Semiconductors are the essential components that power modern technology, from smartphones and laptops to cars and medical devices. They are also the driving force behind innovation and progress in various industries, such as artificial intelligence, biotechnology, and renewable energy. However, the semiconductor industry faces many challenges, such as global supply chain disruptions, geopolitical tensions, and skills shortages. To address these issues and boost the competitiveness of the U.S. semiconductor sector, the federal government enacted the CHIPS and Science Act, which provides roughly $280 billion for semiconductor research and manufacturing.
In this article, we’ll provide a breakdown of the CHIPS and Science Act and discuss its implications for the IT labor market.
Fueling Growth: The CHIPS and Science Act
The CHIPS and Science Act is a U.S. federal statute enacted by the 117th United States Congress and signed into law by President Joe Biden on August 9, 2022. The act provides roughly $280 billion in new funding to support domestic research and manufacturing of semiconductors in the United States. The act aims to compete with China, which has been aggressively investing in its own semiconductor industry and posing a threat to U.S. national security and economic competitiveness.
The CHIPS and Science Act combines two bipartisan bills: the Endless Frontier Act, designed to boost investment in domestic high-tech research, and the CHIPS for America Act, designed to bring semiconductor manufacturing back to the U.S. The act is divided into two divisions: Division A, which focuses on semiconductors, and Division B, which focuses on science and technology.
To illustrate this breakdown, here is a visual aid from McKinsey & Company’s article on this act:
Division A of the act establishes and provides funding for three funds:
- The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Fund provides grants and tax credits to support the domestic production of semiconductors and related equipment. The fund allocates $52 billion for this purpose over five years.
- The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Defense Fund, which supports the National Network for Microelectronics Research and Development, a network of public-private partnerships that research advanced microelectronics for national security applications. The fund allocates $10 billion for this purpose over five years.
- The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America International Technology Security and Innovation Fund, which supports international information and communications technology security and semiconductor supply chain activities, such as promoting the development and adoption of secure and trusted telecommunications technologies, semiconductors, and other emerging technologies. The fund allocates $5 billion for this purpose over five years.
Division B of the act authorizes various programs and activities of the federal science agencies, such as the National Science Foundation (NSF), the Department of Energy (DOE), the National Institute of Standards and Technology (NIST), and the National Aeronautics and Space Administration (NASA). Some of the key provisions of this division are:
- The establishment of a new directorate within the NSF, called the Directorate for Technology, Innovation, and Partnerships (TIP), which will support research, education, and technology transfer in key technology focus areas, such as artificial intelligence, biotechnology, quantum information science, nanotechnology, robotics, advanced manufacturing, etc. The division authorizes $81 billion for TIP over five years.
- The enhancement of existing programs within the NSF, such as the Graduate Research Fellowship Program (GRFP), the Faculty Early Career Development Program (CAREER), the Research Experiences for Undergraduates (REU) program, etc. The division authorizes $29 billion for these programs over five years.
- The expansion of DOE’s role in supporting basic and applied research in energy-related fields, such as renewable energy, energy efficiency, nuclear energy, carbon capture, etc. The division authorizes $17 billion for DOE’s Office of Science over five years.
- The improvement of NIST’s capabilities in measurement science, standards development, technology transfer, cybersecurity, etc. The division authorizes $7 billion for NIST over five years.
- The increase of NASA’s funding for space exploration, science, aeronautics, education, etc. The division authorizes $10 billion for NASA over five years.
The infusion of substantial funding into semiconductor research, development, and manufacturing is poised to create a burgeoning demand for skilled professionals across the IT spectrum.
Ripple Effect on the IT Labor Market
The IT labor market is facing a significant transformation in the wake of semiconductor investment. The demand for IT professionals will increase substantially across various sectors and domains. However, the supply of IT professionals will remain constrained by the limited availability and accessibility of relevant education and training. This will create a skills gap that will pose challenges for both employers and workers in the IT sector.
The pre-investment landscape of the IT labor market was already characterized by high demand and low supply of IT workers. According to the U.S. Bureau of Labor Statistics, employment in computer and information technology occupations was projected to grow by 11% from 2021 to 2031, much faster than the average for all occupations.
This may appear to no longer be the case due to many tech layoffs in 2022 and 2023. So far, in 2023, layoffs.fyi reports 983 tech companies with layoffs, totaling 232,932 employees laid off. However, despite these layoffs, the IT labor market remains competitive.
According to CompTIA’s August analysis, tech occupation unemployment fell to 1.8% in July, the lowest level since January. Speaking on this analysis, Tim Herbert, Chief Research Officer at CompTIA, said: “Given the pace of tech hiring, it remains a fairly tight market for tech talent. It continues to be an environment where employers must supplement recruiting efforts with proactive talent development strategies.”
The anticipated demand surge for IT professionals as semiconductor production ramps up will exacerbate the existing challenges in the IT labor market. The Semiconductor Industry Association published a joint report with Oxford Economics to address this labor market gap.
The findings show that the CHIPS and Science Act will create new opportunities for IT workers who can support the development and production of semiconductors, such as software engineers, hardware engineers, systems analysts, quality assurance testers, etc. However, these roles will require specialized skills and knowledge not widely available in the current workforce. For example, software engineers who work on semiconductors will need expertise in low-level programming languages, such as C and assembly, and familiarity with semiconductor design tools and processes. Hardware engineers who work on semiconductors must have proficiency in electrical engineering, physics, mathematics, and computer-aided design (CAD) software.
This gap extends outside of the semiconductor industry. Another illustration from the Semiconductor Industry Association and Oxford Economics report provides a high-level visual of this:
The demand surge for IT professionals in the semiconductor industry will create spillover effects on other sectors that rely on semiconductors, such as telecommunications, automotive, healthcare, etc. These industries will need more IT workers who can integrate and utilize semiconductors in their products and services, such as network engineers, software developers, data scientists, cybersecurity analysts, etc. Because these roles require advanced skills and knowledge that are not easily acquired or transferred, competition for these IT professionals will remain high.
The ripple effects of the CHIPS and Science Act are already reverberating through the IT labor market. The demand for skilled IT professionals, from software engineers to network architects, is primed for a surge. Yet, this growth comes amidst a backdrop of pre-existing constraints – a supply shortage of trained and adept professionals. The skills gap, which existed before the legislation, now poses a greater challenge as the demand intensifies. The CHIPS and Science Act propels the semiconductor industry into an era of growth and innovation. Simultaneously, it magnifies the urgency for a responsive and adaptive IT labor market. The convergence of these two trajectories emphasizes the importance of upskilling and education; organizations must be prepared to invest in recruiting new talent and developing their existing talent pool.