The US is betting big on AI chips, but there's a giant flaw in the plan

• The Biden administration is subsidizing the semiconductor industry to boost US chip production.
• But the US doesn't have enough workers in the AI chip manufacturing sector.

The US desperately needs more workers to build AI chips.

The semiconductor industry is responsible for building AI chips, but over the past two decades, the number of workers in American semiconductor manufacturing has dropped sharply, according to The Wall Street Journal.

That decline in workers corresponded with a decline in the US share of the global chip-making market. Between 1990 and 2020, the number of chips made in the United States fell by a third. In that same period, Taiwan, China, and South Korea's combined share grew by almost 60%, the Journal reported.

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The United States is eager to control chip manufacturing as artificial intelligence becomes critical in national and international security. Since "general-purpose AI software, datasets, and algorithms are not effective targets for controls, the attention naturally falls on the computer hardware necessary to implement modern AI systems," Saif M. Khan and Alexander Mann wrote in a Center for Security and Emerging Technology report.

An edge in chip manufacturing would help the United States maintain global dominance. "Given the foundational nature of certain technologies, such as advanced logic and memory chips, we must maintain as large of a lead as possible," national security advisor Jake Sullivan said in a speech in 2022.

Chip manufacturing, however, is the industry's largest cost driver, according to a report from McKinsey & Company. And manufacturing in the United States has only become more expensive.

So the Biden administration is providing billions of dollars for semiconductor research, development, manufacturing, and workforce development through the CHIPS and Science Act.

Leading chip manufacturer Taiwan Semiconductor Manufacturing Co. is one company using those subsidies to expand production in Arizona.

But subsidies only help if there are workers to do the jobs. If the United States really wants to catch up in the race to make more chips, it will have to convince more workers to join the semiconductor industry.

Universities can be a fertile ground for recruiting that talent.

At Purdue University in Indiana, students are already excited about the buzz around AI and the skyrocketing valuations of US chipmakers like Nvidia.

About 100 Purdue students majoring in materials, mechanical, or electrical engineering have graduated with a concentration in semiconductors, while another 135 students are enrolled in certificate programs, the Journal reported. There's even an on-campus semiconductor club that drew 170 new members in two months.

Purdue is now partnering with South Korean chipmaker SK Hynix to build a $3.9 billion semiconductor complex in West Lafayette that will make AI memory chips, the Journal reported. Still, "one of the biggest challenges is getting students to fall in love with semiconductors," Nikhilesh Chawla, a professor of materials engineering who co-directs Purdue's semiconductor programs, told the Journal.

The good news is that experts also say that the industry's labor costs are likely to diminish in the coming years. Purdue's president, Mung Chiang, told the Journal that one area that may see a decrease in costs is packaging, which helps chips connect to other devices. Packaging has long been labor-intensive, but SK Hynix's plans for advanced packaging will help "rewrite the cost equation," Chiang told the Journal.