(Image courtesy of Continental).
Global Chip Shortage Promo
Global Chip Shortage Promo
Global Chip Shortage Promo
Global Chip Shortage Promo
Global Chip Shortage Promo

Apple, Google, and Other Technology Giants Urge Funding for US Chip Fabs

May 12, 2021
The Semiconductors in America Coalition (SIAC), a new trade group, has urged leaders in both houses of Congress to appropriate $50 billion in funding for the CHIPS for America Act.

Google, Microsoft, Apple, Amazon Web Services, and other major chip buyers are partnering with Intel, AMD, Qualcomm, and other firms from around the semiconductor landscape to create a trade group to lobby for federal subsidies and other incentives to revive chip production and R&D in the U.S. The move comes amid a chip shortage that has been battering the U.S. economy for months.

The new group, called the Semiconductors in America Coalition (SIAC), said Tuesday that it had urged Congress to allocate $50 billion in funding for the CHIPS for America Act. President Biden has championed federal funding as a way to reinvigorate U.S. semiconductor manufacturing and R&D so that more of the advanced logic and other chips the country needs are made on US soil. 

The CHIPS Act was enacted late last year, opening the door to federal subsidies to promote U.S. chip manufacturing. But the U.S. House and Senate have not appropriated any funding for it yet.

In a letter to Democratic and Republican leaders in both houses of Congress, the group said that "robust funding of the CHIPS Act would help America build the additional capacity necessary to have more resilient supply chains to ensure critical technology will be there when we need them. The group said federal subsidies "should focus on filling key gaps in our domestic semiconductor ecosystem" and cover a full range of technologies—from legacy to leading-edge process nodes.

The proposed $50 billion in funding could also be considered as part of the Endless Frontier Act, which was introduced last month by Sens. Chuck Schumer (D-N.Y.) and Todd Young (R-Ind.).

U.S. chip executives have previously urged the White House to roll out funding in the form of tax credits or direct subsidies to make it more affordable for vendors to build fabs in the U.S. and stop the country's share of global chip manufacturing from dropping any more than it already has. They also favor more federal investment in R&D to reinforce the country's leadership in semiconductors.

But the new group brings together technology giants and other U.S. businesses that buy chips, giving the semiconductor industry some new formidable allies to push for more federal funding.

“Leaders from a broad range of critical sectors of the U.S. economy as well as a large and bipartisan group of policymakers in Washington, recognize the essential role of semiconductors in America’s current and future strength," said John Neuffer, CEO of the Semiconductor Industry Association, which represents many of the semiconductor firms partnered with the SIAC.

Also supporting the group are Cisco, Hewlett Packard Enterprise, Verizon, AT&T, and IBM.

The group includes many prominent players in the US semiconductor landscape, such as Intel, TI, Qualcomm, Analog Devices, AMD, Broadcom, Globalfoundries, Marvell, Micron, NVIDIA, and Xilinx, among others. Other members include electronic design software vendors Synopsys and Cadence as well as semiconductor gear makers from U.S.-based Applied Materials and Lam Research to ASML, Tokyo Electron, and Nikon.

The group also includes companies with U.S. operations that are not headquartered in the country, such as NXP Semiconductors and Infineon Technologies, both of which own fabs in Austin, Texas.

Samsung and TSMC, the world's largest contract semiconductor foundries, also support the trade group as they stand to profit from the proposed funding. TSMC plans to invest around $12 billion in an advanced 5-nanometer fab in Phoenix, Arizona. Samsung has been in discussions to expand its US manufacturing presence with an advanced $17 billion chip fab in Texas or upstate New York.

A global semiconductor shortage has ravaged the electronics industry in recent months, snarling the supply chain for chips used from smartphones to video game consoles. The soaring demand has also forced the automobile industry to compete—often unsuccessfully—with Apple and other technology companies for limited inventory, spurring on a global scramble for production capacity.

The auto industry has been battered by the global chip shortage, which has impaired the supply of microcontrollers (MCUs) and other types of chips used in electronic control units, or ECUs, of cars. Last month, Ford said the shortages would force it to slash production by about 50% in its second quarter. It also warned that the impacts could last through the second half of 2021 and early 2022.

Last month, trade groups representing the U.S. auto industry and auto workers said they support the $50 billion in funding proposed by the White House. But they urged the Biden administration to target billions of dollars to boost the production of automobile-grade chips. They proposed doling out funding to fabs that agree to reserve part of their production capacity for chips used in cars.

The new group said that it would oppose attempts by the U.S. to attach conditions favoring the automobile sector (or any other industry) on subsidies to bring chip manufacturing back to the U.S. "To address this problem in the short term, government should refrain from intervening as industry works to correct the current supply-demand imbalance causing the shortage," the trade group said.

While the global chip shortage has devastated the global auto industry, insufficient supply has also dented the consumer electronics market. Last month, Apple said it would lose billions of dollars in second-quarter sales because of the ongoing chip shortage. Other consumer products, such as Sony's Playstation 5, have also faced prolonged delays due to snags in component sourcing.

There are no short-term solutions for the shortage, industry insiders warn. But the global scale of these supply constraints has highlighted the need to strengthen America's supply chain for chips, they say. President Biden recently signed an executive order to examine weak points in key U.S. supply chains and identify potential areas of improvement to prevent any shortages in the future.

America's share of global production capacity for chips has eroded in recent decades from about 37% in 1990 to 12% in 2020 as more U.S. firms outsourced production of the chips they designed.

The SIAC said the decline is largely due to the massive subsidies offered by other governments, including in China and Southeast Asia. That places the U.S. at a competitive disadvantage when it comes to convincing companies to build fabs or research labs in the U.S. As a result, it is now 20% to 40% more expensive to build and operate fabs in the U.S. than in other countries, the group said.

"Unfortunately, U.S. leadership in this critical technology is at risk," the companies said.

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