalition willing to pursue the same strategy.”
The CHIPS and Science Act has also propelled over $210 billion in investments from private companies and 50 new facility ventures, states the SIA. But a joint research by MIT and Denso, a global automotive component manufacturer headquartered in Japan, divulged that just increasing the number of semiconductor fabs in the US is insufficient. The research highlighted a few necessary measures to ensure no future shortages occur. They include focusing on resilience and not just on manufacturing volumes; not just concentrating on advanced chips, but taking the initiative to take advantage of the current supplies; and, introducing ‘common chip standards.’
A group of MIT researchers points out in a white paper that the country’s need to reaffirm its supremacy as a semiconductor superpower must rely on universities to upskill the workforce and introduce new technology. The dossier, “Reasserting U.S. Leadership in Microelectronics,” comes up with a slew of suggestions on how universities can take the lead in the national endeavor to reaffirm its global supremacy in microchips in not only research but also manufacturing.
Besides attracting more students to pursue engineering, STEM, and hardware-related courses, the CHIPS Act might be a favorable twist to the otherwise declining story of hardware and put the focus back on the US as the hub of semiconductor production. But for that, the government needs to improve the immigration law as it has impeded innovation. According to the SIA, by 2030 the US semiconductor industry is projecting a shortage of 67,000 workers. Serious attempts are being made to train and attract domestic workers, but the SIA estimates that a huge gap will remain.
A silver lining is in the offing if the new semiconductor visa proposed by the Economic Innovation Group (EIG) and the industry comes through. The suggested visa provides a “streamlined process” to get competent talent from outside the country when domestic workers are unavailable.
Today, as semiconductors along with quantum computing, artificial intelligence, and advanced wireless networks are the most critical technologies of the century, the US can reinforce its dominance by collaborating with partners and allies to stop China from manufacturing cutting-edge chips by enhancing its manufacturing capacity and continuing to lead in design and research.
Miller’s lines from Chip War, “The chips they invented and the industry they built provide the hidden circuitry that’s structured our history and will shape our future,” aptly
sums up how silicon chips define our economy and national security.
Amongst all the trade wars for chips and technology supremacy, we must not forget that Moore’s Law has sustained the test of time. Moore’s law is not a law of physics that it is bound to be true but rather a prediction.
Jensen Huang, founder of Nvidia, said in September 2022 that Moore’s law is dead. On the contrary, Pat Gelsinger, CEO of Intel, announced at a company event that the law is alive and well. We know that the slowdown of Moore’s law could be damaging for both the industry and the world. Intel aspires to pack 100 billion transistors on a single chip. In the next decade, we would know- what takes on the world, Moore’s Law 2.0 called Super Moore’s Law or the end of it?
© 2024 Mand Labs. All Rights Reserved.
