The United States, where semiconductors were invented, produced 37% of the world’s chip supply until the 1990s. However, currently only about 12% of all computer chips are produced domestically.
That decline in recent years has led to calls to bring chip manufacturing back to the United States, and with the federal government spurring them on, Intel, Samsung, TSMC, and others are planning to build a flurry of new manufacturing plants. clarified. (Qualcomm said it would invest $4.2 billion in partnership with GlobalFoundries to double chip production at the company’s manufacturing facility in Malta, New York.)
Last week, chip maker Micron Technology announced it would spend $20 billion to build the largest semiconductor factory in U.S. history, and could spend up to $100 billion in expansion over 20 years.
In announcing projects for new manufacturing plants, the semiconductor makers at least partially acknowledged the CHIPS and Science Act of 2022 signed into law by President Joe Biden in August. The legislation provides $52.7 billion in manufacturing incentives to boost microchip production in the United States. Semiconductor makers may start trying to use tax cuts and money to offset construction and other costs next year.
Essentially, the CHIPS Act is an attempt to increase the percentage of microprocessors produced in the United States by closing the cost gap with other countries such as Taiwan, South Korea, and China. In these countries, governments already subsidize semiconductor manufacturers.
U.S. legislation is also intended to create high-tech jobs and loosen the control foreign chipmakers have over U.S. OEMs in the supply chain.
Senate Majority Leader Chuck Schumer (D-New York) said in a statement, “In short, without CHIPS and science legislation, Micron would have decided to build its megafabs overseas.
Gartner’s vice president of Emerging Technologies and Trends, Gaurav Gupta, said the CHIPS Act’s money, tax breaks, and other incentives are small change for big manufacturers. “If you look at major chip makers like TSMC, Samsung, and Intel, they spend this much money in a year,” Gupta said.
But the incentive shows that the U.S. government is serious about helping the industry. But more is needed, according to Gupta, who cited the need for CHIPS Act 2.0, 3.0, and beyond.
“This is the first time this funding has been made available.As a result, many chip makers are announcing new fabs and capacity expansions. We can see them building fabs by the time frame 2024 to 2024. But if the U.S. government is serious about moving more chip manufacturing back to the U.S., this is It has to be consistent policy for the next decade and beyond.”
Most of the bill’s funding, $39 billion, will be used to incentivize new chip foundries. He also has $2 billion in legacy chip makers making products essential to automotive and defense systems, $13.2 billion in research and workforce development, and $500 million in supply chain and network security.
The question is, is that enough? And if a company breaks ground on a new manufacturing facility, will there be enough technical talent available to staff the facility? Currently, the United States is experiencing an unprecedented technical talent shortage, especially in the semiconductor sector. increase.
Mark Granahan, co-founder and CEO of iDEAL Semiconductor, a five-year-old fabless chip company in Allentown, Pennsylvania.
As iDEAL is a start-up company, Granahan needs employees to perform all functions within the company, including sales and marketing, applications and systems, and engineering. “To do all of this, you need a technical background. You need a two-year degree, a master’s degree, a Ph.D. is,” he said.
Beyond the fact that most jobs in the semiconductor industry are overseas, students shy away from these careers because chip design and manufacturing have a reputation for being a solid industry compared to software development, Granahan said. Chip development also requires coding and software development, Grahahan said.
The skills gap exacerbates a pre-existing chip supply shortage than the supply chain disruptions caused by the COVID-19 pandemic, but the pandemic has made things even worse. According to Alan Priestley, vice president analyst at Gartner Research, the old semiconductor fab was already running at full capacity. “COVID exacerbated the problem as all the demand forecasts for the industry were thrown into the air,” he said in a previous interview.
Given the high cost and complexity of chip manufacturing, many US semiconductor companies have moved to a “fabless” model. In this model, the chip is designed here and manufactured overseas (mainly in East Asia). The region now accounts for nearly 80% of global chip manufacturing, according to the Center for Strategic & International Studies (CSIS).
“Some of America’s largest tech companies, such as Google, Apple, and Amazon, rely solely on Taiwan’s TSMC for almost 90% of their chip production,” CSIS research assistant Gregory Arcuri wrote in a January blog. I am writing to
Support for reshoring chip manufacturing was driven in large part by import shortages during the pandemic and dramatic increases in freight costs and delivery times. Other factors included growing awareness of the total cost of offshoring and growing concerns about US dependence on China, Gupta said.
“Even critical U.S. infrastructure—aerospace, communications, defense, and military—depends on chips manufactured abroad,” Gupta said.
A potential conflict between Taiwan and China and the danger of China interfering in the global chip supply chain add to these concerns, according to the Reshoring Initiative, a manufacturing advocacy group based in Sarasota, Fla. It brings a new focus.
“Geopolitical and climate change destabilization has exposed our vulnerabilities and the need to address them,” the Leshoring Initiative said in a report. We have a golden opportunity for a meaningful recovery, and continuing on our current trajectory will reduce our deficit, add jobs, and make America safer, more self-sustaining, and more resilient. Become.”
Apple, Microsoft, Alphabet, Amazon, and others are citing problems abroad that are hampering hardware production and urging the US government to increase domestic chip production. In fact, according to a US Department of Commerce report released in January, at some point in 2021, the world will only have five days’ worth of chips in its supply, and there are no signs that the situation will improve any time soon. The shortage is severe.
According to the Semiconductors in America Coalition (SIAC), in contrast to the United States, the governments of Taiwan, South Korea, Japan and China all subsidize semiconductor manufacturing and research facilities. “As a result, it is 20% to 40% more expensive to build and operate manufacturing facilities in the United States than abroad,” SIAC said in a letter to US Congressional leaders.
“Government investments to revive chip production will ‘create hundreds of thousands of U.S. jobs,'” David Isaacs, vice president of government relations for the Semiconductor Industry Association, said in a blog post. The effort will also spur hundreds of billions of dollars of investment in chip companies within the United States, ensuring a more resilient chip supply his chain for major manufacturing and national security communities. will, he said, Isaacs.
Recent initiatives to bring high-tech manufacturing back to America are working, according to the Reshoring Initiative. In its report, the group stated that by 2022, the number of companies directly related to offshore companies making foreign direct investment (FDI) in US-based sectors and facilities and domestic companies returning jobs to the state. We expect to see a record 350,000 new jobs. This is up from his 260,000 news jobs in 2021.
If its job projections are correct, by 2022 the total number of jobs announced since 2010 will be over 1.6 million, says the Reshoring Initiative report. The group also noted that reshoring has outperformed FDI for the third consecutive year.
According to the Reshoring Initiative, high reshoring rates mean that U.S.-based companies are beginning to see the same benefits of localized production that many foreign companies have seen over the years. indicates that there is
“5 million manufacturing jobs are still offshore, [and] There is much more growth potential as measured by the (US) $1.1 trillion annual trade deficit,” said Harry Moser, founder and president of the Reshoring Initiative.
In addition to state incentives, Micron chose Upstate New York for its new plant because it offers partnership opportunities with local K-12 education programs, community colleges, and institutions for outstanding engineering and technical talent. said.
“The state has a long history of semiconductor development and manufacturing and offers promising opportunities to collaborate on research and development initiatives with organizations such as the Albany Nanotech Complex and the U.S. Air Force Research Laboratory,” Micron said in a statement. .
The key point here is that for decades, the foundry model has allowed companies that need semiconductors to design in-house and ship designs to foundries, increasingly located overseas, for manufacturing.
Martin Schmidt, president of Rensselaer Polytechnic Institute in Troy, New York, said one consequence of the U.S. falling behind other countries in chip production is how it affects student career choices. said it was.
“If U.S. students are considering career choices and are interested in semiconductor manufacturing, manufacturing methods, and the advanced technologies to develop them, those opportunities today are largely offshore,” he said. There is recognition,” said Schmidt. “What this means is that we are not producing a generation of innovators who are on the cutting edge of semiconductor manufacturing and design.”
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