Semiconductor Manufacturing in the age of onshoring

Supply chain disruptions between 2021 and 2022 cost High Tech businesses $269 billion in missed revenue, prompting businesses and governments alike to share an overarching goal: mitigate the risks associated with having most of the world’s semiconductor chips produced in very few locations by onshoring these operations.

In 2023, High Tech businesses were already spending an average of $1.1 billion to digitize, automate and relocate supply and production facility, a number expected to increase to $3 billion by 2026. Indeed, 76% of High Tech companies plan on producing and selling most of their products in the same region by 2026, a sharp increase from 42% today.

There are already more than 60 announced new or expanded manufacturing facilities across the United States and the businesses involved are highly optimistic about their prospects and expect to be ready for the anticipated rebound in chip demand in 2024.

However, executives are also acutely aware that they face considerable challenges on the path to success. They know they’re shouldering an agenda that, for most, means moving well outside their strategic comfort zones. Based on input from semiconductor industry executives and ongoing quantitative research, Accenture has identified four steps that companies can take to better their chances of success as they accelerate their efforts to build and operate onshore fabrication plants (fabs).

Four steps to navigate the current landscape

Step 1: Create internal capability to engage in the public/private partnerships.

The US government alone promised to invest $52 billion in manufacturing grants and research to the semiconductor industry along with a 25% investment tax credit. The challenge for company leaders is how to secure some of this government funding.

To ensure a greater chance of meeting the requirements laid down by the government and the states, high tech businesses should be proactive about establishing a team in charge of engaging with government officials and managing the grant process. This team should develop an understanding of leading practices for public/private partnerships and help navigate unfolding deadlines and handle government requests.

To foster deeper engagement with the public sector, high tech companies should also focus on elevating ecosystem partnerships. Highlighting the unique role each stakeholder plays in developing new fabs helps government partners evolve from financing providers to stewards of the sector working hand-in-hand with an ecosystem.

Step 2: Rethink Talent strategies.

The need for talent is as critical as the fab’s physical construction, yet the high tech industry, like many others, faces a significant STEM talent shortage. To address this gap, businesses should focus on allowing existing employees to develop skills that are in demand and enable them to move across functions. There is a high likelihood of transferability between engineering talent and connected technologies which can uncover missed talent pools and close skills gap.

Expanding the talent pool is another venue. Developing formal outreach programs from urban to rural regions, for example, is a great way to raise awareness of the industry beyond traditional talent sources and attract employees from different backgrounds. The government’s renewed focus on diversity also means it is an opportunity to further activate public/private partnerships and federal funds to extend into the workforce and support efforts to recruit, retain and identify various talent.

Finally, artificial intelligence can help automate tasks where possible and focus on filling more strategic and time sensitive roles. The strategy, however, should entail more than automating to create operational efficiencies – it should focus on attracting the right talent to leverage emerging technologies to run fabs as efficiently as possible.

Step 3: Be proactive about security and emerging technologies.

Each year, manufacturing processes become more complex, and the number of players involved in bringing a solution to market increases. This means security, specifically as it relates to emerging technologies and supply chain protection, has never been more important.

Every business serious about security must ensure that the company’s approach to security permeates the entire organization. Articulate and formalize roles and responsibilities pertaining to security and establish formal, required, regular training for people at all levels, with no exceptions.

Similarly, fabs should be designed and built with security in mind. Start by identifying the tools and technologies needed to secure data, technology infrastructure and architecture as early as possible. The government can play a role here as well: the United States State Department’s International Technology Security and Innovation Fund allocates $500 million to explore and secure semiconductor manufacturing by providing cybersecurity tools that bolster industry partners’ defense capabilities.

Step 4: Re-asses ROI expectations.

The timeframe from planning to launch continues to tighten as new talent, change management and new partners add project complexity. These factors decrease available time, increase projected costs and impact projected ROI. Organizations should adapt accordingly to avoid getting caught off guard.

One good way to stay ahead of bad ROI surprises is to share information and use financial incentives to strengthen industry ecosystems. Prompt the local supply chain to adapt and players to take on new roles. Engage with partners in new ways and consider new financial arrangements with OEMs and suppliers to decrease risk and increase bargaining power. Long-term supply agreements can help smooth market fluctuations while information-sharing agreements with suppliers and customers grant better understanding of the complexities they face and add predictability into production.

Building capacity is a lengthy and costly process – make sure to be clear with investors and the government about the project’s long-term value. Such projects require a shift in mindset with a greater focus on building long-term capabilities instead of meeting short term demand. Partner closely with finance and operations, using AI and predictive analytics to provide clear guidance on value created for both sets of stakeholders today and several years down the road.

High Stakes, High Potential

The journey down the path of manufacturing reinvention is long and complex, but the chances of success rise when company leaders address their strategy with a longer-term horizon than their business traditionally dictated. Now is the time to turn shovel-ready projects into significant onshore assets.