Outsourcing of Microchips Impacts U.S. Jobs: is solar next?
As an increasing number of semiconductor companies enter the solar market through various means, the outsourcing trend of microchips for these U.S.-based companies may be a sign for the future solar cell market. U.S.-based fabless companies continue to dominate the global sales for semiconductors, as 17 of the top 25 and nine out of the top 10 are headquartered in the United States. Only one Japanese company, MegaChips, is even in the ranking, as the fabless/foundry outsourcing business model has not been readily adopted by Japanese and other Asian companies, for that matter. IC Insights Inc. has recently reported that nine fabless IC companies had sales of $1B or more in 2009, led by Qualcomm Inc., based in San Diego, CA, and Advanced Micro Devices Inc., based in Sunnyvale, CA, which shifted to a fabless business model in 2009.
However, this trend has taken its toll on the U.S. job market and will worsen conditions in the next decade. U.S. semiconductor and other electronic component makers will lose 146,000 jobs between 2008 and 2018, according to a report published by the U.S. Bureau of Labor Statistics (BLS) in December. The report ranks the chip industry second highest in terms of estimated job losses over the next decade, only behind retail department stores.
Previously, from 1998 to 2008, 217,000 semiconductor jobs were eliminated. In specific, the semiconductor subcategory job totals fell dramatically from a peak of 292,000 jobs in 2001 to about 185,000 in 2009, nearly a 40 percent reduction. Moreover, the BLS figures project that U.S. semiconductor manufacturing employment will have dropped from an annual high of 676,000 in 2000 to 287,000 by 2018, equivalent to approximately two-thirds of the workforce. Many of these same companies produce solar cells as well. Seventy percent of U.S. gross domestic product is associated with consumer spending; thus, a reduction in manufacturing will increase that alarming factor, and consumers will have even less choice in terms of retail options.
The world’s largest semiconductor foundry, which has subsequently developed a solar cell process line, Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), headquartered in Taiwan, plans to add several thousand new workers this year to its labor force of approximately 23,000 globally. As more U.S. companies such as AMD and Qualcomm rely more heavily on an outsourcing foundry model for there microchips, TSMC is planning to recruit more than 3,000 employees this year to support capacity expansion and aggressive technology development. Primarily engineers in semiconductor manufacturing and research and development will be hired, but the company is also adding personnel in solar, solid state lighting, information technology, marketing and sales, and management.
Thus, the semiconductor industry is undergoing a fundamental change in structure that will leave only a few companies producing devices at the leading edge, as more of them utilize common, shared foundry processes due to the exorbitant cost of maintaining or building new start-of-the-art fabrication facilities, which require multi-billion dollar investments. Bob Johnson, VP of research at the Gartner analyst firm, predicts that by 2014 there will be only 10 companies operating at the leading edge: 1-2 non-memory device manufacturers, 4-5 memory chip companies, and 3 foundries. Similarly, Handel Jones, CEO of International Business Strategies, predicts "significant changes" over the next 5-10 years, both in terms of the structure of the industry and its budget framework. He has stated that once the 22nm node size generation is in production by 2012, that there will be only three device manufacturers: Intel, Samsung and STMicroelectronics, along with foundries: TSMC and Global Foundries.
This is an alarming prediction for the semiconductor industry; however, it has overcome grim expectations on device shrinkage before. A follow-up article will be published by this author soon to discuss the possibility of this trend emerging for the solar industry as well.
Photo Credit: NT-Soft