U.S. semiconductor manufacturing powerhouse industrial policy takes a major step forward

Washington seeks to enhance the global status of the U.S. semiconductor manufacturing industry, and policy progress saw a new breakthrough this week. The White House mobilized executive branch efforts to overcome short-term bottlenecks in chip supply; at the same time, the Senate of Congress also passed a $10 billion proposal for semiconductor projects.

White House working group to address short-term bottlenecks in the semiconductor supply chain

The White House on Tuesday (June 8) released a report on the risk assessment of four key product supply chains required to be completed by an executive order signed by President Biden in February this year. The four supply chains are semiconductors, pharmaceuticals, critical minerals and high-capacity batteries. Deputy Director of the National Economic Council Fazili (Sameera Fazili) said Tuesday at a White House press conference that in the case of semiconductors, the U.S. Department of Commerce will redouble its efforts to bring together industry players and work with allies and partners to improve transparency, communication and trust throughout the semiconductor supply chain.

Fazeli said it is important to address supply chain issues in both the short and long term. As we continue our long-term work on supply chain resilience strategies, we need to be flexible and able to address emerging issues in the supply chain,” she said. That’s why we’re creating a new Supply Chain Disruption Task Force today to address short-term bottlenecks in the semiconductor, homebuilding, transportation, agriculture and food industries.”

The White House said the U.S. Department of Commerce has promoted nearly $75 billion in direct private sector investment in domestic semiconductor manufacturing and research and development through “strategic engagement” with the semiconductor industry. The White House said the Commerce Department will strengthen its cooperation with industry to facilitate the flow of information between semiconductor manufacturers, suppliers and end users.

U.S. technology industry consulting firm International Data Corporation (IDC), vice president of the semiconductor industry research project, Mario Morales (Mario Morales) said the U.S. semiconductor industry’s current short-term “bottleneck” problems are both the technical challenges of the semiconductor packaging chain Mario Morales, vice president of research programs for the semiconductor industry, said the short-term “bottlenecks” in the U.S. semiconductor industry include technical challenges in semiconductor packaging and logistical problems caused by the new crown epidemic.

Morales told the Voice of America: “I think the real bottleneck right now is the back end of the semiconductor industry, when you start thinking about the OSAT (outsourced semiconductor test and packaging) industry, these areas are not only underinvested from the past few years, but as we consider high-performance computing solutions and cell phone solutions at the same time, advanced packaging is seen in complexity is also greatly increased …… the implementation of these packages is starting to use more substrates, so we’re seeing a shortage in terms of substrates.”

“There are also some issues on the logistics and transportation side, where logistics companies are finding that ships are not coming in on time and they’re having a dilemma with their goods. The logistics companies actually raised their prices to two to three times what they normally would have been. So, I think those are the issues that a short-term solution might be looking at.” He said.

Senate passes bill to inject $52 billion into chip industry

Meanwhile, the Congressional Senate on Tuesday passed a $250 billion investment in the American Innovation and Competitiveness Act (American Innovation and Competitiveness Act), which includes $52 billion in designated funding for the semiconductor industry.

The U.S. technology industry generally welcomed the development. Alexa Lee, senior manager of the Information Technology Industry Institute (ITI), told VOA that she hopes U.S. semiconductor industry policy will be tilted toward manufacturing.

She told the Voice of America: “From our perspective, at least on the manufacturing side must be emphasized …… of course this does not mean that the role of some other division of semiconductor such as R&D, packaging and testing is not important, just on the manufacturing side, if you do not bring the manufacturing plant, this whole ecosystem is very difficult to be driven.”

IDC corporate vice president Morales, on the other hand, stressed the importance of basic research and development: “I think if you look at the $52 billion, I think at least half of that has to go into …… basic research and research into new materials, especially to start breaking the dependence on rare earth materials and finding or creating materials that are more sustainable on a long-term basis.”

The U.S. share of global semiconductor manufacturing capacity has fallen from 37 percent in 1990 to 12 percent today, according to a report by the Semiconductor Industry Association (SIA) and the Boston Consulting Group (BCG). The analysis suggests that government investment will help the U.S. reclaim its position as a major semiconductor manufacturing nation.

Market research firm Counterpoint Research last month in an analysis report predicted that the investment plan in the “Chip for America Act” (CHIPS for America Act) passed in February this year, if implemented, by 2025, the U.S. advanced chip production capacity will exceed South Korea, expanding to 21% of the global total, and in 2027 The U.S. is expected to expand its advanced chip production capacity to 21 percent of the global total by 2025 and 24 percent of global capacity by 2027.

U.S. Joins Allies to Reduce Chinese Influence in Supply Chain

The White House’s Supply Chain Security Assessment states, “Many manufacturing facilities are located in and owned by China and Taiwan, exposing the worldwide semiconductor industry to significant risk of geopolitical action. Even a minor conflict or embargo could cause immediate and significant damage to the United States and have long-term effects on the resilience of the U.S. supply chain.”

Peter Harrell, senior director of international economic and competitiveness affairs at the White House National Security Council, said Tuesday, “We want to encourage foreign and U.S. companies to invest in the United States …… but this overall strategy is not just about using money to attract capacity to the United States. In terms of our overall strategy, it’s not just about expanding U.S. capacity, it’s also about working with allies and partners.”

For its part, the White House said the U.S. has recently enjoyed successful partnerships with Japan and South Korea, including a $17 billion investment in the U.S. semiconductor industry announced by a major South Korean company.

Meanwhile, auto parts supplier Bosch (Bosch) Group of Germany’s 1 billion euro chip factory was inaugurated this Monday in Dresden, Germany, and is scheduled to begin producing chips next month. This project from the European Commission for the microelectronics sector “European common interest important project” (IPCEI) received 140 million euros in funding.

IDC vice president Morales said the U.S., European, Japanese and South Korean governments are putting in place policies to encourage semiconductor manufacturing: “Ultimately, they’re trying to reduce some of the risks that we’ve seen over the past year, particularly from the epidemic and (these countries’) reliance on China and Taiwan. So you’ll see more efforts by countries to try to strike a balance at a longer-term level. That could take five to 10 years, but I think some of these initiatives are moving in that direction.”