All new vehicles become used cars and trucks once they’re sold.
It’s an obvious statement, but one that needs to be laid out to explain the root cause for ongoing inventory and pricing issues in the U.S. used vehicle market, which has been a barometer for the country’s inflation levels.
During the onset of the coronavirus pandemic in early 2020, automakers shuttered factories for weeks to stop the spread of Covid-19. It was an unprecedented action that eventually led to additional supply chain problems, such as an ongoing semiconductor chip shortage, causing factories to cease production again for weeks, if not months, at a time in recent years.
The lack of production meant fewer new vehicles would become used models for consumers to purchase, leading to inventory constraints in both the new and used vehicle markets, as well as record prices due to resilient demand.
It’s been three years since those initial plant closures, but American consumers — as well as the Biden administration — hoping for the used vehicle market to return to “normal” pre-pandemic levels shouldn’t hold their breath.
A notable decline in used vehicle prices toward the end of last year has been roughly cut in half in 2023, as inventories remain significantly down following vehicle-production disruptions. There’s also been an uncharacteristically large number of consumers buying out leases to avoid sky-high car prices and increasing interest rates.
“It looks like it will persist for some time,” said Chris Frey, senior industry insights manager at Cox Automotive. “It’s really a function of this hole in new production, creating a dynamic where wholesale or general used values are higher because there are millions of fewer new vehicles that would eventually turn into used.”
Cox Automotive reports wholesale used vehicle prices are up by 8.8% this year through mid-March, according to the Manheim Used Vehicle Value Index, which tracks vehicles sold to dealers at auction. The prices are trending higher, and the index is heading back toward a record of 257.7 basis points set at the start of 2022. It was 238.6 as of mid-March.
Used vehicle inventory is down 21% from a year ago and off a whopping 26% from pre-pandemic levels of 2.8 million available vehicles in 2019. Cox Automotive doesn’t expect the total number of used sales to return to pre-pandemic levels of about 38.2 million units until at least 2026, Frey said.
Adding to the production hole is a change in leasing. Cox reports a 20% increase in consumers who leased their vehicles buying them out instead of trading them in from 2019 to 2022. The increase occurred as residual values of the vehicles in some cases were far above expectations, making it significantly cheaper to buy the vehicle than lease another amid inflated prices and rising interest rates.
“It’s still under a lot of pressure, just like it was last year,” said Benjamin Preston, an autos reporter for Consumer Reports. “Prices came down a little bit … but the bottom line is they’re just way higher than they were before the pandemic.”
Cox Automotive previously forecast wholesale prices on the Manheim Used Vehicle Value Index to end 2023 down 4.3% from December 2022. The company has not revised that forecast but may need to do so amid the increasing wholesale prices.
Cox reports the average listed price of a used vehicle was $26,068 in February, the most recent data available, down from records last year of more than $28,000 but significantly higher than the roughly $22,000 average it reported two years ago. Retail prices for consumers traditionally follow changes in wholesale prices.
So, what’s the solution? There’s no other course but an increase in new vehicles being produced in order to boost the number of future used models. Automakers are expected to lift production this year, but they’ve also pledged to not overbuild like they have in the past.
“We’re unlikely to go back to pre-pandemic levels. Vehicles cost way more now,” Frey said regarding used car pricing. “The landscape has changed. [Automakers] are not manufacturing as many as they have because they got the taste of gold — huge profits from not having so many vehicles in manufacturing.”
Automotive News’ annual dealership census shows the number of U.S. dealerships increased 0.4% last year, though new-vehicle sales per franchise fell 8.8% because of new-vehicle inventory challenges and other factors.
The census ranks 42 brands for throughput, a measure of dealership network health. The new census is the first to include Polestar, which had 29 franchises as of Jan. 1.
The research shows Ford Motor Co. shed 35 dealerships last year—a 1% decline. The brand had 2,967 franchises as of Jan. 1. It gained 19 exclusive stores last year but shed 31 franchises. Its Lincoln brand lost 54 franchises and four exclusives to land at 637 franchises on Jan. 1.
Overall, the number of exclusive dealerships across the industry rose 1.6% to 12,151. Import-badged exclusive dealerships also grew by 2%.
Hyundai added 80 stores, Mazda 21, and Kia and Mitsubishi each more than 10. Jeep more than doubled its exclusive store count, and Cadillac’s dealer network grew by two to 564 franchises, according to Automotive News.
Throughput was a mixed bag, falling for 30 franchised brands and increasing for 11.
Toyota ranked No. 1 for throughput, with 1,494 vehicles sold per franchise. However, inventory constraints tempered its throughput by 8.8%.
Lexus captured the No. 2 spot with throughput of 1,060 vehicles. That represents a 15% decline as dealers struggled with record low inventories for most of the year.
Though BMW’s throughput declined 1.6% to 947 vehicles, it still climbed one spot to third place. The third place finisher in 2021, Honda, dropped five spots to No. 8, with throughput falling 33% to 826 vehicles. Acura throughput fell 35% to 378 vehicles.
Automotive News reported Mercedes-Benz was the only brand in the top 10 whose throughput rose. The brand jumped four spots to No. 4 as its throughput jumped 6.4% to 916 vehicles. Kia moved from the sixth spot in 2021 to the fifth spot, despite a 2.2% decline in throughput to 892 vehicles.
The research found Cadillac dealers sold 240 new vehicles per franchise, up 45% for the industry’s largest percentage gain.
The month of March brings with it many changes. As the weather changes and we cruise into Spring, we shift from football to baseball, college basketball morphs into an all-consuming month long, can’t miss event, and of course, selling season! The hope of warmer weather for riding and RV’ing combined with tax return season generally means an uptick in traffic for new auto’s, RV’s and powersports!
This month also marks some significant changes for us at ADS.
We are thrilled to announce our newest partnership with Zurich. We were honored to be selected as one of their ‘elite’ agencies to represent this globally recognized brands market leading F&I products to auto and powersports dealers. “We are pleased to welcome Bob, Ryan, and the entire ADS team to the Zurich network of F&I agencies; and expanding our reach to their auto and powersports dealers,” said Todd Kaminski, Head of Business Development for Direct Markets, Zurich North America. “Their sound business processes, solid dealership relationships and tremendous client satisfaction are key characteristics we look for to help bring Zurich F&I products, training and participation program to new markets.”
This month we will be hosting an AFIP certification course in our new training center. Be sure to check out the link below and register to be part of this invaluable certification.
As many of us are knee deep in tax season, I am reminded how the profit participation landscape has changed over the years. With some of the recent changes in structures, investment options, access to unearned reserves, etc. it may be a good time to evaluate your capital and tax strategy to make sure you are in the best possible position. Please reach out to us to set up a time to for a no obligation review of your current structure to ensure you are in the best position to accomplish your goals.
Advanced Dealer Solutions (ADS), has announced it has signed on to represent the Zurich suite of protection products to its current and future auto and powersports dealers.
Zurich North America is a leading provider of Finance and Insurance (F&I) solutions for auto dealers offering a full suite of vehicle protection products for gas-combustion, hybrid, and electric vehicles.
“We are excited to add Zurich products and programs to our current offering”, says Bob Mancuso, President of ADS. Mancuso went on to say, “Zurich’s size, strength, and stability will add to our overall value proposition, and it furthers our goal of being an independent voice when it comes to a dealer’s F&I products and programs.”
“We are pleased to welcome Bob, Ryan, and the entire ADS team to the Zurich network of F&I agencies; and expand our reach to their auto and powersports dealers,” said Todd Kaminski, Head of Business Development for Direct Markets, Zurich North America. “Their sound business processes, solid dealership relationships, and tremendous client satisfaction are key characteristics we look for to help bring Zurich F&I products, training, and participation program to new markets.”
“Advanced Dealer Solutions prides itself on its unbiased approach of offering dealers a true choice in the products and programs that best fit their needs. We feel Zurich’s market presence and customer awareness will add value to the products and programs we currently provide our dealers.” says Ryan Nelson, EVP of Advanced Dealer Solutions.
Advanced Dealer Solutions is a premier dealer development agency based in Richfield, Ohio with specialties in F&I training and development, product structure, and reinsurance management for auto, RV and powersports dealers across the country.
Zurich can trace its roots in the automotive industry to 1922. Over the last 101 years, Zurich has evolved alongside its auto dealer customers, listening to their needs and challenges, and developing solutions that help accelerate their growth and protect their legacy.
Just like the industries we serve; ADS has a lot going on and much to be excited about.
In the last month we have hosted the inaugural F&I training as well as a dealer group meeting in our new training facility. The space has exceeded our expectations, and more importantly it has exceeded our dealer’s expectations. Check out the pictures below to see the room in action.
Over the next few months, we will be making several exciting announcements. Stay tuned to hear about our growth and how we plan to provide even more solutions to dealers. Be sure to subscribe to our LinkedIn, YouTube and Facebook pages as well as our newsletter to get the latest updates on what our team is up to.
Data privacy and its impact on automotive marketing. It was positioned to be a headlining story of 2022 as dealers evaluated the impact on their advertising strategies. But, between the ongoing vehicle inventory shortages and Google’s announcement that they will delay deprecating 3rd party cookies until 2023, the story has largely faded from view. If your dealership has put data privacy and its impact on automotive on the back burner, it’s time to turn up the heat. Why? The next update from Apple – iOS 15 – will impact your email marketing.
Before we go any further, no need to panic. Email marketing remains one of the most effective ways to influence car shoppers. The evidence suggests Apple’s iOS 15 update will likely impact how you and your vendor partners measure effectiveness. And the first hint of that impact will come quickly.
So, what is it and what should you be thinking about?
iOS 15 will go public for iPhones, iPads, and desktops using OS Monterrey this month. The update includes two features that will impact email marketing and measurement, Mail Privacy Protection and Hide My Email. At a high level, Mail Privacy Protection gives the consumer the opportunity to protect their email and prevent the tracking that tells people like you and me if, when, and where the email was opened. There’s no need to get into the technical weeds, but this update means when a customer or prospect receives an email on their Apple device, and they have opted into Mail Privacy Protection, that email will automatically register as “opened” regardless of the person’s actual activity.
Now you might be asking, is this the reality for everyone using an Apple device, and will it be effective immediately? The short answer to the first question is no. However, when Apple Mail user downloads the new operating system to their device, they will be asked if they want to protect their email. What we learned when Apple introduced App Tracking Transparency with iOS 14 this spring, 96% of Apple users said “Yes! Don’t track me.” So, it is prudent to expect a majority of Apple users to do the same with Mail Privacy Protection.
The second answer is yes, but not fully. We know from experience that the adoption of new operating systems comes in waves. Some cutting-edge techies update as soon as new features are available and others follow suit in waves. Suffice it to say, expect at least 75% of users to be up and opted in on the new updates by the end of 2021.
Which leads us to why this matters. Google Chrome’s plans with 3rd party cookie tracking is front and center because they are the dominating web browser – accounting for 65% of internet activity. Similarly, Apple is the dominant player in email. For dealers using email marketing (which is practically everyone), this update has the potential to impact up to half of the customers and prospects you engage via email.
Again, no need to panic. This update does not render email marketing ineffective. But it should cause you to pause, evaluate and adjust a few things.
Let’s look at a few high-level actions you can take.
1. Look back at Opens: Establish a measurement standard
Because Mail Privacy Protection automatically triggers the “open” pixel, you can expect your open rates to grow. To track how much, take a look at your history. Open rates vary from send to send, but normalize within a given range over time. Start by taking a look back at the first six months of 2021 to set a measurement standard. This gives you a benchmark to see how open rates change month to month. When you see the normalized open rate start to increase, you will have a general idea of how many of your customers are Apple Mail users and inflating your measurement.
2. Look beyond Opens: Expand your portfolio of email metrics
Open rates are a key metric in marketing reports. Yet by itself, the open rate has long been a flimsy performance measurement. Open rates can be an indicator of awareness, but engagement is better measured by clicks and conversions. Open rates are typically higher and look better on a report, and iOS 15 will likely only inflate those numbers. Resist the urge to take credit for the higher open rates that everyone will see as more users download the new operating system.
Instead, pay MORE attention to click thru rates and conversion metrics. In order to understand email campaign effectiveness at a greater level, utilizing UTM tags and Google Analytics are another incredibly effective way to monitor email performance and conversion. At Client Command, we also measure effectiveness through match back reporting and give dealers visibility into the impressions, frequency and clicks that influence a sale. Your vendors are likely already measuring the effectiveness of email marketing with an equal or greater focus on clicks and conversions. It’s important that you make sure you extend this to internal email engagement efforts, such as email cadences from your CRM.
3. Assess your Automation “Triggers”: Disable cadences based on “Opens”
Marketing automation is built on trigger events. If X action happens, Y cadence is deployed. There is a high likelihood that at least one email cadence set up in your CRM are built around whether someone opens or does not open an email. Opens is far from the only trigger, but is common, especially within dealership operations.
Instead, tie triggers to a more reliable action; such as ownership milestones, service activities or important events. To go deeper, build trigger events inside those cadences, based on clicks — to the enclosed offer, digital retailing tool or form. At Client Command, our marketing automation is triggered by online shopping activity and clicks to lead forms.
4. Resist the urge to react: Entertain some level of the “wait and see” approach
Yes, we know enough to take some proactive action like the steps previously mentioned. But even the Email Service Providers (ESPs) who think only about email delivery all day every day, are taking some level of the “wait and see” approach versus an all-encompassing game plan. They are making necessary adjustments now (including but not limited to the ones mentioned prior), preparing to measure the full impact over a period of time and make optimizations and recommendations accordingly. We experienced this earlier this year when Apple released iOS 14 – partners positioned themselves for the change and continue to optimize as we learn more about the nuances of the impact. Adjustments from ESPs could further impact OR improve email marketing measurements. So, if the ESPs are waiting, there is wisdom in following their lead.
Net-net. Email marketing remains a highly effective way to stay in front of car shoppers and a critical component of your omni-channel marketing strategy. As iOS 15 rolls out and users begin to sign on, start adjusting what you can control – how you measure effectiveness and how you trigger your email cadences – and be ready to adjust to residual impacts. The key is working with partners you trust — committed to staying up to speed, working to keep you ahead of the curve and ready to navigate these and future changes with you.
Article originally published here https://clientcommand.com/ios-15-and-dealership-email-marketing/.
In this issue of Business Spotlight, Auto Digest spoke with CEO of Client Command Jonathan Lucenay.
Business Spotlight
Think about the last time that you searched for a new car, what did that look like? Did you search locally, or within your state, maybe even nationwide just to compare prices? The big question is… how many dealerships did you go to? How many salespeople did you try to haggle with? Many of today’s shoppers are looking at deals across the country, online, and are not limited to your town’s “dealership row.” Sometimes the transaction is settled before the shopper ever steps foot in the showroom. Welcome to 2022, folks!
Thanks to innovative companies such as Client Command, the primary market area of many shoppers is now nationwide and easily accessible. Dealerships have adapted to this over the years, and now utilize DaaS (or data-as-a-service) to identify and offer their cars to these interested parties. This could mean a dealership in Lexington, Kentucky sells a car to a young woman in Butte, Montana. This… is cool, frankly… and was not the reality we lived in just 10 or so years ago. For all of the change happening in the automotive powertrain space these days, it seems retail is also feeling pressure from OEMs to perform.
Enter Client Command
In this issue of Business Spotlight, Auto Digest spoke with CEO of Client Command Jonathan Lucenay. A Cumming, Georgia-based firm with around 70 employees that is a powerful player in the dealership marketing world. After 9/11, CEO Jonathan Lucenay began to realize how the market around him was changing and how decisions were often times made emotionally. He decided to let data tell him where and who to market. Fed up with all of the DMS (Database Management System) providers that were still using tech from the 1970s as a base platform, he started to change the industry himself. He literally said that what he saw back in those days “drove me crazy.”
“Dealers were hesitant so I told our initial clients that they could just pay for the results. The impacts were massive! The results exceeded anything most of those dealers had ever seen. That was 2001.” – CEO Jonathan Lucenay
What do they have that is unique?
The folks at Client Command have been in the industry for over twenty years, originally doing marketing and advertising analysis for seemingly ancient mediums such as radio and TV. Oh, how times have changed. After realizing the demand and opportunity for more targeted ads in the early 2000s, CEO Jonathan Lucenay began to transition his company into this new model. A model that combines inputs from a variety of sources to pair a match. Effective leaders can anticipate change on the horizon, as shown.
Their primary technology, called “Active Shopper Network,” is able to accurately track and identify nearly every person shopping for a car in the United States. The algorithm gets data from over sixty billion URLs every day and has databases to pair all of these searches to the one doing the searches. This includes data from online videos, social media, and email, along with web searches. The company was named Inc. Magazine Best Workplace 2018 and has received the US Business News Technology Elite Award for Best Automotive Marketing Solutions Provider. They do have plans to go international in the future, which will undoubtedly present it’s own new set of challenges for the team.
“The customer expects [the ads] to be real time, but they also expect them to be meaningful.”
Marketing On Easy Mode
When Auto Digest asked Mr. Lucenay what the biggest challenge is for the company, he responded that the hard stuff is what they make look easy. The business is proud to tout that they integrate billions of data sources and sift through it to get actionable data for the local dealership. This data comes from websites, search engines, ISP’s, and a variety of other sources that most of us aren’t even aware exist! Client Command supports dealerships because when they win, Client Command also wins. The have some testimonials on their website from dealers, and it seems the relationship is more of a genuine partnership than a business client. The same statement, however, applies if a loss happens. Good motivation to succeed, right? When prying further, and asking Jonathan what his team is doing to overcome this challenge of educating dealerships on their market, he stated that it’s step by step. It is a process to work with one dealership at a time to prove their value and establish that mutual teamwork. The team works diligently to enhance not just the data, but also the entire platform that is visible to their customers on a weekly basis. These days, it seems there is an algorithm for everything… but not all add true value, and Client Command is cognizant of this.
Enabling Great Talent to Succeed
The culture of Client Command is one that is built around knowing people, both the data and the person… whether this means their business partners or their own employees. The CEO made it clear that although data firms such as his sometimes struggle to maintain a certain level of “normality” in the office, (data analytics is not typically known for it’s engaging and enthusiastic workforce) he used the word “electric” to describe the energy at CC. The company ensures that investments are not only made on the software side of things but more importantly with their human capital. This enables the rest of the team to more efficiently give that ever-so-valuable people knowledge to the dealerships surrounding them.
“Big data is meaningless unless it’s actionable.”
In conclusion, Jonathan and his team firmly believe that although consumers like digital retail, dealers can adjust along with the consumers in the market. His organization is just one example of many in the rapidly-evolving auto sector that are learning to encourage and implement new and sometimes risky ideas. That is how a competitive edge is maintained.
And just like that 2022 has come to an end. This past year will prove to be memorable for the rapid changes in the market, the ongoing uncertainty we find ourselves living in and our continued search for a ‘new norm’.
Let’s now shift our focus to 2023 and how we can make it the best year ever. Despite the predicted retractions and continued headwinds we face, accomplishing even the loftiest of goals is possible if you take the time to go through proper goal-setting actions. There are countless articles and videos on how to set goals and methods to track them. Here are a couple of articles to help you define your goals and establish methods to crush them! Whatever your goals are, we wish you luck in accomplishing them this year.
U.S. Pours Money Into Chips, but Even Soaring Spending Has Limits
Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments are not a silver bullet.
Don Clark reports on the semiconductor industry, and Ana Swanson reports on trade and international economics.
In September, the chip giant Intel gathered officials at a patch of land near Columbus, Ohio, where it pledged to invest at least $20 billion in two new factories to make semiconductors.
A month later, Micron Technology celebrated a new manufacturing site near Syracuse, N.Y., where the chip company expected to spend $20 billion by the end of the decade and eventually perhaps five times that.
And in December, Taiwan Semiconductor Manufacturing Company hosted a shindig in Phoenix, where it plans to triple its investment to $40 billion and build a second new factory to create advanced chips.
The pledges are part of an enormous ramp-up in U.S. chip-making plans over the past 18 months, the scale of which has been likened to Cold War-era investments in the space race. The boom has implications for global technological leadership and geopolitics, with the United States aiming to prevent China from becoming an advanced power in chips, the slices of silicon that have driven the creation of innovative computing devices like smartphones and virtual-reality goggles.
Today, chips are an essential part of modern life even beyond the tech industry’s creations, from military gear and cars to kitchen appliances and toys.
Across the nation, more than 35 companies have pledged nearly $200 billion for manufacturing projects related to chips since the spring of 2020, according to the Semiconductor Industry Association, a trade group. The money is set to be spent in 16 states, including Texas, Arizona and New York on 23 new chip factories, the expansion of nine plants, and investments from companies supplying equipment and materials to the industry.
The push is one facet of an industrial policy initiative by the Biden administration, which is dangling at least $76 billion in grants, tax credits and other subsidies to encourage domestic chip production. Along with providing sweeping funding for infrastructure and clean energy, the efforts constitute the largest U.S. investment in manufacturing arguably since World War II, when the federal government unleashed spending on new ships, pipelines and factories to make aluminum and rubber.
“I’ve never seen a tsunami like this,” said Daniel Armbrust, the former chief executive of Sematech, a now-defunct chip consortium formed in 1987 with the Defense Department and funding from member companies.
President Biden has staked a prominent part of his economic agenda on stimulating U.S. chip production, but his reasons go beyond the economic benefits. Much of the world’s cutting-edge chips today are made in Taiwan, the island to which China claims territorial rights. That has caused fears that semiconductor supply chains may be disrupted in the event of a conflict — and that the United States will be at a technological disadvantage.
The new U.S. production efforts may correct some of these imbalances, industry executives said — but only up to a point.
The new chip factories would take years to build and might not be able to offer the industry’s most advanced manufacturing technology when they begin operations. Companies could also delay or cancel the projects if they aren’t awarded sufficient subsidies by the White House. And a severe shortage in skills may undercut the boom, as the complex factories need many more engineers than the number of students who are graduating from U.S. colleges and universities.
The bonanza of money on U.S. chip production is “not going to try or succeed in accomplishing self-sufficiency,” said Chris Miller, an associate professor of international history at the Fletcher School of Law and Diplomacy at Tufts University, and the author of a recent book on the chip industry’s battles.
White House officials have argued that the chip-making investments will sharply reduce the proportion of chips needed to be purchased from abroad, improving U.S. economic security. At the TSMC event in December, Mr. Biden also highlighted the potential impact on tech companies like Apple that rely on TSMC for their chip-making needs. He said that “it could be a game changer” as more of these companies “bring more of their supply chain home.”
U.S. companies led chip production for decades starting in the late 1950s. But the country’s share of global production capacity gradually slid to around 12 percent from about 37 percent in 1990, as countries in Asia provided incentives to move manufacturing to those shores.
Today, Taiwan accounts for about 22 percent of total chip production and more than 90 percent of the most advanced chips made, according to industry analysts and the Semiconductor Industry Association.
The new spending is set to improve America’s position. A $50 billion government investment is likely to prompt corporate spending that would take the U.S. share of global production to as much as 14 percent by 2030, according to a Boston Consulting Group study in 2020 that was commissioned by the Semiconductor Industry Association.
“It really does put us in the game for the first time in decades,” said John Neuffer, the association’s president, who added that the estimate may be conservative because Congress approved $76 billion in subsidies in a piece of legislation known as the CHIPS Act.
Still, the ramp-up is unlikely to eliminate U.S. dependence on Taiwan for the most advanced chips. Such chips are the most powerful because they pack the highest number of transistors onto each slice of silicon, and they are often held up as a sign of a nation’s technological progress.
Intel long led the race to shrink the size of transistors so more could fit on a chip. That pace of miniaturization is usually described in nanometers, or billionths of a meter, with smaller numbers indicating the most cutting-edge production technology. Then, TSMC surged ahead in recent years.
But at its Phoenix site, TSMC may not import its most advanced manufacturing technology. The company initially announced that it would produce five-nanometer chips at the Phoenix factory, before saying last month that it would also make four-nanometer chips there by 2024 and build a second factory, which will open in 2026, for three-nanometer chips. It stopped short of discussing further advances.
In contrast, TSMC’s factories in Taiwan at the end of 2022 began producing three-nanometer technology. By 2025, factories in Taiwan will probably start supplying Apple with two-nanometer chips, said Handel Jones, chief executive at International Business Strategies.
TSMC and Apple declined to comment.
Whether other chip companies will bring more advanced technology for cutting-edge chips to their new sites is unclear. Samsung Electronics plans to invest $17 billion in a new factory in Texas but has not disclosed its production technology. Intel is manufacturing chips at roughly seven nanometers, though it has said its U.S. factories will turn out three-nanometer chips by 2024 and even more advanced products soon after that.
The spending boom is also set to reduce, though not erase, U.S. reliance on Asia for other kinds of chips. Domestic factories produce only about 4 percent of the world’s memory chips — which are needed to store data in computers, smartphones and other consumer devices — and Micron’s planned investments could eventually raise that percentage.
But there are still likely to be gaps in a catchall variety of older, simpler chips, which were in such short supply over the past two years that U.S. automakers had to shut down factories and produce partly finished vehicles. TSMC is a major producer of some of these chips, but it is focusing its new investments on more profitable plants for advanced chips.
“We still have a dependency that is not being impacted in any way shape or form,” said Michael Hurlston, chief executive of Synaptics, a Silicon Valley chip designer that relies heavily on TSMC’s older factories in Taiwan.
The chip-making boom is expected to create a jobs bonanza of 40,000 new roles in factories and companies that supply them, according to the Semiconductor Industry Association. That would add to about 277,000 U.S. semiconductor industry employees.
But it won’t be easy to fill so many skilled positions. Chip factories typically need technicians to run factory machines and scientists in fields like electrical and chemical engineering. The talent shortage is one of the industry’s toughest challenges, according to recent surveys of executives.
The CHIPS Act contains funding for work force development. The Commerce Department, which is overseeing the doling out of grant money from the CHIPS Act’s funds, has also made it clear that organizations hoping to obtain funding should come up with plans for training and educating workers.
Intel, responding to the issue, plans to invest $100 million to spur training and research at universities, community colleges and other technical educators. Purdue University, which built a new semiconductor laboratory, has set a goal of graduating 1,000 engineers each year and has attracted the chip maker SkyWater Technology to build a $1.8 billion manufacturing plant near its Indiana campus.
Yet training may go only so far, as chip companies compete with other industries that are in dire need of workers.
“We’re going to have to build a semiconductor economy that attracts people when they have a lot of other choices,” Mitch Daniels, who was president of Purdue at the time, said at an event in September.
Since training efforts may take years to bear fruit, industry executives want to make it easier for highly educated foreign workers to obtain visas to work in the United States or stay after they get their degrees. Officials in Washington are aware that comments encouraging more immigration could invite political fire.
But Gina Raimondo, the commerce secretary, was forthright in a speech in November at the Massachusetts Institute of Technology.
We would like to wish everyone a Merry Christmas and a Happy New Year!
Our office will be closed Friday, December 23rd, and Monday, December 26th through Friday, December 30th. Our reps and staff will be available via email and phone.
