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When will AI start to replace human workers in a more significant way? That’s a question that’s become the subject of much speculation during the AI boom. But long before we have to worry about that happening, a shortage of human workers could prove to be the AI industry’s biggest obstacle.
Sales at the world’s largest chipmaker and maker of chips fueling the AI revolution, Taiwan Semiconductor Manufacturing Company, rose 45 percent in July to $7.9 billion, contributing to rapid growth in the second quarter. Demand for AI chips remains strong, with its high-performance computing business accounting for more than half of TSMC’s revenue in the latest quarter
Despite these stellar numbers, AI stocks have been volatile in recent months, making investors increasingly wary of the risks facing companies like TSMC, from earthquakes in Taiwan to China-Taiwan tensions and broader geopolitical tensions. Less discussed, but just as important, is a looming shortage of engineers and technicians.
Until now, the prevailing belief was that increasing chip manufacturing capacity was simply a matter of money. The global chip shortage that began in early 2020 was addressed by governments throwing billions at chipmakers to increase capacity, preferably in their own backyard. TSMC has expanded its semiconductor factories in the United States, Germany, and Japan.
The United States has been one of the world’s most aggressive in adding capacity, with chip investment expected to top $250 billion over a five-year period. But money, it seems, can only go so far in chipmaking.
The problem is that building a chip factory is not as simple as setting up a new smartphone-assembling factory in another country, where local workers can be quickly hired and trained. Chip plants require highly skilled workers, with master’s and doctorates in science and engineering, to run them. Building a chip plant also requires skilled workers.
The massive investment and subsequent expansion of the U.S. chip industry means more than 160,000 new job openings in engineering and technical support, along with additional openings in related construction trades, according to McKinsey analysis. Yet only about 1,500 engineers join the chip industry each year. For chip technicians, that figure is even lower, with only about 1,000 new technicians joining each year. Over the next five years, demand for these workers is expected to reach 75,000.
Meanwhile, the U.S. chipmaking workforce has fallen 43 percent from its peak in 2000, according to McKinsey. At the current rate, the shortage of engineers and technicians could reach 146,000 workers by 2029. In South Korea, home to chipmaker Samsung Electronics, the chip industry has been facing a shortage since 2022 and is expected to face a labor shortage of 56,000 by 2031, according to industry estimates.
Demographic trends are another issue. Both Taiwan and South Korea, where TSMC and Samsung have the majority of their workers, are facing population declines. The number of students enrolled in higher education has declined every year since 2012. Those two countries account for more than 80 percent of the world’s contract chipmaking. A labor shortage has already pushed back the start date of TSMC’s Arizona plant and is said to have flown about half of the plant’s 2,200 workers from Taiwan. Cultural differences are further complicating hiring.
Since each new plant costs nearly $30 billion to build, factories must run nonstop 24 hours a day, seven days a week to justify the price tag commercially. TSMC founder Morris Chang has pointed out that if a machine breaks down at 1 a.m. in the United States, it will be fixed the next morning, but in Taiwan it will be fixed at 2 a.m. Replicating this Taiwanese work culture may be difficult in other countries.
Can’t AI just start making chips? Indeed, AI is helping to design, test, and verify new designs and accelerate the development of new chips. Making physical chips from those designs is another story. The need for skilled engineers to operate the machines is unlikely to be solved by AI any time soon.
It is natural for companies to have difficulty filling positions that require high levels of skills and qualifications. But for the chip industry, the gap between jobs and workers is becoming dangerously wide.
june.yoon@Vscek.com
