Jamie Bsales

US and EU Make Moves to Reduce Dependence on Foreign Semiconductor Providers

Supply chain woes shed light on a problem 30 years in the making

Jan 25, 2022 11:22:28 AM


Among the myriad lessons learned from the COVID-19 pandemic and subsequent supply-chain crises, “don’t outsource all your crucial manufacturing to off-shore providers” is at the top of the list (close behind “don’t play with bats”). The schooling is particularly pointed for the technology sector, where decades of moving semiconductor manufacturing to Asia-Pacific suppliers has meant a lack of product as lockdowns ensued and just-in-time logistics plans foundered. Figure in a newly emboldened China, which still claims control over the breakaway republic of Taiwan—home to about 50% of the world’s semiconductor manufacturing and more than 90% of the most advanced capability—and it is understandable why business and government leaders around the world have started to change course. The goal: so-called “semiconductor autonomy.” Autonomy, while a noble goal, is likely overstatement. It would take decades and hundreds of billions in investment to claw back what had begun to be lost in the 1990s.


European Union Looks to Control its Chip Destiny

Still, progress toward that end is afoot in Europe. On the continent, the European Union Commission (EU) is set to adopt the European Chips Act later this year. The act looks to codify a three-pronged approach to lessen EU members’ reliance on foreign chips, while strengthening home-grown technology.


The tenets include a research strategy leveraging existing semiconductor brainpower through IMEC in Belgium, LETI/CEA in France, and Fraunhofer in Germany. The second prong is a collective plan to increase European production capacity by supporting the development of fabrication plants (aka “fabs”) capable of producing the advanced chips (2nm and below) that are now almost exclusively the province of Taiwan-based manufacturers—most notably Taiwan Semiconductor Manufacturing Company (TSMC), which alone accounts for 50% of global capacity. Third on the to-do list is to create a framework  for international cooperation and partnership. The goal is not only to bolster local technology and capacity, but to diversify supply chains away from overdependence on one region (APAC). To that end, the EU would court and welcome foreign investors looking to locate capacity within the EU.


The US Seeks to Regain What it Squandered

A similar movement is taking hold in the US, arguably the birthplace of semiconductor mass production that was pioneered by Texas Instruments and Fairchild Semiconductor in the late 1950s and early 1960s. Last week, Speaker Nancy Pelosi announced that the House of Representatives will soon introduce a bill aimed at increasing US competitiveness with China and boosting federal spending on semiconductor research and manufacturing. A similar bill earmarking $52 billion to increase US semiconductor production passed the Senate last year, and Biden has vowed to sign the bill into law when it reaches his desk.


But private industry is not waiting for the federal government to act. On the same day as Speaker Pelosi’s announcement, Intel promoted a $20 billion investment in a new chip fab complex to be located in Ohio. That investment could top $100 billion over the coming decade as the chip designer and maker looks to establish a world-class fab infrastructure in the Midwest. And this investment is on top of Intel’s previously announced plans to invest $3.5 billion to upgrade its New Mexico fab and $20 billion to add two additional fabs to its Phoenix-area facility. This is all part of Intel CEO Pat Gelsinger’s goal, expressed to CNET, of bringing the US share of semiconductor manufacturing to 30% of the world’s total from its current 12%.


A rendering of the Ohio semiconductor fabrication compound announced by Intel


All of this bodes well for the technology industry in general, as more choice is always better when it comes to sourcing key components. Indeed, document imaging OEMs have reported that the inability to source chips for new A3-class MFPs has been just as detrimental to their sales as the prolonged absence of knowledge workers from offices. While these new investments will take years to bear fruit, at least there is movement in the right direction.


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