How Bad Are the Workforce Challenges in Electronics Manufacturing?

An aging workforce. A generation with a new mentality and different expectations. Surging demand and an industry that requires esoteric knowledge, practical experience, and hard and soft skills—it’s a confluence of circumstances that have led to a significant talent deficit.

A study prepared for the Semiconductor Industry Association (SIA) by Oxford Economics showed the U.S. semiconductor industry faces a shortfall of roughly 67,000 workers by 2030.

Projected to grow to 460,000 (up from about 345,000) by the end of the decade, at the current rate of graduation, the U.S. simply won’t produce enough qualified workers to satisfy workforce demand.

To help bridge the talent gap, electronics manufacturers can rehire skilled workers who have jumped to other sectors. But attracting top talent (or, quite frankly, any talent) isn’t without its challenges, requiring stable employment and competitive compensation and benefits, never mind millennial-appealing company culture and remote work opportunities, something manufacturing inherently lacks. Unfortunately, market surges causing extreme shifts in labor demand make offering stable, ongoing employment difficult, and companies are often left struggling to choose between feast or famine, either not having enough labor to meet production requirements or incurring the extra costs of having people sidelined.

Skilled boomers aging out of the workforce are adding insult to injury—In 2022, nearly one-third of the manufacturing workforce was over 55 years of age—further draining the skilled talent pipeline of critical knowledge and experience.

Although electronics isn’t the only industry dealing with labor issues, it is particularly hard hit. The challenges are considerable enough to have a significant influence on America’s reshoring revolution, stalling Biden’s quest to bring chip manufacturing home.

Propelled by the passage of the CHIPS and Science Act of 2022, companies such as Intel, Micron, TSCM, and others have announced plans to reshore CHIP manufacturing, attracting, according to Joe Biden, “$640 billion in private companies' investments that are building factories, creating jobs in America again.”

But to make it in America, we need skilled people who can and want to work in America.

Houston, we have a problem: The SIA report

The much talked about SIA report has estimated that total industry revenue will balloon to $1 trillion by 2030, from approximately 345,000 jobs today to approximately 460,000 jobs by the end of the decade, representing 33% growth and adding about 115,000 jobs.

But there simply won’t be enough engineers, computer scientists, and technicians to go around, warns the group. About 58% (roughly 67,000 jobs) of the projected positions may go unfilled.

Of the unfilled jobs, it’s projected that 39% will be technicians, most of whom will have certificates or two-year degrees; 35% will be engineers with four-year degrees or computer scientists; and 26% will be engineers at the master’s or PhD level.

Source: SIA

The SIA report, titled “Chipping Away: Assessing and Addressing the Labor Market Gap Facing the U.S. Semiconductor Industry,” also offers policy recommendations to help fill the labor gap and complement existing workforce development initiatives that are currently being carried out by U.S. semiconductor companies.

“Along with making historic investments to reinvigorate domestic semiconductor production and innovation, the CHIPS and Science Act anticipated the need to strengthen the semiconductor workforce in America,” said John Neuffer, SIA president and CEO. “We look forward to working with government leaders to advance policies that build on our industry’s longstanding workforce development efforts, expand the pipeline of STEM graduates in America, and retain and attract more of the top engineering students from around the world.”

The Depth of the Problem

Labor issues aren’t limited to CHIP manufacturing or the U.S.

Labor gaps in shipping and logistics are making it difficult for companies to fulfill Service Level Agreements (SLAs) and deliver finished goods on time and in full to their customers.

Other high-growth industries facing a labor market gap continue to increase the competitiveness of the market, including medical technology, clean energy, aerospace, cyber security, automotive, the IoT, and next-generation communication.

“The numbers are striking.”

According to the same SIA report, for the economy as a whole, by the end of 2030, an estimated 3.85 million additional jobs requiring proficiency in technical fields will be created in the U.S. Of those, unless we can expand the pipeline for such workers in fields such as skilled technicians, engineering, and computer science, 1.4 million jobs risk going unfilled.

Kearney: Geographical Diversity is Key to Supply Chain Resiliency

In an article developed by Kearney for the Consumer Technology Association, Building a Resilient U.S. Consumer Technology Supply Chain, Kearney asks and answers the question: Is it realistic to assume that it [bringing most consumer technology manufacturing to the United States] can be done successfully?

“According to our research, the answer is ‘no.’ Not only does the United States lack many of the critical raw materials and associated processing capacity, but reshoring manufacturing of all technology products now taking place in Mainland China and Taiwan for the US market would require a direct investment of well over $500 billion. Additionally, a more than 10x increase in workforce for both manufacturing and the indirect supplier ecosystem would be needed to meet the expected production output.”

All geographies in Kearney’s study face labor challenges similar to those in the U.S., including a shortage of skilled workers, a competitive job market attracting talent to other industries, and an aging workforce. Wage discrepancies and workforce migration are also listed as further issues.

Geographies included in Kearney’s study: United States, Mainland China, Taiwan, Canada, France, Germany, United Kingdom, Japan, Republic of Korea (South Korea), India, Mexico, and Vietnam.

Kearney recommends a “team approach,” expanding manufacturing efforts between the U.S., South Korea, Japan, Germany, and France, exploiting each geography’s strengths and existing capabilities, and considering their potential to increase production capacity with investments between now and 2033.

Deloitte: Navigating Persistent Talent Obstacles

Deloitte’s 2024 Manufacturing Industry Outlook cites a recent survey conducted by the National Association of Manufacturers (NAM), where results showed that almost three-quarters of surveyed manufacturing executives feel that attracting and retaining a quality workforce is their primary business challenge.

How can companies navigate this pressing business challenge?

Increasing flexibility 

46.8% of those surveyed in the NAM study said their company offers flexible scheduling to production workers. Other forms of flexibility offered to production workers include remote work, compressed workweeks, and the opportunity to swap or split shifts.

Improved earnings

Deloitte's analysis showed a 4% rise in the average hourly earnings of employees.between Q1 FY2022 and Q1 FY2023. Notably, there was also a 19% reduction in the average number of voluntary separations over the same period.

Other workforce improvement strategies, as recommended by Deloitte, include:

• Employing digital tools to improve talent acquisition
• Tapping into the knowledge of retirees
• Building and upskilling the talent pipeline

There’s no denying the waters are choppy, and the stakes are high for the electronics manufacturing industry. However, by leveraging automation, increasing flexibility, compensating more competitively, and establishing apprenticeship programs that fill your skilled talent pipeline, companies can preserve their future and keep pace with change.

Find out how, in partnership with US DOL, IPC has made it easier for companies to adopt a registered apprenticeship program and stop the skills leakage without all the red tape.