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Semiconductor Fabrication in the United States
By Suman Lala, Senior Manager — Growth Advisory, Aranca
Silicon Valley, helping the nation to emerge as a leader in semicon- ductor design and fabrication. Over time, however, the
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U.S.’s share in semiconductor pro- duction drastically fell (from 37% in 1990 to 12% today). Nonethe- less, its current share in global semiconductor revenue lingers be- tween 45% and 50%. The decline in production share could be mainly attributed to the mam- moth infrastructure investments undertaken in countries such as Taiwan, South Korea, and China in the Asia-Pacific (APAC) region. Investments by govern-
ments in these countries encour-
ith the advent of the in- tegrated circuit in the U.S. in the 1950s came
aged microchip companies to set up fabrication operations and even enticed U.S. firms to open facilities overseas. Meanwhile, the U.S. reinforced its leadership position in semiconductor design and began outsourcing fabrica- tion to these upcoming pure-play foundries in APAC.
Massive Shortage Today, the nation is now
working to reestablish its repu- tation as a semiconductor fabri- cator. Supply chain challenges, as well as the ongoing political tensions between countries, have resulted in a massive shortage of semiconductor chips in the U.S. Semiconductors are critical to the U.S. economy as well as
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national security and technology leadership. As semiconductor fabrication is now a major focus, the government has implement- ed initiatives to set up and sup- port new fabs. This would bring semiconductor-related jobs back into the U.S. market and enable innovation as future technologies would drastically differ from ex- isting ones.
Innovation is inevitable as
we step into the era of digital transformation, artificial intelli- gence (AI), and 5G technology. U.S. national security, including defense capabilities, cybersecuri- ty, AI, autonomous systems, and advanced imaging equipment, heavily relies on advanced semi- conductors and its components. To address the United
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States’ dependence on other countries for meeting its domes- tic demand, the government passed the Creating Helpful In- centives to Produce Semiconduc- tors (CHIPS) Act of 2022. The act aims to increase the supply of chips in the country with a $52 billion grant and with a key focus on domestic manufacturing. Re- ceivers of this fund would be for- bidden from expanding their manufacturing overseas which, in the long run, would prevent chip shortages, as well as help the U.S. to become a global con- tender in fabrication and em- ployment generation. In addition to the CHIPS
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Act, the Biden Administration introduced the Facilitating American-Built Semiconductors (FABS) Act in March 2022. This act aims to establish a tax credit to incentivize investments in new, expanded, and upgraded fabs; equipment production facil- ities; and chip design in the U.S.
Private Initiatives Private companies are also
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focusing on domestic chip manu- facturing. For instance, Intel has made aggressive moves to ex- pand its existing fabrication ca- pacity (in Arizona and Oregon); the company has also announced plans to set up a new fab worth $20 billion in Ohio.
International firms such as
Taiwan Semiconductor Manufac- turing Co. (TSMC) and Samsung are also setting up fabrication fa- cilities in the U.S. While TSMC has completed the construction of its Arizona fab, which will pro- duce 5 nm chips in 2024, Sam- sung plans to construct a $17 bil- lion facility in Taylor, Texas, just outside of Austin, a regional technology hub. The Semiconductors Indus-
try Association (SIA) believes that the grant provides an oppor- tunity to set up 19 fabs, 10 more than the status quo according to them, and would represent a 24% share of the addressable new fab capacity entering the market by 2030. Although U.S.’s efforts to-
ward transforming from a leading semiconductor designer to a prin- cipal semiconductor fabricator are encouraging, concerns revolving around its environmental impact, higher costs, and timeline need to be addressed. The incentives provided
through the Act may lower pro- duction costs overall, but labor costs in APAC are still substan- tially different from those in the U.S.
Thus, chips as well as cer-
tain electronics produced in the U.S. could become more expen- sive. Another potential drawback is the time of commencement of production at these fabs (expect- ed by 2025). While the current shortage
is deemed a one-off situation by some, others could argue that even increased production would not be able to address recession or transport disruption-induced shortages. The U.S. must continue to
focus on being self-sufficient and becoming a global leader in semi- conductor fabrication, enabling it to become self-reliant in terms of
development and security. Contact: Aranca US, Inc.,
100 Park Avenue, Suite 1600, 16th Floor, New York, NY 10017 % 212-880-6426 E-mail:
suman.lala@
aranca.com Web:
www.aranca.com r
October, 2022
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