Communications of the ACM
Building Up the U.S. Semiconductor Industry
While some semiconductor companies continue to wait for funding, others are moving forward in building new fabrication plants.
Credit: Wong Yu Liang/Moment/Getty Images
The wait continues one year after the passage of the bipartisan CHIPS and Science Act of 2022, which called for $52.7 billion in federal funding to revamp the U.S. semiconductor industry. The funding was to include $39 billion in semiconductor subsidies, $13.2 billion for semiconductor research and development and workforce development, and $500 million to strengthen the industry's global supply chains.
The expectation was that by August or September, of this year, decisions would be made, and initial funds given to semiconductor companies, says Gaurav Gupta, a vice president analyst in the emerging trends and technologies team at Gartner. The CHIPS program office received more than 450 submissions, a lot more than anticipated, "so they are probably doing their due diligence in making decisions,'' he says.
Meanwhile, "Companies are a bit frustrated and getting impatient,'' Gupta notes, adding that "government processes take time and there isn't really a way to push this."
The money allocated in the CHIPS Act "is stretched thin across the U.S. semiconductor ecosystem, and realizing its benefits has been slower than expected,'' echoes Michael Ciatto, global business leader of supply chain at professional services firm Genpact.
During this limbo state, while some companies wait for funding, others are moving forward in building new fabrication plants "due to high demand for devices like high-performance power chips used in automotive and industrial," according to Mike Burns, co-founder of iDEAL Semiconductor.
That brings another set of challenges, including persistent shortages in critical construction materials, commodity price volatility and inflation, and a shortage of skilled labor, Burns says. "Other companies have observed reduced demand on the consumer electronics side and are thus moving more cautiously and awaiting government incentives."
The talent conundrum
Fostering a sustainable semiconductor workforce development ecosystem was identified as a key objective of the CHIPS Act, says Tony Chan Carusone, CTO of Alphawave Semi and a professor of electrical engineering at the University of Toronto. "Thus, we are hopeful there will be significant investment in the highly skilled engineers required through all parts of the semiconductor supply chain."
However, filling a sustainable talent pipeline takes commitment and time--even longer than the time it takes to increase fab capacity, Chan Carusone adds. In the interim, this has created a shortage of skilled workers for these roles, he says.
Ciatto agrees, citing a statistic from Gartner that "The global semiconductor market is expected to face a shortage of one million workers by 2030 due to underinvestment across the board. In places like Arizona, where fabs are being built, there's a shortage of skilled labor to meet the high-paced expectations."
Even for giant semiconductor companies like the Taiwan Semiconductor Manufacturing Company (TSMC), Ciatto says, expanding into the U.S. is complicated by regulatory hurdles and the need to import skilled labor. "The highly automated nature of fabs requires specialized technicians, exacerbating the educational imbalance in the U.S. between short tech programs and lengthy engineering degrees,'' he says.
TSMC was aiming to have its first U.S. chip factory in Arizona operational by late next year but has delayed its plans. "The construction, equipment setup, and staffing gaps are further compounded by the concentration of Tier 1 and 2 suppliers in Asia, where the semiconductor industry has thrived for three decades,'' Ciatto says. "Awakening companies to the importance of U.S. manufacturing for long-term economic growth is a step forward, but it's not just about money; infrastructure and regulatory challenges remain."
One of the main regulatory hurdles is the lengthy approval processes, which is adding to construction delays in Arizona, according to Ciatto. "The lack of government experience in managing manufacturing projects adds to the uncertainty. Long-term institutionalized challenges persist, and while minimizing operational costs is crucial, it doesn't address broader issues like supply chain vulnerabilities."
Gupta believes the lack of construction workers to build the fabs is of greater concern than a shortage of skilled talent to run them. "Semiconductor talent to run the fabs, whether it is engineers or technicians, will come as the industry grows and there is a need,'' he maintains. "Most chipmakers have some programs with universities to develop talent."
However, it is up to the chipmakers to make a decidedly unsexy industry more attractive to new college graduates, Gupta observes. "You need compelling reasons for people to look toward the semi industry for opportunities over software/services, and that's a continuous struggle."
Burns says this isn't an issue for iDeal, which is aggressively hiring talent. "Highly skilled technology candidates have more choice in a career path and are placing a greater emphasis on the excitement of a company itself; namely, its mission and technology platforms."
He says candidates are excited about iDEAL's technology and feel aligned with the company's mission to enable decarbonization through electrification.
Once they are eventually constructed, new U.S. fabs will create "tens of thousands of direct jobs in the semiconductor ecosystem and will support hundreds of thousands of additional jobs throughout the U.S. economy,'' according to the Semiconductor Industry Association, in its annual State of the Industry Report.
While this is promising, the industry must contend with issues that include ongoing tensions between the U.S. and China, which continue to impact the global supply chain, as well as "the need to enact policies to reinforce U.S. leadership in semiconductor design, strengthen the U.S. semiconductor workforce by reforming America's high-skilled immigration and STEM education systems, and promote free trade and access to global markets,'' the report said.
And, although the global chip shortage has eased, the SIA reported that "macroeconomic headwinds and market cyclicality have caused a short-term downturn in sales, which is projected to linger throughout the year."
So, while the U.S. Chips Act highlights the importance of innovation in the semiconductor industry, "Realizing its potential faces hurdles, including workforce shortages, regulatory bottlenecks, and the global semiconductor supply chain's intricacies,'' says Ciatto. "Addressing these issues is vital for the U.S. to maintain its leadership in semiconductor technology."
Esther Shein is a freelance technology and business writer based in the Boston area.
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