From your smartphone, to your television, and even your car, just about every electronic device we enjoy as part of the modern world has at its heart a semiconductor. These chips have enabled broad advances in communications, transportation, healthcare, energy and much, much more, with more than a trillion being produced worldwide each year.
It’s no surprise, then, that demand for semiconductors has been growing exponentially since the 1980s. According to Statista, the global semiconductor market is on track to exceed $556 billion this year, up from less than $200 billion at the turn of the century, driven by new installations in electric vehicles, clean energy products, and healthcare and medical devices. In a decade, McKinsey expects the market to be worth more than $1 trillion.
But, our growing dependence on these devices has exposed a limitation in the supply chain. Namely, too much semiconductor production is focused in Asia, leaving U.S. producers at the mercy of overseas companies when designing and building electronic devices. Despite the fact that the U.S. generates nearly half of total sales in leading edge chip manufacturing, design and research, as of 2023 China is currently the world’s largest producer of semiconductors, accounting for 24% of the global supply, followed by Taiwan at 21%, and South Korea at 19%.
Per the Semiconductor Industry Association: “The reality is the average rate of chip manufacturing output has grown five times faster overseas than it has in the United States over the last decade. This is largely due to robust incentive programs other countries have put in place to attract semiconductor manufacturing.”
But the passing of the CHIPS and Science Act will usher in a new era of significant private and public investment in the U.S. semiconductor industry, ultimately leading to a deepening need for skills-based hiring and workforce development at all levels of an organization.
What is the CHIPS and Science Act?
For a country looking to expand its role in the growing digital economy, this status quo just isn’t good enough. That’s why, in 2022, the U.S. government took action to reverse this trend, passing what is known as The CHIPS and Science Act in an effort to capture more of the global semiconductor market and attract new jobs by reshoring more research, development, and manufacturing in the sector for the first time in decades.
The effort kicked off in the wake of the COVID-19 pandemic when production shortages and supply chain security concerns shook the domestic industry. Chip shortages delayed automotive deliveries, sidelined renewable energy developments, and left a wide range of sectors questioning whether or not the current approach to semiconductor manufacturing still makes sense in today’s rapidly diversifying world.
“All of these supply chain disruptions have given us such a stark wakeup call,” Intel CEO Patrick Gelsinger told CNN last year. “We’ve gone from just-in-time supply chains to understanding that what we need are just-in-case supply chains. We need resilience in all of these things.”
However, there is broad economic development potential here as well. Since the bill was announced, more than 50 new semiconductor projects have been announced across the U.S., more than $210 billion in private investment has poured into the sector and as many as 44,000 related new jobs have been created. So far, Micron has announced a $40 billion investment in memory chip manufacturing – which alone will increase U.S. market share in those chips to more than 10% by 2030 – and Qualcomm and GlobalFoundries have announced a new $4.2 billion partnership to expand semiconductor manufacturing in upstate New York. It’s part of an effort by Qualcomm to increase semiconductor production in the U.S. by up to 50% over the next five years. Microchip earlier this year also announced plans to invest $900 million to expand its manufacturing operations in Colorado Springs, CO, adding 400 jobs there as a result.
And that’s just the start.
All this investment is effectively expanding the opportunity for all, creating a bigger pie that more people and companies will benefit from. And this is happening alongside increased demand and applications for chips driven by technologies such as AI, which is currently at the crux of much tech advancement and disruption. Case in point: the Philadelphia Semiconductor Index, which tracks publicly-traded chip companies, is up nearly 40% so far this year, led by the surging Nvidia, whose chips are used in many AI applications.
Perspectives on hiring
All that said, one undeniable impact on the CHIPS and Science Act that is already playing out across U.S. semiconductor manufacturing is happening on the talent front.
This is a new reality for an industry that has, for decades, been focused on offshoring and cost cutting. Employers now face new talent demands and need skills that have long been in short supply in the U.S., as jobs have moved overseas. Now that they’re back, companies both directly involved in semiconductor production, as well as those impacted by the availability of semiconductors, like the automotive industry, need to rethink how they approach hiring and recruitment.
Because if the need isn’t already here, it is coming – fast.
As of 2023, the semiconductor industry directly employs about 250,000 people in the U.S., and supports another one million jobs. One of the stated goals of the CHIPS and Science Act is to create high paying, domestic jobs, building on the 642,000 manufacturing jobs that have been created since 2021 through similar measures, meaning there could soon be a need for tens of thousands of skilled workers.
And not only for engineers and sales folks, which is what hiring in semiconductors looked like before. This influx of investment in the U.S. semiconductor sector will continue to disrupt value chains and spur the need for new and deeper skill sets for roles like applications engineers, product marketers and business development managers with industry-level experience in sectors with heavier reliance on chips such as automotive, energy, healthcare, and technology.
Employers need to be strategic about how they staff up for these new roles. After all, semiconductor manufacturing initially shifted offshore due to the cost benefits of overseas production; now that the industry is bringing those jobs back, both employers and their investors need to ensure that they are hiring for the right skills at the right time to ensure value creation and avoid overinvestment. This dovetails with reinvigorated focus on skills-based hiring that is emerging across other industries – effectively valuing a candidate’s skill set over their credentials or educational background – but will become particularly important in technical fields like chip production where specific skills are in high demand.
Whatever the case, the CHIPS and Science Act stands to dramatically change the way that the semiconductor industry operates around the world, up-ending decades of offshoring to bring production and research back to the markets where many of these devices are being sold. As that happens, and as demand for dedicated chips continues to increase, we expect to see more and more competition for skilled talent here in the U.S. and beyond. The companies that more quickly adapt to this new normal will be those best positioned to thrive in the years ahead.
At JM Search, we are actively speaking to our clients and executive candidates across the semiconductor ecosystem about how the CHIPS act is creating new challenges and opportunities within the market. We will be sharing additional insights on how the investment from the CHIPS act has (and is continuing to) impact various businesses, as well as the talent landscape across the entire semiconductor industry.