SoloPoint Insights

The global semiconductor supply chain has faced a tumultuous journey in recent years, with shortages, disruptions, and geopolitical tensions threatening the stability of this essential industry. In 2022, the United States took a pivotal step forward with the CHIPS Act – a comprehensive legislation aimed at bolstering domestic semiconductor production and securing the critical supply chain. But has this effort curbed the chip supply issue? Let’s review.

The Chips Act

• A year ago, President Biden signed the bipartisan CHIPS and Science Act, allocating $50 billion to revive the domestic semiconductor industry and restore supply chains to the U.S., including $39 billion for manufacturing incentives. Later this year, CHIPS for America will introduce funding opportunities for smaller semiconductor and R&D facilities which aims to restore U.S. leadership in semiconductor manufacturing, boost supply chain jobs, and enhance economic security.

What happened since then?

• More fab plants are being built:

• • Since then, more fab plants are emerging, as major semiconductor companies race ahead to invest billions of dollars into U.S. plant construction.
    • Intel, Samsung, and TSMC are launching projects in Ohio, Arizona, and Texas with a combined investment of at least $69 billion.
    • Texas Instruments is investing in a sprawling $30 billion new manufacturing site in Texas by 2025.

• • With more plants being built, demand for equipment sales went up. In 2022, the semiconductor equipment market reached a record $107.4 billion in sales but experienced a $20 billion decrease in 2023. A rebound is expected in 2024, with a projected $100 billion in sales.
    • Applied Materials Inc. is investing up to $4 billion in a Silicon Valley research center, set to be operational by 2026 and creating 2,000 engineering jobs.

• Ramp up of chips being produced:
  • Chip production has ramped up, and the global chip shortage is now mostly resolved. While there may be a short-term oversupply, certain chip types may still face shortages in the future due to varying demands.

So far, what is the current state of the chip supply level?

• Supply in Consumer Electronics:
  • In the consumer electronics industry, two types of chips are currently in oversupply: NAND and DRAM memory chips, which are used in laptops and data center server devices. The oversupply occurred as companies stockpiled chips during the shortage, but then demand dropped, especially for products like smartphones and laptops. It caused a strong ‘bullwhip’ effect on semiconductor manufacturers further back in the supply chain. The once soaring demand for chips abruptly decreased as end markets shifted from ordering new chips to selling their existing inventory instead.
• Supply in Automotive:
  • Not all semiconductor types are in oversupply as the chip demand in the automotive industry remains robust. At $39.5 billion, the auto industry accounts for less than 9% of chip demand by revenue and is expected to grow by approximately 10% annually by 2025. 
  • The automotive industry has adapted to supply constraints, making it less susceptible to major disruptions. With the current chip supply levels, it is estimated that 22 million units of global light-vehicle production per quarter can be supported.
  • However, the demand for complex infotainment, advanced safety, and vehicle autonomy systems will continue to drive semiconductor usage in vehicles. The value of installed vehicle semiconductors is forecast to increase from an average of $500 per car in 2020 to $1,400 per car by 2028. The consolidation of electronics in cars is also increasing demand for automotive semiconductors, with domain controllers and central computers replacing electronics control units (ECUs). This doesn’t reduce the need for chips but drives the need for more powerful ones.

Impact on the Job Market: Increased hiring for more skilled engineers

• The global semiconductor industry is set to grow by over a trillion dollars by 2030, requiring significant workforce expansion. Many have raised concerns that the new semiconductor plants will not be able to meet production goals without filling thousands of positions. 
• In the U.S. sector alone, around 250,000 new workers are needed, including 50,000 engineers and 200,000 technicians for equipment maintenance and fab operations. By 2030, Deloitte estimates that over one million more skilled semiconductor workers will be needed, equivalent to more than 100,000 annually.
• In addition, the U.S. currently has about 295,000 electrical and electronics engineers, but in the next few years, there will be a shortage of 1,100 workers due to retirements and transitions. With high demand and a limited supply of electrical engineers, career prospects and salary growth in this sector remain strong, consistently exceeding median salary levels.

The increase in chip production will benefit many sectors, not just those within the consumer electronic and automotive spaces. With a greater supply of these crucial components, product developers can create more cutting-edge and innovative technology, driving increased demand for technical and engineering professionals. 

SoloPoint Solutions can help you find these in-demand Mechanical, Electrical, and Manufacturing Engineers with high-end and tailored workforce solutions.