A recent study by the U.S. Congressional Research Service (CRS) estimated that the U.S. share of global semiconductor manufacturing has dropped down from 40% in 1990 to 12% in 2020. Figure 1 shows a geographic breakdown.
As the cost to build domestic fabs in the U.S. surged, a lot of companies went fabless, using die manufactured in some of Asia’s dominant foundries and then finishing the back-end test/packaging either at their own or other assembly/test companies also located in Asia. Users of the most advanced chips today, such as Google, Apple, and Amazon, are reported to rely on TSMC, most of whose fabs are located in Taiwan, for almost 90% of all their advanced chips. The Covid-19 pandemic and the war in Ukraine have also highlighted the fragile and highly globalized supply chain, with a lot of raw materials needed for semiconductors located in countries that are either in regions of global tension or affected by their own dependence on such countries. For example, market research company Techcet has estimated that large portions of semiconductor-grade rare gases such as neon are produced in Ukraine. Ultra-high–purity wet chemicals, such as sulphuric acid, used in semiconductor manufacturing are also largely imported from Asia.
Amongst this backdrop, pressure has grown in the U.S. to act to shore up its own manufacturing base in advanced semiconductor manufacturing, and the culmination of that was on Aug. 8, when President Biden signed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act. The broad goal of this act is to subsidize new investment in domestic manufacturing capacity. The CHIPS Act immediately provides $53.7 billion to various aspects of U.S. semiconductor manufacturing. Some of these include:
- $39 billion to provide financial assistance for building and modernizing the domestic U.S. semiconductor-manufacturing base, of which $6 billion will be used to provide loans and loan guarantees
- $11 billion over the next five years to support research and development as well as workforce-development programs; this includes $10 billion for the creation of 20 regional technology and innovation hubs across the U.S. that will link university R&D with private industry to advance innovation
- A CHIPS for America Defense Fund worth $2 billion to fund university-based research for the Department of Defense
- A CHIPS for America Workforce and Education Fund worth $200 million over five years to increase the semiconductor workforce in the U.S.
- Incentives to fund a domestic supply chain for semiconductors
- $1.5 billion to fund a wireless supply chain for innovation in mobile broadband
- Advance manufacturing investment credits of 25% toward the building of advanced semiconductor-manufacturing facilities
- Other funds directed toward the National Science Foundation for research into fusion, lasers, secure communications, etc.
In a sign that the tide is turning on the willingness of companies to invest in U.S. fabs, TSMC and Intel both announced plans to invest $12 billion and $20 billion, respectively, for the building of new U.S. fabs. Micron also announced that it will invest $40 billion in memory chip manufacturing, which is expected to bring the U.S. share of memory chip production from 2% to 10%, and Qualcomm has committed to spending an additional $4.2 billion on chips from the GlobalFoundries New York fab. Other companies had made plans for fab expansions even prior to the CHIPS Act. For example, Texas Instruments announced in November 2021 its plans to expand manufacturing by adding as many as four fabs, worth up to $30 billion, and Wolfspeed just started its new 200-mm silicon carbide fab in New York this year. Samsung announced last year that it would build a $17 billion manufacturing facility in Texas to tackle a global shortage of chips. “The demand for semiconductor chips continues to increase … The probability that you will see more announcements (of manufacturing expansion) here in the United States will be higher,” said Wolfspeed CEO Gregg Lowe.
U.S. chip manufacturers, who had lobbied Congress for its passage, warmly received the passage of the CHIPS and Science Act. Intel CEO Pat Gelsinger said, “Intel is committed to restoring end-to-end leadership, innovation, and manufacturing here in the U.S.” Microchip Technology CEO Ganesh Moorthy said, “As the largest U.S.-headquartered supplier of microcontrollers and the global leader in semiconductors in aerospace and defense electronics, we will benefit from the Act’s investment tax credits and potential additional grants.” Gary Dickerson, president and CEO of Applied Materials, a major supplier of semiconductor fab equipment, said, “The CHIPS and Science Act provides a catalyst for the industry to accelerate investments to make our supply chains more robust, speed up innovation and commercialization of next-generation technology, and create thousands of U.S. jobs.”
Other companies may follow this expansion lead, not just in fab capacity but also in the supply chain infrastructure. For example, in July, GlobalWafers, a manufacturer of silicon starting wafers, announced plans to build a new $5 billion plant in Texas. The highly convoluted supply chain, however, is unlikely to change in the short term.
Outside of the CHIPS Act, the U.S. government is trying to increase manufacturing in other key technology areas. For example, earlier this year, it announced a $3 billion allocation for infrastructure funding to finance electric-vehicle battery manufacturing in the U.S. Figure 2 shows the current global market share of the top 10 EV battery producers. None are from the U.S.
Earlier this year, the EU Commissioner proposed a similar European Chips Act worth €43 billion. There are fears that bringing some of the manufacturing back into more expensive zones such as the U.S. and Europe could drive up inflation.
The manufacture of SiC power devices is currently dominated by fabs located in the EU, the U.S., and Japan, including key companies like STMicroelectronics, Infineon, Wolfspeed, Rohm, and onsemi. Epi manufacturing for SiC is also mostly from countries where these fabs are located, with the focus lately by many of these device manufacturers to have their own epi production. So in this case, it’s more the supply chain of raw materials needed in manufacturing that is dependent on Asia. A similar situation exists for RF gallium nitride devices, wherein most of the GaN-on-SiC front-end (fab) production is based either in the U.S. or in Europe. With power GaN devices, the situation is mixed, with many GaN device manufacturers leveraging Si fabs in Asia to produce their GaN-on-Si devices. It’s unclear if the CHIPS Act will bring any of this manufacturing to the U.S.
