Supporting US semiconductor industries has long been a critical issue in both business and government arenas. In a recent blog, ER Optics stressed this critical shortage and some of the effects on today’s industry.
Gregory Arcuri reported, for the Center for Strategic and International Studies, that “Congress passed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act.”
He added, “This legislation, was to be “enacted as part of the National Defense Authorization Act (NDAA) for Fiscal Year 2021…” And he also noted that this was back in January 2021. Here we are in July of 2022. The CHIPS programs have not been funded. Thus, programs to intensify the manufacturing of semiconductors in the US are languishing.
How Does the CHIPS Act Concern All of Us?
This shortage is a shame. The CHIPS Act “authorized a series of programs to promote the research, development, and fabrication of semiconductors within the United States.” However, Funding is still the problem.
Over the last two years, it has become increasingly evident that the United States needs to accomplish two distinguished tasks in regard to semiconductors.
1. We must find ways for the US to remain a player on the international technological and economic stage. Thus, we need to build and maintain a stronger manufacturing base in strategic industries.
2. Likewise, the US needs to constantly protect “high-priority supply chains in the event of international conflict or unforeseen crises like the COVID-19 pandemic.”
Surely no one can deny the US must have independence in the field of critical creation semiconductors. However, these complex industries require more than lip service. Supporting them requires financial help from both government and private enterprises.
A Quick Overview: You are a Small Stakeholder in Supporting US Semiconductor Industries
As ER Precision Optics has stated in previous articles Semiconductors, or “chips,” are the building blocks for technology. Chips exist in everything from smartphones to your cars and to US space exploration vehicles. By the way, they are also integral to the solar industry. These small but mighty chips are keys to the future.
The CHIPS Act: Not Yet a Bill with Funding
Everyone agrees we should be supporting the semiconductor manufacturing industry. It might be one of our few bipartisan issues. Yes, there actually is “bipartisan consensus on the need for the expanded domestic manufacture of silicon chips.”
Yet, we lack a proper and agreed-upon bill that supports the semiconductor industry with solid financial incentives. This oversight is a little shocking since China plans to give its semiconductor industries 150 billion dollars of support and incentives this year.
However, “Congress…is yet to agree on a bill that would provide appropriations for the programs’ effectuation…”
In this blog, ER Optics takes a deeper dive into the CHIPS for America Act. Then we will list major parts of the suggested programs which could end up supporting US Semiconductor Industries.
Starting at the Beginning: A Little Backstory on U.S. Semiconductor Manufacturing
According to the Congressional Research Service (CRS), “the United States’ share of global semiconductor fabrication capacity has been on a steady decline for decades.” US production has deteriorated over the last few years.
Back in 1990, we had about 40% of the market. As of 2020, our numbers slipped to around 12%.
What happened? Let’s make an extraordinarily complex story extremely simple. Many US industries began outsourcing their semiconductors to East Asia.
For example, American industries, “Google, Apple, and Amazon, rely on Taiwan’s TSMC alone for nearly 90% of their chip production.” Thus, as you could possibly guess, East Asia now holds 80% of the world’s global chip fabrication.
Supporting US Semiconductor Industry: Expensive Security
Let us note here that semiconductor chips are not only critical for the manufacturing of automobiles and medical equipment. Semiconductors are also extremely critical for military defense weapons systems, environmental systems, and all types of proprietary industrial machinery.
Knowing these facts, it would seem that supporting US semiconductor industries should have grown into a national security issue. In other words, do we really want Taiwan, Korea, and China in charge of the chips we put in our quantum computing, artificial intelligence, and military defense weapons?
What Would the CHIPS Act Finance?
We should also realize that “the People’s Republic of China has declared self-sufficiency in semiconductor production a national priority.” There is a consensus that we should also prioritize supporting US semiconductor industries.
Yet there is the problem that such security is expensive, and Congress does not agree on how to fund the support. Putting the money issue aside for a moment, let’s look at the plans for supporting US semiconductor industries within the CHIPS Act.
Supporting US Semiconductor Industries with the CHIPS Act
1. Incentives: The CHIPS for America Act supports incentives for private firms and public institutions or a consortium of both to obtain financial assistance for three areas:
- It would help finance the construction of a semiconductor fabrication plant in the US.
- Likewise, the CHIPS Act would extend finances for the expansion or modernization of a current facility,
- The act would allow such companies to apply for federal grants not exceeding $3 billion, “unless approved by the Secretary of Commerce in consultation with other federal stakeholders.”
2. Qualifying for Incentives
First and foremost, the applicants would demonstrate commitments to worker and community investment. Then they would need to substantiate three major commitments.
- The industry would have to prove they would provide workforce training.
- Companies would also need to demonstrate a plan to sustain the business after the end of federal support.
- Any applying firm would have to submit proof they were capable of the construction or expansion of such an operation.
Globally Supporting US Semiconductor Industries with R and D
Research and Development are integral to the semiconductor industry. If the CHIPS Act were funded, it would first create a Multilateral Semiconductors Security Fund. This global financial funding system would work at the international level. It would join the United States and its allies to accomplish 2 major goals:
- They would be dedicated to developing “secure semiconductors.”
- Likewise, the fund would be engaged in securing strong supply chains for current and future micro-electronic needs. (Car manufacturers would not be held back for want of semiconductors!)
Organizing the New and Expanding Semiconductor Industries Within the US: the CHIPS Act
The CHIPS Act gives structure to the new and expanded semiconductor industries. For work at the national level, CHIPS for America would first create a subcommittee on Microelectronics Leadership.
- The subcommittee’s goal would be “developing a national strategy for the creation of a robust microelectronics industry in the US.”
- This group (the SML) would also set research and development priorities “for the maintenance of U.S. leadership in advanced chip design and manufacture.”
Establishing The National Semiconductor Technology Center
Next, or secondly, the SML would establish a “public-private consortium including private firms, the Department of Energy, and the National Science Foundation.”
- The National Semiconductor Technology Center would be in charge of “conducting semiconductor research.”
- Likewise, they would focus on prototyping innovative chips.
Then, The CHIPS Act Creates the National Institute for Standards and Technology (NIST)
Finally, but equally important, the NIST will establish a National Advanced Packaging Manufacturing Program. Its’ primary focus is “to strengthen semiconductor advanced test, assembly, and packaging capability”…in the US.
Consider this fact. Assembling, testing, and packaging delicate microelectronic chips is almost as difficult as initial manufacturing. Semiconductors must be handled, stored, and shipped meticulously.
The CHIPS Act empowers the National Advanced Packaging Manufacturing Program to conduct its own specialized R&D program.
Supporting US Semiconductor Industries with Vigorous Government Financing
Initially, the CHIPS Act asked for $39 billion in assistance for constructing or improving plants over the next 5 years. Additionally, the CHIPS Act requested another $11.2 billion, earmarked for Research and Development.
However, none of the above can happen until Congress agrees on a bill that provides funding for the programs. We are watching this story unfold on the geopolitical stage, and Congress has a briefing concerning it this week. However, seems like the longer we wait, the more expensive the price tags on these critical programs will become.
At ER Optics, where we create the silicon substrate upon which most semiconductors depend, we hope you found food for thought in this blog. And remember, we are watching other countries who are supporting their semiconductor industries with generous dollars. It’s not the space race, but the semiconductor race that might prove just as important to the future.