A group of leading US chip industry executives the week before last urged President Biden to increase funding for domestic chip manufacturing, arguing that it is necessary to make it more affordable for companies to build fabs and ensure that the US share of global chip manufacturing does not decline more than it already has.
The letter, signed by Steve Mollenkopf of Qualcomm, Lisa Su of AMD, and Intel's former chief executive Bob Swan, called on the Biden administration to include “substantial funding" for chip manufacturing in and research its recovery and infrastructure plans. The leaders urged it to roll out funding in the form of grants or tax credits to help the US reduce its heavy dependence on overseas production plants, or fabs.
The letter was also signed by Sanjay Mehrotra of Micron Technology, the leading US manufacturer of memory chips; Rich Templeton of Texas Instruments, the largest analog semiconductor vendor; Victor Peng of programmable chip giant Xilinx; Vincent Roche of Analog Devices; Thomas Caulfield, the CEO of Globalfoundries, the top US-based semiconductor foundry; and Matthew Murphy of Marvell Technology.
The petition, sent by the Semiconductor Industry Association (SIA), a trade group that represents top US chip makers, highlighted the fact that the US share of global production capacity for chips has declined from 37% in 1990 to about 12% in 2020. At the same time, the share of chip manufacturing that occurs in China, South Korea, Southeast Asia, Taiwan and other regions in East Asia soared to 75% of the total.
"Semiconductors are critical to the US economy, American technology leadership, and our national security," the executive group said. Investments in domestic semiconductor manufacturing and research will allow more of the components fueling US economic growth, jobs, and infrastructure to be made here, while simultaneously enhancing our national security and supply chain resilience to meet future challenges."
Today, most US semiconductor companies are fabless and outsource production of high-end chips to TSMC and Samsung Electronics, the largest contract chip makers, or foundries, in the world by far.
That has underscored a potential weakness for the US in its technology cold war with China, which is investing aggressively to expand its domestic chip production and bring more self-sufficiency to its tech industry. The US is also pushing to repatriate chip manufacturing that moved offshore over the the years. Advanced chips are central to areas ranging from aerospace and defense to 5G networks.
Intel is largely not in the business of building computer chips for other vendors and it has been hurt by delays in rolling out its most advanced production processes, including 7-nanometers, in recent years. Globalfoundries has halted development of its most advanced chips in the face of severe delays and soaring costs. That has put the US behind global rivals in the race to manufacture cutting-edge chips.
Still, the US remains a semiconductor powerhouse, accounting for 47% of the $439-billion market last year, the largest share of any country. US firms are also leading players in software tools used to design chips and the machines used to manufacture them. Even though Intel, Micron, Texas Instruments, and others still assemble chips in the US, the country’s share of global chip production has been in decline.
"This is largely because the governments of our global competitors provide significant incentives and subsidies to attract new semiconductor manufacturing fabs, while the US does not," the executives said. As a result, the US is no longer a competitive spot for semiconductor companies to build fabs, the group said. Ultimately, the threatens to undermine US leadership in areas such as 5G and artificial intelligence.
Chip-making is one of costliest manufacturing processes in the world: Building an advanced production plant for logic chips currently carries a price tag of more than $15 billion, according to industry analysts.
The US semiconductor industry has warned that massive subsidies and other incentives offered by the governments of global rivals place it at an unfair disadvantage. But in recent years, politicians from both parties have proposed funding to remedy the imbalance. Building more chips in the US would reinforce America’s technology supply chain against future crises and create new jobs in the process, they argue.
US companies have also lamented a lack of federal assistance in research and development. In 2019, US firms invested $40 billion—or around 20% of their total revenue—in research and development, the SIA said. But only a fraction of the funds were funneled from the US government. The SIA reports that the percentage of R&D funding in the US from federal coffers has been largely unchanged for decades.
Last month, the US Congress enacted a provision – the CHIPS for America Act – in the US Department of Defense's budget for 2021. The act approves the use of federal funding to help lure more investment for US chip manufacturing and reinforce American leadership in the industry by backing fundamental chip research. Ultimately, Congress has the final say on how much money it will allocate for the effort.
The funding could end up in the hands of US-based logic chip manufacturers including Intel and Global-foundries, which supplies the Department of Defense. The funding could also go to non-US firms: TSMC plans to put billions of dollars into its upcoming 5-nanometer production plant in Arizona. Samsung has been in discussions to expand its US manufacturing footprint with a new advanced fab in Austin, Texas.
"We believe bold action is needed to address the challenges we face," said the executives, who sit on the SIA board, said. “The costs of inaction are high.”