The global semiconductor talent shortage

Addressing the semiconductor worker shortage

Much-publicized semiconductor shortages have impacted a number of critical industries and attracted unprecedented attention and investment from both private and public sectors across R&D, manufacturing, talent development, and more. Two such examples are the recently passed CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act and still pending EU Chips Act in Europe. In 2021, the global semiconductor industry had revenues of just over $550 billion, and this is expected to rise by over 80% to more than a trillion dollars in 2030.

With an estimated more than two million direct employees worldwide in 2021, Deloitte predicts that more than one million additional skilled workers will be needed by 2030, equating to more than 100,000 annually. For context, there are fewer than 100,000 graduate students enrolled in electrical engineering and computer science in the United States annually.

And the semiconductor worker shortage shows signs of getting even tighter. The current global economic environment and ongoing semiconductor supply chain issues add to the challenges faced by semiconductor companies. However, there are solutions that companies and policymakers can deploy to help solve the semiconductor talent shortage, ranging from investment in developing new talent pipelines to better analytics and tools, partnerships with educational and government institutions, an increased focus on DEI and ESG, and a better employee experience overall.

The end of the chip shortage isn’t the end of the semiconductor talent shortage

Yes, demand for some types of chips is down: Semiconductors needed for PCs, smartphones, and crypto mining are all beginning to decline due to weakness in consumer buying, falling stock markets, and slowing economies. But demand for chips in the automotive industry, factory equipment, and appliances continues to be strong. The forecasts still show expected global 2022 sales of all semiconductors to be up by almost 14%.

More importantly, whether the normally cyclical (this is the sixth cycle since 1990) chip industry goes up or down by a few points in the next couple years is less important in the face of the longer-term trend of an industry growing by more than 80% by 2030. And there is a corresponding talent boost required to enable, achieve, and support that growth.

Diverse semiconductor supply chains and labor efficiency

In 2021, the global industry produced about $275,000 in revenue per worker. But that was possible in part due to the highly clustered nature of chip manufacturing and the back end—assembly, testing, and packaging (ATP). About 80% of all chips were made in four countries in East Asia, and over 90% of the ATP was in those countries or nearby.

What was a wonderful thing for labor efficiency turned into a nightmare during the recent semiconductor supply chain crisis, and governments around the world—especially in the United States and Europe—are spending more than $100 billion to build more manufacturing locally. The United States currently makes about 10% of all chips and aspires to 30% share by 2030. The European Union is sub-10% and aspires to 20% share by 2030. Combined, countries that make about a fifth of all chips today want to make up 50% of the market share by the end of this decade. A less concentrated chip industry, both in manufacturing and ATP, will help US and European industries that rely on chips. But labor efficiency will decline as a result, and we will need more people in more locations to make a trillion dollars’ worth of chips than we would in a highly clustered world.

Compounding the problem is the concentration of ATP capabilities. Receiving less press coverage than the fabs that actually manufacture the chips, these back-end capabilities are still a critical and necessary part of the process, and about 15% of the global semi workforce. Making more chips in the United States or Europe is a good thing in terms of self-sufficiency … but if those chips need to be sent to Asia for ATP after manufacture and then sent back for consumption, the supply chains just doubled in length. Of the almost 500 assembly and test facilities worldwide, 65 are in the Americas and only 24 in Europe, suggesting that if both regions wish to become more fully self-sufficient, they will need to grow the ATP workforce at an even faster rate than the manufacturing workforce.

New mix of talent needed

Numerous skills are required to grow the semiconductor ecosystem over the next decade. Globally, we will need tens of thousands of skilled tradespeople to build new plants to increase and localize manufacturing capacity: electricians, pipefitters, welders; thousands more graduate electrical engineers to design chips and the tools that make the chips; more engineers of various kinds in the fabs themselves, but also operators and technicians. And if we grow the back end in Europe and the Americas, that equates to even more jobs.

Each of these job groups has distinct training and educational needs; however, the number of students in semiconductor-focused programs (for example, undergraduates in semiconductor design and fabrication) has dwindled. Skills are also evolving within these job groups, in part due to automation and increased digitization. Digital skills, such as cloud, AI, and analytics, are needed in design and manufacturing more than ever.

The chip industry has long partnered with universities and engineering schools. Going forward, they also need to work more with local tech schools, vocational schools, and community colleges; and other organizations, such as the National Science Foundation in the United States.

What can be done?

At a high level, Deloitte believes that the industry needs to do three things to solve the semiconductor worker shortage:

1. Unleash the workforce. Organizations should identify, access, and develop (build/buy/borrow) those future skills across the engineering and manufacturing workforce to drive superior performance and value.
   
   Semiconductor companies are not just competing for tech talent against other semi companies. The tech talent shortage spans across TMT and beyond. Additionally, domestic chip companies are looking for skills in engineering and manufacturing that, for the past 30 years, have been moving predominantly overseas.
2. Rearchitect work. Organizations also need to identify their future-state capabilities and redesign the way humans and technology interact to deliver services, outcomes, and value for their customers and their organizations (e.g., digitalization, AI/machine learning).
3. Adapt the workplace. Additionally, organizations should prepare their teams to successfully navigate transformative changes in new or greenfield locations and adopt new technologies, roles, and ways of working. They also need to optimize the environment that maximizes the potential of workers and creates an attractive workplace for employees.
   

The bottom line

The future of work in semi looks different than organizations might have anticipated just two or three years ago, and the volume of talent as well as the skills and capabilities they need to support both near- and long-term objectives and market demand have changed. Organizations need to take the time to understand what the recent supply chain crisis means for their overall organizational design and talent needs.

The ability to identify, recruit, and develop the necessary workforce cannot rely on how companies have operated historically. They need to build new talent pools in new locations, leveraging educational and community partnerships as never before. The speed at which growth is expected as well as the changing skills and capabilities required demand new ways of defining and implementing innovative talent access strategies. Organizations also need to understand the gap between their current capabilities and future requirements to define the talent access strategies that will meet their long-term needs.

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