[Insight & Opinion] Can the US Become a Semiconductor Manufacturing Powerhouse Amid Labor Shortages?

The friend who visited Korea after a long time looked busy. Working as a lawyer in Washington DC, USA, the friend was involved in matters related to the local expansion of Korean companies and was experiencing firsthand the large-scale investments and entry efforts of Korean companies into the US. While sharing various episodes about corporate investments, securing locations, and local governments providing incentives, the friend suddenly said, “Still, it doesn’t seem easy.” This referred to the stark difference between the future envisioned by the Joe Biden administration and the reality in the US. There are many reasons why it is difficult, but the most representative one is the labor shortage. Even if a factory is built with a large investment, it is really not easy to find proper personnel, and this problem is even more serious for companies that are not large corporations.

US manufacturing has been weakened over decades due to offshoring. The collapse of research, education, and training systems related to production technology has made labor shortages a long-standing issue. The textile industry is experiencing a 20% labor shortage, and the metal manufacturing industry is also expected to face a shortage of 400,000 workers by 2024. The reality is that US manufacturing not only lacks sufficient labor to lead change immediately but also lacks enough unskilled labor willing to learn. Even if all skilled workers in the US are employed, it is predicted that about 35% of manufacturing jobs in the US will remain vacant. According to Deloitte’s forecast, more than 2 million manufacturing workers will be lacking by 2030. Among the approximately 40 million baby boomers currently economically active, 25%, or 10 million, work in manufacturing, especially traditional manufacturing sectors, and their retirement will further deepen the labor shortage in manufacturing. Of course, the number of manufacturing jobs in the US has decreased by more than 25% over 20 years since 2000, but production volume itself has not declined due to technological advances and automation. However, the fundamental problem remains and is growing over time.

The problem is even more serious given that the manufacturing the US pursues is in advanced manufacturing sectors such as semiconductors and secondary batteries. Taiwanese semiconductor company TSMC, which is building a new factory in Arizona, worries that costs will be more than 50% higher than in its home country. Above all, it is expected to face great difficulties in securing production line workers. Handling expensive specialized equipment and quickly responding to various issues on-site requires a considerable level of education and training. However, labor with such skills and experience tends to choose other industries such as office jobs rather than manufacturing sites. This is because they expect more freedom and greater opportunities for rewards compared to jobs that require following fixed tasks according to rules.

Since 2021, the US has been using incentives and penalties through the Inflation Reduction Act (IRA) and the CHIPS Act to attract advanced manufacturing domestically, and in response, large Korean companies are rapidly increasing their investments in the US. Companies facing intentional supply chain restructuring and mandatory market-linked investments have no choice. However, it is uncertain whether such bold large-scale investments will achieve the desired results.

Historically, it is difficult to find cases where manufacturing industries that left the embrace of great powers have revived and leapt forward. It remains to be seen whether the US, which has followed a path of deindustrialization for over 40 years, can reverse the trend. While actively responding to changing trends and striving to secure the advantages of being a first mover, preparations for contingency plans in case of unforeseen circumstances must also be made.

Choi Jun-young, Specialist, Yulchon LLC