The industries of the world economy are suffering from a lack of critical components. What needs to be done? Make more microchips, of course. How will that help? The answers are complex.
One aspect is that the Biden administration is paying close attention to the situation, which is reducing production of automotive vehicles, consumer electronics and other tech-dependent products. The federal government is getting behind the push to establish more wafer fabrication facilities in the United States, which started with the Pentagon for mil-spec devices and is now spreading to other semiconductor-based applications that support national security.
“We used to be at 50% of the world capacity 30 years ago, and now we’re down to 12 percent,” said Ajit Manocha, president and CEO of SEMI. Along with the long decline in U.S.-based semiconductor manufacturing, recent times have seen “calamities” in Japan and Taiwan, such as tsunamis, earthquakes and fires, he added.
The brutal winter storm that hit Texas in February did not help the situation, shutting down production at wafer fabs for Samsung Austin Semiconductor, NXP Semiconductors (two fabs) and Infineon Technologies. It took weeks to bring those four Austin-based fabs back up to regular production and output.
Intel plans to build two wafer fabs in Arizona to support its burgeoning foundry business. Taiwan Semiconductor Manufacturing Co. (TSMC) is working toward constructing a “gigafab” in the Grand Canyon State, combining multiple fab lines in one facility, rather than having multiple wafer fabs. Samsung Foundry aims to have another fab in or near the capital of Texas, with a budget of more than $17 billion. Intel will spend about $20 billion on two fabs in Arizona. TSMC expects to spend $35 billion during this decade on the Arizona fab, following a $3.5 billion investment in its wholly owned subsidiary that will run the facility.
“Having multiple fabs in multiple countries protects us from future disruptions,” Manocha said. “More importantly, the U.S. definitely welcomes the new fabs. If you really look at the overall IC industry, it is around $480 billion at the end of this year, so let’s say half a trillion dollars. It’s going to double in the next 10 to 15 years to $1 trillion. You need many more fabs. So, three fabs in Arizona, one in Texas, is definitely a good start.”
Manocha said the market should expect many more fabs to be built in the U.S. and probably in other countries because there will be a need for more fabs to support a $1 trillion chip industry. Demand for chips is coming from smart healthcare or developing new products like quantum computing and automotive sectors.
“I think that there is quite a realization in many countries that semiconductors are very strategic for national security, for national economic security, and cybersecurity,” Manocha said. “There is definitely a realization of the importance of the semiconductor industry.”
Support for CHIPS
In April, President Joe Biden convened a virtual conference of government officials and industry executives to discuss the ongoing semiconductor shortages that have plagued the worldwide automotive industry and reduced the availability of certain products, such as video-game consoles and other consumer electronics. During that meeting, the president held up a silicon wafer and said, “This is infrastructure.”
“I think that the president’s been pretty clear that he’s supportive of policy to get more manufacturing capacity in the U.S,” said Joe Pasetti, vice president of global advocacy and public policy at SEMI. “It’s sort of been largely informal, as his remarks when he was signing the executive order and things like that, and in his remarks to the members of Congress who proposed the CHIPS for America Act. In general, we understand them to be quite supportive of these initiatives.”
The Semiconductor Industry Association (SIA), which lobbies on behalf of American chipmakers in Washington, D.C., and elsewhere, has lauded the Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act bipartisan legislation, which became a provision of the 2021 National Defense Authorization Act. The organization also applauded President Biden’s February 24 executive order on critical supply chains. Now comes the hard part — getting Congress to authorize the funding required in the proposed national infrastructure program, including money for semiconductor research and development in the U.S.
The SIA has worked with other business groups to build up support in the federal government for semiconductor-related initiatives.
“President Biden and Congress have a historic opportunity to invest boldly in domestic semiconductor manufacturing incentives and research initiatives to turbocharge American innovation and ensure the long-term strength of U.S. economic growth, job creation, national security, and this country’s chip supply chains,” said John Neuffer, president and CEO of the SIA, said in a statement.
Risto Puhakka, president of VLSIresearch, said that “there’s not a lot of things going on in Silicon Valley,” in terms of semiconductor manufacturing. More fabs are emerging elsewhere.
Texas Instruments is expanding its RFAB facility (a 300 mm wafer analog fab) in Richardson, Texas, while GlobalFoundries is expanding its production capacity, and Micron Technology has R&D fabs in Boise, Idaho, he said.
“It’s clear there’s quite a bit of money coming toward the industry,” Puhakka said. “There’s the CHIPS Act, which I think is $25 billion, which is mostly for R&D support. It includes the National Semiconductor Technology Center (NSTC), which basically takes a good chunk of the $25 billion. That’s not directly related to manufacturing capacity, it’s related to research.”
Several potential sites could host the NSTC, he suggested.
There is $50 billion being allocated to semiconductor manufacturing and R&D as part of Biden’s $2 trillion-plus infrastructure program.
Semiconductor equipment companies will greatly benefit from the new fab lines, Puhakka said.
The automotive industry last year reduced its purchases of microchips, since vehicle sales dropped during the worldwide pandemic, and that has led to the current chip shortage for vehicles, according to Puhakka.
“All the segments woke up, they woke up at a little bit different times, which gave us false signals last year, and then once they all came in the high demand, all at the same time,” he added.
The current situation is similar to what happened two decades ago with the “Y2K” crisis, Puhakka said.
How will the industry pay for expanding capacity? “Money is cheap,” he said, as banks are eagerly lending money at present.