Due to recent shortages and concerns that China will dominate the industry, the US is working hard to increase production with this “new oil”.
In the past two years alone, the United States has fully understood that semiconductors are at the heart of modern economies, as important as oil. In a digitized world, tools cannot be without a bluetooth chip, which helps to track location. Appliances also need chips to manage power usage. In 2021, the average car with about 1,200 chips is worth $600, double what it was in 2010.
The supply chain crisis that caused chip shortages has become an important lesson. Automakers could lose $210 billion in revenue last year because of chip shortages, according to consulting firm Alix Partners. Competition with China also raises concerns that the country could dominate important chips for military purposes or block US access to certain components.
Now, the US government and businesses are spending billions of dollars trying to build up domestic manufacturing and keep the chip supply. Since 2020, semiconductor companies have proposed more than 40 projects across the country worth nearly $200 billion, creating 40,000 jobs, according to the American Semiconductor Technology Association (SIA).
Semiconductors offer advantages like oil
This is truly a big bet on the industry that is shaping economic competition on an international scale, and giving nations political, technological and military advantages.
Intel CEO Pat Gelsinger said: “Where the oil is located has given rise to a geopolitical advantage over the past five decades. The location of the chip factories over the next five decades is even more important.”
When oil became the mainstay of the industrial economy in the 1990s, the United States was one of the world’s largest producers. Securing a semiconductor supply is more complicated than that. While the barrels of oil are all the same, semiconductors come in many varieties, with different functions and costs, depending on the supply chain. In the current context, the US cannot produce all such chips on its own.
“The US doesn’t have a manufacturing facility,” said Mike Schmidt, chief of the Commerce Department’s office overseeing implementation of the Science and Chip Act, signed into law by President Biden in August with a $52 billion grant. Leading the way. For the United States to lead the world in terms of modern manufacturing facilities and create momentum for future retention is a very ambitious set of goals.”
The recent chip shortage has nothing to do with the highest priced chips.
Jim Farley – CEO of Ford, knows that the employees at their factory in North America only work 3 days a week from the beginning of the year to November 2022 because of a chip shortage. The lack of chips with simple functions, like the 40-cent components that run the windshield wiper engines for the F-150 pickup truck, has kept 40,000 vehicles short of production targets.
In 2014, each sleep apnea machine manufactured by ResMed contained only one chip to handle air pressure and humidity. The company then began putting cellular chips into devices that sent nightly alerts about people’s sleeping behavior to their phones and doctors.
As a result, the regular usage rate of users has increased from more than half to about 87%. Since the death rate is lower for people with apnea with frequent use of the device, a relatively simple chip could save lives.
However, ResMed did not have enough chips during the shortage, and demand for the device increased. Some providers cancel agreements, patients have to wait months.
To solve it, ResMed had to redesign its equipment (which is assembled in Singapore and Sydney) to replace it with other chips. They looked for new chip suppliers and even had to launch a chip-free version.
Biden Administration Efforts
Although the chip shortage has eased, the company’s equipment has been sold again, but CEO Mick Farrell is still concerned that chip supply may still be congested. In May, he was one of a group of tech CEOs who petitioned US Commerce Secretary Gina Raimondo for support. Raimondo’s team has asked other federal agencies to designate medical equipment as essential and help connect buyers to contact the manufacturer directly, rather than through a distributor.
Such petitions also boost the Biden administration’s efforts to pass the Science and Chip Act. Many economists have criticized the policy of supporting industry as giving certain businesses an advantage. But many Republican and Democratic lawmakers say semiconductors are the exception, because, like oil, they are important in both military and civilian use.
American scientists and engineers have been inventing, then commercializing, semiconductor chemicals since the 1940s. Today, American businesses still hold strong positions in the most profitable segments of the semiconductor supply chain, including: chip design, software tools that put those designs to use in practice, and millions of dollars worth of machines to “engrave” chip designs onto wafers.
However, the actual manufacturing of semiconductors is outsourced in Asia. According to Boston Consulting Group and SIA, the US share of global chip manufacturing has fallen from 37% in 1990 to 12% in 2020, while mainland China’s share has increased from 0 to 15%. Taiwan and South Korea each account for more than 20%.
The most modern chip makers – used in parts like the “brains” of computers, smartphones or servers, there are Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung Electronics Co. Intel ranked 3rd. Memory chips are mainly manufactured in the US, branded in America or Asia. Similar chips at the lower end – used in consumer and industrial products, are manufactured around the world.
Chip production is mainly focused on three “hot spots”, namely mainland China, Taiwan and South Korea. This worries American military and political leaders. They fear that if China dominates the semiconductor industry, the US economy and national security will be at stake.
Since about 2016, US officials have begun to block China’s attempt to acquire leading chip and technology companies. Many Washington leaders were surprised when a Canadian study revealed last year that China’s largest chipmaker, Semiconductor Manufacturing Interntional Corp. (SMIC), has begun production of 7-nanometer chips – complex chips that are said to be beyond their capabilities.
On October 7, the US government imposed unprecedented restrictions on chip-related exports to China. Meanwhile, US officials also hope federal subsidies will help build factories large and modern enough to remain competitive and profitable long into the future.
“We had to figure out how to leverage all the leverage to push these businesses to grow even stronger,” Ms. Raimondo said in an interview. $100 billion. We have to convince TSMC or Samsung that they can go from 20,000 wafers/month to 100,000 and make a profit in the US.”
But that ambition comes at a sensitive time for chipmakers, many of which have seen demand for electronics plummet. Intel is having to cut capital spending, TSMC also recently said that weak demand may cause it to cut capital spending this year.
To meet the investment needs of chip companies, Raimondo has approached private infrastructure investors with these projects, similar to Brookfield Asset Management’s investment in Intel’s Arizona plant. Last November, she presented the idea to 700 asset managers at an investment conference at Barclays Bank. She also reaches out to customers like Apple to offer to buy the chips that these factories make.
America can hardly lead
Those efforts seem to have paid off. In December, TSMC said it would increase its investment to $40 billion in state-of-the-art chips at its Phoenix plant. At an event this same month, attended by Biden and top officials, Apple CEO Tim Cook and Advanced Micro Devices CEO Lisa Su also pledged to buy some TSMC products.
However, TSMC said that while the company is excited about its plans and the support from local, state and possibly federal, building a similar manufacturing facility in the US is still a challenge quite tall. Morris Chang, founder of TSMC, said the difference could be as much as 50%. TSMC also said it also sent more than 600 US engineers to Taiwan for training.
A ceremony to celebrate the start of mass production of 3-nanometer chips at a TSMC facility in Taiwan on December 29 (left).A circuit board on display at Macronix International Co. in Taiwan (right).
And Europe also has its own plan to boost the share of chip production in 10 years, while the governments of countries and territories such as China, Taiwan or other Asian countries also pour money into this field. In addition to the project in Arizona, TSMC is also building a factory in Japan and considering potential investments in Europe.
Rising costs and a dearth of skilled workers in the US have hindered them from reviving electronics manufacturing. Mung Chiang, president of Purdue University in Indiana, said computer and engineering students prefer chip or software design to manufacturing. Moreover, the actual experience location is also… lacking.
However, developing domestic talent is only half the battle. The US also depends on foreign countries for many important inputs for semiconductors.
Lasers print small circuit designs on silicon wafers often using pure neon gas. However, this rare gas is mainly imported from Ukraine, Russia and China, and when the Russia-Ukraine conflict occurs, China becomes the main supplier.
Several other raw materials used in chipmaking, such as tungsten, which is converted to tungsten hexafluoride and to make transistor parts, are also sourced mainly from China. To remove the tie for the US chip industry from China, decades of globalization must be undone, something industry leaders say will not be a reality.
Even if the US cannot own the entire semiconductor supply chain, it still has a chance to turn around the fact that it has lost its leadership in many areas, such as passenger cars, road equipment, and so on iron, machine tools, consumer electronics and solar panels.
Refer to WSJ