WASHINGTON – A new report finds the US government has a strategic opportunity to reverse the decades-long trajectory of declining chip manufacturing in America, strengthen national security, make domestic supply chains more resilient, and make the country one of the most attractive places in the world to produce semiconductors.
The report, issued in September by the Semiconductor Industry Association and the Boston Consulting Group, says the US share of the global semiconductor fabrication industry has dropped to 12%, from 37% in 1990. Moreover, just 6% of new capacity is earmarked for the US, the authors say. In contrast, China will add nearly 40% of new capacity, making it the largest semiconductor manufacturer in the world.
The US is slowed by the high cost of fabs, which is about 30% higher over a 10-year period than key sites in Southeast Asia, and 37% to 50% higher than China. Much of the difference – up to 70% – is due to government subsidies and incentives that gravitate manufacturers to the Pacific Rim.
Nonetheless, the US could grab back up to twice its current share through a series of targeted government incentives, the authors assert. Such a strategy would ensure supply for critical end-markets such as aerospace and defense and increase employment in the sector by 70,000, while providing a boost to political issues such as trade balances. The report says the right combination of incentives could generate 19 new fabs, each staffed with 3,000 to 6,000 workers.
Ironically, the study shows, the US holds dominant positions in EDA software, core IP and manufacturing equipment. Its share of the materials and manufacturing sectors, however, are roughly 12% each, and it lacks the leading-edge capabilities of Taiwan (TMSC) and South Korea (Samsung). As fabless models have taken hold, the US now lags every major chip-producing market, including Japan and Europe. (Intel’s plans to sell its manufacturing plants, announced after the report was released, will only accelerate this trend.)
The authors assert government investment of $20 billion to $50 billion would lead to the addition of 14 to 19 new fabs in the US, at the peak making it the top site for new plants outside China. Such a move would boost the US share of the world market to 14% by 2030, versus 10% if there were no changes to the status quo.