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US chip renaissance faces a skills problem

by on12 April 2024

Labour shortage 

The US is in a pickle if it hopes to spark a chip-building renaissance without the aid of inexpensive Chinese labour. A fresh report in the Wall Street Journal cautions that the US lacks the manpower to staff its heavily subsidised fabs.

South Korea’s SK Hynix recently announced its collaboration with Purdue University on a $3.9 billion semiconductor complex, a landmark investment in the state's history. However, the road ahead is fraught with challenges. SK Hynix not only needs to build the fabrication plant, or fab, which will produce high-bandwidth memory chips for AI, but also find the right personnel to operate them.

Kwak Noh-Jung, chief executive of SK Hynix, said: “We need several hundred engineers in physics, chemistry, material science, and electronics engineering to operate our advanced-packaging manufacturing fab.”

Filling a fab with staff is more difficult in the US than in South Korea, where SK Hynix has agreements with local universities and its in-house university. Nevertheless, Kwak said: “The final goal is clear. We need to have very good engineers for our success in U.S.”

The US is attempting to do something extraordinary: reverse a dwindling share in a crucial manufacturing sector. Between 1990 and 2020, the US share of global chip-making shrank to 12 per cent from 37 per cent, while the combined share of Taiwan, South Korea and China grew to 58 per cent.

The federal CHIPS programme has lavished billions of dollars on Intel for fabs in several states, Taiwan Semiconductor Manufacturing Co. in Arizona and GlobalFoundries in New York and Vermont. SK Hynix is also hoping for support.

Subsidies alone won't guarantee a sustainable industry. Fabs need customers, a supply chain and, above all, a skilled, specialised workforce. From 2000 to 2017, U.S. employment in semiconductor manufacturing shrank to 181,000 from 287,000. It has since recovered to about 200,000. Why did the U.S. share of semiconductor production shrink? As in other industries, the US became an expensive place to manufacture.

Susan Houseman of the Upjohn Institute, who has studied outsourcing, said this wasn't "primarily a story about offshoring." US companies are still leading in chip design: Nvidia is leading in artificial intelligence, Qualcomm is leading in communications, and Apple is leading in smartphones. Over time, they mostly contracted out the fabrication of their chips to foundries such as TSMC, which benefited from generous domestic subsidies. The theory behind CHIPS is that, by matching Asia's subsidies, the U.S. can again be competitive in chip-making. Nonetheless, there is a chicken-egg problem. Fabs need a ready supply of skilled workers. But without fabs, America's best and brightest have little incentive to pursue careers in the sector.

Last modified on 12 April 2024
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