Domestic Semiconductor Infrastructure Needs to Do Some Serious Catch Up

The woeful semiconductor shortage of recent years seems to be, at least for the moment, held nominally at bay. Lead times are contracting on at least some products. At the same time, with a keen awareness of the cost of such shortages, a number of semiconductor companies have doubled down on building new fabrication plants in the United States. Unfortunately, that will take time—years or even decades.

Semis in the news

Currently, the United States represents 34% of semiconductor demand and only 14% of the supply—but that is shifting. The CHIPS and Science Act of 2022 provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development. This includes $39 billion in manufacturing incentives, including $2 billion for the legacy chips used in automobiles and defense systems, $13.2 billion in R&D and workforce development, and $500 million to provide for international information communications technology security and semiconductor supply chain activities. The legislation also includes a 25% investment tax credit for capital expenses for manufacturing semiconductors and related equipment.¹

Figure 1: Semiconductor supply and demand is not regionally balanced. Currently, the three biggest consumers of semiconductors represent a much smaller portion of the total supply. Recently, the U.S. share of supply has increased, but the next decade or two will likely shift that figure even more. (Image source: McKinsey & Co.)

Pushed by these manufacturing and tax incentives, a handful of major chipmakers are investing heavily in new fabs in the U.S., including GlobalFoundaries (New York); Intel (Arizona, New Mexico, Ohio); Samsung (Texas); TSMC (Arizona); Texas Instruments (Texas); and Micron (New York).² The investment figures are substantial. For example, the most recent announcement from Micron Technology of a mega-fab in Clay, NY, begins a cycle of investment that the company expects will reach $100 billion over the next 20 years. The fab will focus on leading-edge memory chips and is expected to create 50,000 jobs in New York, including 9,000 at the company. $5.5 billion in incentives from New York, as well as federal funding, was a key part of the investment, Micron said.³

Taking a broader view, the Semiconductor Industry Association has identified at least 46 new semiconductor ecosystem projects across the U.S., including the construction of new semiconductor manufacturing facilities (fabs), expansions of existing sites, and facilities that supply the materials and equipment used in manufacturing (Figure 2).

Figure 2: The Semiconductor Industry Association has identified at least 46 new semiconductor ecosystem projects across the U.S., including the construction of new semiconductor manufacturing facilities (fabs), expansions of existing sites, and facilities that supply the materials and equipment used in manufacturing. (Image source: SIA)

In total, the SIA calculated that this represents over $180 billion in company investments in the U.S. and the creation of more than 200,000 jobs across the U.S. economy, including 36,000 direct jobs in the semiconductor ecosystem.

Optimism reigns

The optimism is clear across the industry. Four out of five semiconductor execs expect that their organizations’ revenue will increase in 2023, according to a recent KPMG Global Semiconductor Industry Outlook 2023 report.⁵ Slightly fewer—64%—expect industry revenue to increase in general—which says to me that they trust the path that they are forging for their organization, and believe that they can capture bigger than average growth levels by planning strategically.

A global talent shortage is the single biggest issue facing the ecosystem, the report said. That makes sense—the U.S. will need to increase the development of STEM training in order to make sure that workers are available to join the burgeoning U.S. semiconductor manufacturing landscape. And, not surprisingly, based on announced plans by semiconductor companies, the nationalization of semiconductors is the top geopolitical concern. The US Chips Act is one example of this turn, but the European Chips Act has similar implications.

Although the impact of the United States’ focus on increasing its strength in semiconductor manufacturing has not been fully felt, it’s clear that there are some really positive indicators that growth and change will continue. Now, over the next five to ten years, it’s going to be critical that the industry works together to pull in the direction of tipping the scales to help balance America’s proven design leadership with a similar level of semiconductor manufacturing prowess, particularly with respect to emerging technologies.

References:

1: https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/

2: https://www.tomshardware.com/news/new-us-fabs-everything-we-know

3: https://investors.micron.com/news-releases/news-release-details/micron-announces-historic-investment-100-billion-build-megafab

4: https://www.gartner.com/en/newsroom/press-releases/2023-01-17-gartner-says-worldwide-semiconductor-revenue-grew-one-percent-in-2022

5: https://advisory.kpmg.us/content/dam/advisory/en/pdfs/2023/global-semiconductor-industry-outlook-2023.pdf