The federal government needs to provide more direct incentives to encourage the construction of semiconductor plants on U.S. soil or risk falling further behind other countries, a study from the Semiconductor Industry Association and Boston Consulting Group urges.
“We have learned that we can’t entirely rely on supply chains outside our border for critical goods. Semiconductors are absolutely critical and we need more onshore alternatives,” said Jimmy Goodrich, vice president of global policy at the SIA.
The domestic semiconductor industry employs 180,000 workers, with fabrication plants or fabs in 18 U.S. states. In Colorado, Broadcom Ltd. runs a fab in Fort Collins and Microchip Technology took over an Atmel plant in Colorado Springs. But chipmakers once had a much more robust presence in the state, including now-shuttered plants owned by Intel and Sanmina.
U. S. chipmakers remain a leader in research and development and account for nearly half of worldwide chip sales. But only 12% of those sales come from plants based in the U.S., down from a 37% share in 1990, according to the report.
A key reason manufacturing has moved to other counties is that it costs about 30% more to build and operate a chip plant over 10 years in the U.S. than it does in Taiwan, South Korea and Singapore. Compared to China, which is rapidly gaining market share, a U.S. plant can cost 37% to 50% more.
Some of the higher costs are linked to land values, prevailing wages and regulations. But about 40% to 70% of the difference is because of lower government incentives than other countries are providing, which China, in particular, is generous in its support of new fabs, the study found.
Assuming the status quo, the study estimates the U.S. share of global chip manufacturing would fall to 6% by 2030. Providing $20 billion in support would add 14 plants and lift the nation’s market share to 14%, while a $50 billion program would add 19 plants and boost it to 24%, second to China.
The additional support would add 70,000 direct jobs, improve supply chain resiliency, shore up national security and keep the nation’s edge in emerging technologies like artificial intelligence, quantum computing and 5G, the SIA argues.
Goodrich said Colorado, given its history, could land some of that new capacity, providing a boost to its economy.
A separate report from the Information Technology and Innovation Foundation argues that nations shouldn’t focus on building self-contained ecosystems for chips but continue to foster a cooperative model that has allowed for a surge in innovation and lowered costs.
“Each segment of the global semiconductor value chain has, on average, enterprises from 25 countries involved directly, and enterprises from 23 countries in support functions,” the report said.
Like the SIA, the ITIF argues the United States should increase incentives for more domestic production, as well as provide funding for collaborative, pre-competitive research and development.
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