Vice Chair, Senior Client Partner
In today's global economy, private investment in computer and software companies is growing by the day. The COVID-19 pandemic has only accelerated the pace of digitization, driving demand for consumer electronics to an all-time high. With a range of volatile global conditions increasing pressure on semiconductor supply, a large-scale shortage has been years in the making.
Trade between semiconductor giants China and the United States remains challenging and unpredictable, while climate change is leading to increasingly disruptive weather events. This year, Taiwan, which has the world’s largest semiconductor foundry footprint, was plunged into its worst drought in more than five decades. The U.S. chip industry was similarly affected by the Texas winter storm and power crisis in early 2021.
The shortages created by this supply-demand imbalance are already having major real-world impacts. The automobile industry is expected to lose more than $100 billion in sales in 2021 due to semiconductor scarcity — and the situation is far from improving.
While challenges such as climate change and government intervention are too complex for any one business to tackle alone, there is one key factor that all organizations can — and must —take control of: talent.
Companies are already struggling to identify and recruit qualified candidates, particularly in areas such as predictive software and systems development, validation and testing, chip design and end-market expertise. Even when suitable candidates are found, attracting them has proven to be a major challenge.
In fact, it is lack of talent — rather than lack of infrastructure or capital investment — that is limiting the ramp-up of semiconductor production capacity and slowing the development of intelligent supply chain and manufacturing capabilities. Organizations that can attract the right talent during this semiconductor shortage will gain significant advantages in a quickly evolving industry.
From wearable devices to cars and even coffee makers, virtually all products on the market today work with integrated circuits. To fulfill this ever-increasing demand, companies in the semiconductor industry have been increasing their R&D spend and expanding capacity in existing and new fabs, or semiconductor fabrication plants. In 2021 alone, major semiconductor companies have committed more than $120 billion in capital spending to increase their fab footprints.
But the question remains: who will do the highly technical work generated by all this capital investment? Identifying and recruiting qualified candidates — investing in talent — is the key.
As we saw in 2020 with the onset of the COVID-19 pandemic, global crises have had a major negative impact on the fragile semiconductor industry. With climate change and other risk factors accelerating on a global scale, these crises will only grow in volume, magnitude and unpredictability.
While the semiconductor shortage appears to have caught many companies by surprise, others have clearly predicted and planned for it by building predictive analytics into their supply chain management systems. Following previous supply chain shocks caused by tsunamis and earthquakes in Japan, Toyota modified their just-in-time model to better predict manufacturing needs in advance while building buffer inventory to reduce interruptions in production.
This type of approach depends on quality software talent and ongoing employee training in systems, validation and testing, and end-market expertise.
Every organization needs to form a resilient, agile, and cross-functional team trained in crisis management in order to manage the semiconductor shortage. More than a decade ago, DHL Express began upskilling employees through its Certified International Specialists (CIS) program. When the COVID-19 pandemic hit last year, DHL was able to keep pace with the sudden surge in e-commerce and international PPE shipments thanks to its earlier commitment to crisis management.
The organization also avoided layoffs by leveraging forecasts and customer feedback to reorient its workforce to higher priority tasks. Companies looking to successfully navigate the crises of tomorrow must follow examples like these and invest in people and procedures today.
The semiconductor shortage has already had a particularly significant impact on the automotive industry. The partnership between industry players and their semiconductor suppliers has simply not been strong enough to weather the storm. To avoid similar supply issues in the future, semiconductor companies and their customers need to build up emergency chip supplies as a buffer when crisis hits.
This buildup requires close partnership — working to coordinate the appropriate quantities, prices and stages for distribution. To get it right, organizations will need international and diverse talent with relevant skills across R&D, manufacturing, business units, sales operations and other planning functions. Comprehensive talent solutions like these are the key to building win-win relationships in the supply chain.
The semiconductor shortage has highlighted the critical role of talent, but there is no single solution for bridging the gap. To create a strong and flexible workforce for the years ahead, organizations will need to take a broad and proactive approach encompassing talent acquisition, talent management and succession planning.
First, companies must find and attract talent from new spaces. For at least a decade, semiconductor companies have struggled to find the talent they need within the sector itself. To secure the skills they need for the future, organizations will have to bring in talent from elsewhere. One area of focus is recent graduates. More engaging branding could help communicate to these younger candidates the extraordinary impact semiconductors have on everyday life, whether through 5G, IoT, automotive, industrial or consumer applications.
In addition to looking outward for new talent during the semiconductor shortage, companies also need to look inward and strengthen their existing talent base through upskilling. Not only is upskilling a highly effective complement to talent acquisition activities, it helps organizations increase employee retention and enhance their employer brands.
But it's not just employees who need to upskill. Leadership also needs to embrace new strategies and talent solutions in order to successfully navigate the challenges ahead.
Recent models predict that the semiconductor industry could gain as much as $40 billion in value annually through the successful implementation of AI and machine learning alone. But this will only be achievable if the transformation is driven by leaders who thrive in uncertainty, embrace innovation and have the emotional intelligence to achieve results in any context.
It's clear that the key to any solution for the current semiconductor shortage will start with people — and the companies that forge ahead successfully will be the ones that focus on acquiring, retaining and nurturing the best talent in the years to come.
For more information on how to resolve talent issues during the semiconductor shortage, reach out to our consultants today.