Cranes, bulldozers, and scaffolding now dot the US landscape as a wave of residential and commercial building sweeps the country. In addition to private investment, the federal government’s $550 billion infrastructure legislation, designed to funnel money into road upgrades, rail improvements, and other public assets, is expected to raise construction spending to about $1 trillion over the next five to ten years.
Companies in advanced industries, which includes sectors such as semiconductors, defense, aerospace, batteries, advanced electronics, and automotive, could account for a good proportion of the construction spending. Through 2028, the value of their recent and proposed construction projects is expected to reach about $400 billion in the United States. The bulk of this spending, about $223 billion to over $260 billion, will go toward building or expanding semiconductor fabs across the country.1 The remainder will be devoted to giga-factories for batteries, data centers, renewable-energy plants, and other critical infrastructure.
Some semiconductor companies have already begun constructing new US-based fabs, but many have encountered obstacles related to the COVID-19 pandemic, which temporarily halted or slowed construction and disrupted supply chains. Shortages persist for many critical materials, including polyvinylidene fluoride (PVDF) piping and concrete. (For more information, see sidebar “Fab materials and equipment.”) Difficulties getting construction licenses and permits have also caused delays. But the shortage of skilled labor, including pipe fitters, welders, electricians, and carpenters, poses the greatest challenge to fab construction. Competition for these employees is intense across sectors, and people with specialized skills, such as tool calibration, are particularly scarce.
With many homeowners finding it hard to get a general contractor to renovate their bathrooms, how can semiconductor leaders ensure appropriate staffing for fab construction projects that are a magnitude more difficult and require a much larger, more specialized crew? Since few fabs have been constructed in the United States in recent years, workers with the right skills are in short supply. Some strategies for overcoming the labor shortage could involve increasing the pool of available workers, such as by encouraging more women to enter nontraditional fields. Other strategies could involve changing how and where construction proceeds—for instance, giving more consideration to labor issues during site selection, making better use of analytical tools during recruitment and retention, encouraging greater collaboration among stakeholders, or even creating an in-house team to manage fab construction at semiconductor companies.
Bridging the labor gap for fab construction
Semiconductor fabs are under construction across the United States, but most of that investment is flowing to specific geographic clusters, including Arizona and Texas. The bottom line: the need for construction workers is hitting multiple regions.
To complete the $400 billion worth of construction projects in advanced industries, including semiconductors, the United States would need about 200,000 to 300,000 more skilled laborers such as electricians, mechanical workers, welders, and pipe fitters (exhibit). The labor gap for these projects is even higher if the need to build temporary housing and other facilities to house the influx of workers is taken into account. Typical industry training and recruitment programs will probably be insufficient to close the gap, and the resulting labor shortage could lead to schedule delays, increased costs, and quality issues.
Although businesses across sectors have difficulty finding skilled labor, semiconductor companies face additional complications: few US-based workers have experience handling the intricacies of designing, building, and setting up fabs because there has been little call for such skills over the past two decades. Workers who do have this specialized knowledge tend to be based in areas that already have fabs. General construction workers could undertake specialized tasks, including constructing clean rooms and calibrating tools, but face a steep learning curve. Many construction project managers may be unfamiliar with the regulations or other special considerations related to fab construction.
Employers that attempt to attract and retain skilled workers understand the importance of highly competitive wages. But further steps may also help. Other countries have partly filled the labor gap by recruiting or training skilled workers from abroad. In the United States, however, immigration probably will not supply all the workers needed, so other levers are required too. There may also be US-specific strategies that could produce positive results.
No silver bullet exists that will resolve the labor gap for fab construction, and the solution will probably involve a combination of strategies. What’s more, semiconductor companies cannot solve the problem alone. They might benefit from a coordinated effort in which other stakeholders, including construction companies, participate in—or sometimes even lead—recruitment and retention efforts. In this article, we discuss a few approaches that might help to close the gap for skilled labor.
Fab construction is not the only labor issue semiconductor companies confront in the United States. Once fabs are operational, they will also need skilled workers to manage a variety of processes. Since such employees are in short supply, many fabs are developing training programs for operational workers to fill the gap, but their recruitment and training are outside the scope of this article.
Increasing workforce diversity
Although the total US workforce is now 47 percent female, women represent only 5 percent of construction employees, according to the Bureau of Labor Statistics, and this proportion has barely budged over the years. With such a large gender gap, women might represent the greatest source of untapped potential, and companies may want to encourage their participation in nontraditional jobs, as they have done during other labor shortages (see sidebar “Rosie the Riveter’s place in history”). In fact, this could be an opportune time to recruit women. A recent McKinsey study showed that the shift to remote work, declines in business travel, and increased automation are reducing the size of the workforce in fields that employ many women, including food service, customer service, and administrative support.
Helping women gain access to apprenticeship programs may bring them into the trade. Programs that help women access such programs are now fairly rare, but a few nonprofits are making efforts and show how this could be done. Women in these pre-apprenticeship programs go on field trips, listen to guest speakers, and participate in hands-on workshops in addition to learning basic skills, such as the use of power tools. The nonprofits then help participants to gain places in apprentice programs or get appropriate jobs.
Greater attention to the immigrant workforce could also have a major impact. Consider Ohio, where non-US citizens represented only 3 percent of the construction workforce from 2015 through 2019. One of the largest new fabs is being built in the state, and construction project managers there might attract more immigrant labor by creating a friendly working environment for non-English speakers—for instance, using bilingual instructions or hiring bilingual supervisors—and by providing temporary housing. Such measures may be well established in regions where immigrants already represent a large portion of the workforce, but they could represent a novel solution in places like Ohio.
Increasing collaboration among stakeholders
Workforce development programs often have a range of sponsors, including government agencies, unions, small trade schools, or individual companies. These groups may have different—and sometimes competing—goals. Closer collaboration among such groups might increase alignment and help them develop common goals that would allow them to ramp-up their efforts more broadly and rapidly.
In the public sector, state and federal policy makers could consider ensuring that their initiatives are aligned with the goals of private stakeholders. Officials could, for example, work with private companies and educational institutions to encourage colleges and trade schools to offer classes that build skills in high demand. New York now works with trade schools, community colleges, and others to ensure that people who want technical training can get it; there are now over 17,000 active construction apprentices in the state. New apprenticeship programs will be only one of the solutions, however, since the United States would have to add 15 large union apprenticeship programs on the scale of those offered by the state of Illinois just to fill the gap for building projects in advanced industries.
Nonetheless, collaborations aimed at creating more construction apprenticeship programs in the semiconductor industry could help, as they have in other sectors. Consider the Rework America Alliance, sponsored by the nonprofit Markle Foundation and supported by McKinsey. Working with a broad group of organizations from the technology, business, labor, education, and other sectors, the Rework America Alliance helps people, regardless of formal education, to move into good jobs in the digital economy by providing appropriate training.
Collaboration among stakeholders may also be critical to encourage a mindset shift among young people and their parents about trade careers. Many people do not believe that a technical associate degree or a trade apprenticeship can be a pathway to a fulfilling career with advancement opportunities. Yet these credentials may give employees with only a high school degree or less a chance to improve their prospects significantly. While the average median hourly wage for all workers in 2021 was $22, certain jobs in the construction trades tend to pay better—for instance, $29 an hour for electricians and pipe fitters. Trainees also get paid during apprenticeship programs, so they can earn a good living and avoid going into debt before they embark on their careers.
Developing state-specific solutions and selecting construction sites more strategically
Since semiconductor job sites are dispersed geographically, and labor challenges vary by region, stakeholders could benefit from developing customized solutions for each fab construction site. Officials in states undergoing drastic transitions in their industrial base—for instance, a decline in the manufacture of automotive components—might prioritize reskilling and training local workers for fab construction. In some cases, these officials might consider recruiting construction workers from other sectors, such as residential-home building, and provide them with fab-specific training. State officials could consider helping stakeholders coordinate their efforts to increase the number of skilled tradespeople, as well.
Semiconductor companies may also mitigate delays by considering labor issues—especially the availability of local construction workers—more deeply during site selection. They might, for instance, consider working with trade schools or other groups to create programs that focus on fab construction skills. Likewise, semiconductor companies could assess other factors that might influence recruitment and staffing, such as the proximity of job sites to public transportation or major roads. In areas where labor shortages are particularly severe, companies may need to consider increasing wages even further above the norm and to offer better incentives, such as the provision of day care and temporary housing.
Enhancing recruitment, retention, and productivity
The factors that will enhance recruitment and retention efforts may vary by location. Companies could establish control rooms where they use analytics to gain a better understanding of the workforce in different geographic areas. With the resulting insights, companies can improve their work schedules, implement work processes that alleviate physical strain, or introduce other changes that will increase employee satisfaction. To optimize the agility and responsiveness of contractors, companies might benefit by using analytical project tools. For instance, they could use tools designed to track the flow of materials to monitor employee retention and attrition instead.
Companies could also invest in productivity improvements and automation that help redeploy labor to critical tasks. McKinsey analyses of construction projects show that employees spend, on average, about 30 percent of their time on important and effective work. That is much lower than the average for many other industries, such as manufacturing, where about 60 percent of all time is productive. Construction companies might eliminate some downtime by leveraging engineering and construction project management tools, such as manufacturing production systems that optimize task sequencing and workflows. Labor can also be redeployed by using other technologies, including digital production control tools, digital twins, and virtual and augmented reality.
When building begins, companies may reduce timelines and minimize labor issues by investing in the modular construction of fabs, as their counterparts in Southeast Asia do, since this allows some production to occur in locations where workers are in greater supply. Even clean rooms can be prefabricated off-site and then assembled at the appropriate locations. Modular construction is common for many other facilities in the United States but has not yet gained traction with fabs. Moving to this method will require careful collaboration among owners, builders, designers, and procurement teams.
Companies might also examine ways to help employees advance, as some research suggests that lateral career opportunities are two-and-a-half times more predictive of employee retention than compensation and 12 times more predictive than promotions. They could also consider investing in employee management skills. If companies encourage all crew members to adopt an “ownership mindset” and to accept responsibility for their work, employees may feel more invested in their jobs.
Finally, companies could build a sense of ownership by giving employees the authority to make decisions without going through layers of management. Employees who build their skills may be able to assume some important tasks even if they lack the seniority or experience for them, which could allow more experienced, specialized workers to focus on more critical assignments. Of course, it may not be possible to offload some tasks that require licensing, apprenticeship, or specific skills.
Developing a core in-house construction team and building capabilities
In this market, builders may hesitate to bid on a fab construction project or withdraw from consideration after expressing initial interest. Semiconductor companies may find it particularly difficult to find builders who have the appropriate mechanical-design expertise, including specialized knowledge of specific equipment, process requirements, and codes. Although the substructure elements, such as the foundation, can be handled by a generalist firm, specialists must ensure that the fab’s interior can support unique processes and equipment.
One possible solution is to have semiconductor companies develop a core project team of employees with fab construction expertise to manage projects from design to completion over two or three years. The team could help the semiconductor company to focus on pragmatic design issues, reduce communication time, and gain more control over the entire project. If a semiconductor company wants to build multiple fabs over the next years, the core team would help to form a standardized management approach for all of them.
To create an internal core team for construction, semiconductor companies could first identify untapped internal talent with expertise in facilities management, building processes, and mechanical-design processes. They could also look for external talent with knowledge of construction management and fab process protocols. Effective core teams could create tremendous value in the semiconductor industry, as they have in other sectors, such as real estate.
Significant fab construction in the United States is unprecedented but possible. The key is to find coordinated and customized solutions that benefit everyone—construction workers, semiconductor leaders, and other stakeholders. Direct efforts to recruit and retain construction employees are often essential, but semiconductor leaders can also mitigate labor issues by becoming more strategic about matters such as site selection, incentives, and plant efficiency. All stakeholders, including semiconductor and construction leaders, may accelerate progress by coordinating their efforts and aligning their goals for recruiting and retaining skilled labor.
These activities will not only benefit semiconductor companies but also help workers who seek challenging and well-compensated positions, as well as end customers waiting for chips. Everyone stands to win.