October 1, 2023

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The United States pours money in tranches, but even high spending has limits

In September, chip giant Intel gathered officials at a plot of land near Columbus, Ohio, where it was It pledged to invest at least $20 billion in two new semiconductor manufacturing plants.

A month later, Micron Technology celebrated the construction of a new manufacturing site near Syracuse, New York, where the chip company is located It is expected to spend $20 billion By the end of the decade and maybe five times that at the end.

And in December, the Taiwan Semiconductor Manufacturing Company hosted a party in Phoenix, where it is planning It tripled its investment to $40 billion and building a second new factory to produce advanced chips.

The pledges are part of a massive ramp-up in the US chip industry’s plans over the past 18 months, the scope of which has been likened to Cold War-era investments in the space race. The boom has ramifications for global technological leadership and geopolitics, with the United States In order to prevent China From becoming an advanced powerhouse in chips, the Silicon strips That led to the creation of innovative computing devices such as smartphones and virtual reality glasses.

Today, chips are an essential part of modern life even after the innovations of the technology industry, from military equipment and cars to kitchen appliances and toys.

Across the country, more than 35 companies have committed nearly $200 billion to chip-related manufacturing projects since spring 2020, according to the Semiconductor Industry Association, a trade group. The money is slated to be spent in 16 states, including Texas, Arizona and New York, on 23 new chip plants, nine factory expansions, and investments from companies that supply equipment and materials to the industry.

Payment is one aspect Industrial Policy Initiative By the Biden administration, which is providing at least $76 billion in grants, tax credits and other subsidies to encourage domestic chip production. Besides providing sweeping funding for infrastructure and clean energy, the effort marks the largest American investment in manufacturing since World War II, when the federal government unleashed spending on new ships, pipelines and plants to manufacture aluminum and rubber.

“I’ve never seen a tsunami like this,” said Daniel Armbrost, former CEO of Sematech, a chip consortium formed in 1987 with the Department of Defense and funding from member companies.

President Biden has wagered a prominent part of his economic agenda on stimulating chip production in the United States, but his reasons go beyond economic benefits. Lots of advanced chips in the world today Made in Taiwan, the island to which China claims its territorial rights. This has caused fears that semiconductor supply chains could be disrupted in the event of conflict — and that the United States would be at a technological disadvantage.

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Industry executives said the new US production effort may correct some of these imbalances — but only to a point.

New chip plants will take years to build and may not be able to offer the most advanced manufacturing technology in the industry when they begin operations. Companies can also delay or cancel projects if they are not given sufficient subsidies from the White House. An acute shortage of skills could dampen the boom, as complex factories need far more engineers than the number of students graduating from American colleges and universities.

said Chris Miller, associate professor of international history at Tufts University’s Fletcher School of Law and Diplomacy and author of A Modern Book on the Chip Industry’s Battles.

White House officials have argued that investments in the chip industry will sharply reduce the proportion of chips required to be purchased abroad, improving the economic security of the United States. At a TSMC event in December, Mr. Biden also highlighted the potential impact on tech companies like Apple that rely on TSMC for their chipmaking needs. He said it “could be a game-changer” because more of these companies “bring more of the supply chain home.”

American companies led the production of chips for decades, starting in the late 1950s. But the country’s share of global productive capacity has gradually declined to about 12 percent from about 37 percent in 1990, as countries in Asia introduced incentives to move manufacturing to those shores.

Today, Taiwan accounts for about 22 percent of total chip production and more than 90 percent of the most advanced chips, according to industry analysts and the Semiconductor Industry Association.

The new spending is set to improve America. A $50 billion government investment is likely to drive corporate spending that will raise the US share of global production to as much as 14 percent by 2030, according to a 2020 Boston Consulting Group study commissioned by the Semiconductor Industry Association.

“We’re really put in the game for the first time in decades,” said John Neufer, president of the union, adding that the estimate may be conservative because Congress approved $76 billion in support in a piece of legislation known as the CHIPS Act. .

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However, this intensification is unlikely to eliminate US dependence on Taiwan for the most advanced chips. These chips are the most powerful because they have the highest number of transistors in each silicon chip, and they often mark the nation’s technological advancement.

long intel led The race to reduce the number of transistors on a chip, which is usually described in nanometers, or billionths of a meter, with smaller numbers indicating the latest production technology. Then TSMC has moved forward in recent years.

But at its Phoenix location, TSMC may not be importing the most advanced manufacturing technologies. The company initially announced that it would produce five-nanometer chips at the Phoenix plant, before saying last month that it would also make four-nanometer chips there by 2024 and build a second factory, opening in 2026, for three-nanometer chips. . I stopped discussing further progress.

In contrast, TSMC plants in Taiwan at the end of 2022 Started to produce three nanometer technology. By 2025, factories in Taiwan will probably start supplying 2nm chips to Apple, said Handel Jones, CEO of International Business Strategies.

TSMC and Apple declined to comment.

It’s unclear if other chip companies will bring more advanced technology for high-end chips to their new locations. Samsung Electronics plans to Invest 17 billion dollars in a new plant in Texas but did not disclose its production technology. Intel is making chips around seven nanometers, although it has said its US factories will be producing three-nanometer chips by 2024 and more advanced products shortly thereafter.

The spending boom is also set to reduce, though not erase, US dependence on Asia for other types of chips. Domestic factories produce only about 4 percent of the world’s memory chips – essential for storing data in computers, smartphones and other consumer devices – and Micron’s planned investments could eventually raise that proportion.

But there are still likely gaps in the assortment of older, simpler chips, which have been in short supply over the past couple of years. American automakers had to close factories and production of partially completed vehicles. TSMC is a major producer of some of these chips, but it is focusing its new investment on more profitable factories for high-end chips.

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“We still have a dependency that is unaffected in any way shape or form,” said Michael Hurlston, CEO of Synaptics, a Silicon Valley chip designer that relies heavily on older TSMC factories in Taiwan.

The chip industry boom is expected to create significant job creation—up to 40,000 new jobs in factories and the companies that provide them, according to the Semiconductor Industry Association. This would add to about 277,000 employees in the semiconductor industry in the United States.

But it will not be easy to fill many skilled jobs. Chip factories usually need technicians to operate the factory machines and scholars in fields such as electrical and chemical engineering. Talent shortage is one of the industry’s toughest challenges, according to recent surveys of CEOs.

The CHIPS Act contains funding for workforce development. The Department of Commerce, which oversees the disbursement of grant money from CHIPS Act funds, also made it clear that organizations hoping to receive funding must develop plans to train and educate workers.

In response to this problem, Intel plans to invest $100 million to stimulate training and research at universities, community colleges, and other technical educators. Purdue University, which has built a new semiconductor lab, has set a goal of graduating 1,000 engineers each year and has lured chipmaker SkyWater Technology to build a $1.8 billion manufacturing plant near its Indiana campus.

However, the training may only go so far, as chip companies compete with other industries that desperately need workers.

“We’re going to have to build a semiconductor economy that appeals to people when they have so many other options,” Mitch Daniels, who was president of Purdue at the time, said at an event in September.

Because training efforts can take years to bear fruit, industry executives want to make it easier for highly educated foreign workers to obtain visas to work in the United States or stay after earning their degrees. Officials in Washington know that comments encouraging more immigration could stoke political fires.

But Gina RaimondoTrump, Secretary of Commerce, was blunt in a November speech at the Massachusetts Institute of Technology.

Attracting the world’s best scientific minds, she said, is “an advantage that America loses.” “We will not let that happen.”