Chip industry faces critical shortage of skilled workers amid expanding demand

As the global chip industry expands rapidly, driven by the surging demand for AI technology and advanced electronics, a new crisis is emerging: a severe shortage of skilled workers.

As speculation grows about when artificial intelligence will begin to significantly replace human workers, the industry faces a pressing challenge that goes beyond technological advancements: a severe shortage of skilled engineers and technicians, Caliber.Az reports citing the foreign media.

This issue may prove to be a major obstacle to the AI revolution.

Taiwan Semiconductor Manufacturing Company (TSMC), a key player in powering AI advancements, reported a remarkable 45 percent increase in sales to $7.9 billion in July, continuing its rapid growth from the previous quarter. The demand for AI chips remains robust, with high-performance computing now contributing over half of TSMC's revenue.

Despite these impressive figures, AI-related stocks have experienced volatility, raising investor concerns about risks associated with companies like TSMC—ranging from natural disasters in Taiwan to geopolitical tensions with China, as well as broader international uncertainties. However, a less discussed yet critical issue is the shortage of engineers and technicians essential for chip production.

Previously, the prevailing assumption was that addressing chip shortages was primarily a matter of financial investment. Governments worldwide, responding to the global chip shortage that began in early 2020, have invested billions to expand manufacturing capacity, with a focus on localizing production. TSMC, for instance, is expanding its semiconductor facilities in the US, Germany, and Japan.

The US, in particular, has made significant strides, with over $250 billion expected to be invested in its chip industry over the next five years. Yet, as it turns out, financial investment alone cannot resolve the challenges facing chipmaking.

Building and operating a chip factory is far more complex than setting up a typical assembly plant. Unlike industries where local workers can be swiftly trained, chip manufacturing requires a highly specialized workforce, including engineers with master’s and doctoral degrees in science and engineering. Even the construction of these plants demands expert workers.

The recent surge in investment to expand the US chip sector is expected to create over 160,000 new jobs in engineering and technician support, along with additional positions in related construction crafts, according to McKinsey. However, the current pipeline of talent is inadequate: only about 1,500 engineers and 1,000 technicians enter the chip industry each year, while the demand is projected to hit 75,000 workers in the next five years.

The US chip manufacturing workforce has declined by 43 per cent from its peak in 2000, and if current trends continue, the shortage of engineers and technicians could reach 146,000 by 2029. South Korea, where Samsung Electronics is based, has been grappling with a shortage since 2022 and is expected to face a deficit of 56,000 workers by 2031.

Demographic challenges exacerbate the problem. Both Taiwan and South Korea, which together account for over 80 per cent of global contract chip manufacturing, are experiencing declining student enrollment in higher education since 2012. The worker shortage has already delayed the opening of TSMC’s Arizona plant and forced the company to fly in about half of its 2,200 workers from Taiwan, facing further complications due to cultural differences.

With each new plant costing nearly $30 billion, these factories must operate 24/7 to justify their expense. TSMC founder Morris Chang highlights the challenge of replicating Taiwan’s work culture abroad, where machines are repaired promptly around the clock.

While AI can assist in designing, testing, and verifying new chip designs, the physical manufacturing of chips still relies heavily on skilled human workers. The gap between the growing demand for chip manufacturing talent and the available workforce is widening, posing a significant challenge for the industry.