Labor impact

Growth of the semiconductor industry has had a notable impact on the job market, both directly within the semiconductor sector and indirectly in related industries and the broader economy. Job creation has risen significantly over the past two years, with positions spanning research and development, manufacturing, design, testing and quality control.

The complex and specialized nature of technology used in the sector has spurred some labor market competition, especially for highly skilled workers. The level of STEM graduates was stunted during the pandemic, according to the U.S. Department of Labor. The dearth of science, technology, engineering and mathematics graduates must be resolved to keep pace with demand.

While these new jobs have generated vast benefits, they have has also created strain on the housing market for geographies where companies are heavily recruiting for these open roles but housing demand far exceeds supply.

Retraining, education programs and grants are essential for further skill and knowledge development as well as research capabilities within the field of semiconductors, and are included as part of the CHIPS and Science Act of 2022.

Neighboring opportunity

The semiconductor manufacturing boom in the United States also brings opportunity for Canada and Mexico. Investments most likely will include fabricators that make smaller chip sets for controllers and the like, testing and packaging of chips, and assembling them into protective housings.

Mexico recently hosted trade delegations with key semiconductor manufacturers from Taiwan. Mexico will likely face challenges supplying power and water to new facilities. Renewable energy is preferred—something Mexico has historically struggled to provide. Its government must move quickly to convince businesses it can provide these inputs, or it may miss its chance; no new significant facilities have been announced in Mexico since the U.S. CHIPS Act in August 2022. Should major chip companies invest in Mexico, U.S. suppliers of testing and measurement equipment and other critical materials would have an opportunity to invest alongside them.

Canada, by comparison, openly recognizes its need to invest more in the semiconductor ecosystem, but the country’s capability to do so is limited. Investing in large-scale semiconductor fabrication will be cost-prohibitive, so that country will push toward specific facets of chipmaking: design, packaging, and testing, as well as smaller-scale manufacturing of chips used in the automotive, defense and health care industries.

Canada already has expertise in chip design, having created data center chips that use less power for quantum computing applications. Deepening intellectual property investments through R&D and design are within Canada’s reach and would build on existing capabilities. 

Accordingly, Canada’s government announced funding of C$240 million this year, and its chipmaking sector is seeking investments through venture funds and strategic partnerships. This policy route positions Canada to complement the U.S. semiconductor industry rather than compete against it, and businesses should seek investment opportunities to tap into.

Other challenges

The United States faces its own challenges with semiconductor growth. In Phoenix, for example, the construction of one chip fabrication plant is behind schedule, with delays stemming from safety concerns and labor issues. U.S. plants typically cost four to five times as much to construct compared to Taiwanese facilities, according to the comments of one semiconductor firm during an earnings call this year.

Finding engineers, scientists and skilled labor to operate and run the state-of-the-art facilities is also a challenge that will require close partnerships and investments with local universities. Consider that Arizona recently halted development of new housing subdivisions for lack of water supply—adding pressure to a shortage of housing inventory.

Apart from U.S. government policy, demand for smartphones remains a significant factor pushing Asian suppliers to make chips in the U.S. As previously mentioned, the trade-off is added cost that drives up the prices of end products to consumers. For example, more than half the cost of a typical smartphone is tied to the semiconductors central to its functionality. To keep production costs as low as possible, suppliers need to reduce their costs through automation and make core processes more efficient.  

The need to shorten supply lines presents another challenge. Electronic devices are mainly assembled in Asia, which means chips made in the U.S. today must be shipped to Asia, integrated into devices, then shipped back. We therefore anticipate more Asian suppliers will realize the inefficiency of this logistics model and co-locate their assembly in North America.