The chips are down. We need your support, semiconductor industry tells US president Biden
(2021/02/19)
- Reference: 1613745469
- News link: https://www.theregister.co.uk/2021/02/19/semiconductor_firms_open_letter_biden/
- Source link:
The US semiconductor industry has [1]sent an open letter to President Biden [PDF] asking for support in domestic semiconductor research and manufacturing, arguing the sector's importance to national security and the country's tech dominance demand it.
The letter urged the Biden Administration to fully fund the [2]CHIPS (Creating Helpful Incentives to Produce Semiconductors) for America Act . This bipartisan piece of legislation, which the US Congress passed in the waning months of the Trump presidency, creates a package of grants and tax incentives to strengthen the domestic semiconductor supply chain.
[3]
Highlights of the bill include a 40 per cent tax credit against the purchase of semiconductor equipment, or the construction of new manufacturing facilities, as well as $10bn federal fund specifically earmarked for new foundry facilities. A further $10bn is committed to R&D investment, while NIST and the Department of Defense are compelled to establish specific research and skills-development programmes.
The letter states:
[4]
Semiconductors play a critical role in enabling the products and services that fuel our economy, contribute to American innovation, and enhance our national security. Given the central role of semiconductors, strengthening the U.S. position in semiconductor research, design, and manufacturing is a national priority.
While the governments of our global competitors have invested heavily to attract new semiconductor manufacturing and research facilities, the absence of U.S. incentives has made our country uncompetitive and America’s share of global semiconductor manufacturing has steadily declined as a result.
Signatories to the missive include the Semiconductor Industry Association (SIA), SEMI, the US Chamber of Commerce, and TechNet (which represents the wider US tech industry.) Other bodies representing the defence, medical, and automotive industry also lent their support.
"Increased federal investments in semiconductor research and manufacturing will enable critical innovation that benefits a wide range of industries that rely on semiconductors, as evidenced by the organizations that cosigned this letter," said Ajit Manocha, president and CEO of global industry org the SEMI Foundation, in a statement.
"To reverse the declining US share of global semiconductor manufacturing, we call for funding incentive programs passed last year in the NDAA and enacting an investment tax credit that would be an immediate, broad-based incentive to build new and expanded manufacturing capacity at all technology nodes."
How big is the US's semi sector really?
Determining the US's share of the semiconductor manufacturing industry is a complicated task for several reasons. Firstly, it's a deeply globalised industry, as noted [5]by a 2018 US International Trade Commission report [PDF] , with work shifting between nations across production stages.
While sophisticated components (specifically wafers) are often produced in developed nations like Taiwan, Japan, and the US, the more labour-intensive aspects of production are often outsourced to countries like Malaysia, Vietnam, and the Philippines. For what it's worth, the US had 13 per cent of global wafer manufacturing capacity in 2017, trailing Taiwan, Japan, China, and South Korea. There's also the question about what we consider to be manufacturing. Does photomask production count, for example?
Moreover, semiconductors aren't a single monolithic block, as pointed out by [6]a 2019 Congressional Research Service report [PDF] . This paper highlighted regional strength across four distinct categories of components: logic devices (like CPUs and microprocessors), memory devices, analogue devices, and optoelectronic sensors.
Unsurprisingly, the US dominates in logic and analog semiconductors, thanks to the likes of Intel, Maxim, Analog Devices, and others. However, it's comparatively weaker in memory, for example, which is dominated by South Korea's Samsung and SK Hynix. This division skews things. According to [7]figures from the SIA sales of memory chips in 2018 were worth nearly $158bn. That's almost as much as the combined value of logic devices ($109bn) and analog devices ($59bn) put together.
Production is similarly fragmented, with the US performing strongly in some areas, and weaker in others. In 2018, the US accounted for over half of all revenue for IDMs (integrated device manufacturers - those semiconductor firms that design and make their own chips). It held nearly two-thirds of fabless revenue, thanks to the strength of firms like Qualcomm, AMD, and Nvidia.
The only areas in which the US lags behind are contract manufacturing (which is admittedly important) and outsourced ATP (Assembly, Testing, and Packaging). Taiwan accounted for two-thirds of contract foundry revenue, and half of all ATP revenue.
Moreover, the ascent of Taiwan, China, and South Korea in semiconductor manufacturing hasn't come at the expense of US dominance across the industry overall. Since 1988, the US firms have consistently held around half the global semiconductor market share, [8]according to a 2019 SIA report [PDF] – even if some production has been offshored to Asia.
Still, there's a valid question about how long this hegemony can last. Taiwan's TSMC and South Korea's Samsung are producing chips at a 5nm process, with a [9]move to 3nm expected next year . Meanwhile, Intel is still [10]grappling with a shift to 7nm . This has forced it to start outsourcing production to TSMC.
[11]
The issue isn't necessarily capacity, or revenue. The United States' semiconductor industry is big indeed, and there are areas where it continues to fend off the competition. The issue is the long-term technological viability of domestic production. And that can only really be fixed with a healthy dose of investment. ®
Get our [12]Tech Resources
[1] https://www.semi.org/sites/semi.org/files/2021-02/SEMI%20CHIPS%20Multi%20Assn%20Letter%2002182021.pdf
[2] https://www.congress.gov/bill/116th-congress/house-bill/7178
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YC-up@ysHkOOOeHTv7sYQwAAAEY&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YC-up@ysHkOOOeHTv7sYQwAAAEY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.usitc.gov/publications/332/journals/barbe_kim_and_riker_-_trade_and_labor_in_the_us_semiconductor_industry_.pdf
[6] https://fas.org/sgp/crs/misc/R46581.pdf
[7] https://www.semiconductors.org/wp-content/uploads/2019/05/2019-SIA-Factbook-FINAL.pdf
[8] https://www.semiconductors.org/wp-content/uploads/2019/05/2019-SIA-Factbook-FINAL.pdf
[9] https://www.theregister.com/2021/01/15/tsmc_q4_2020/
[10] https://www.theregister.com/2020/07/24/intel_7nm_chip_slip/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YC-up@ysHkOOOeHTv7sYQwAAAEY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[12] https://whitepapers.theregister.com/
The letter urged the Biden Administration to fully fund the [2]CHIPS (Creating Helpful Incentives to Produce Semiconductors) for America Act . This bipartisan piece of legislation, which the US Congress passed in the waning months of the Trump presidency, creates a package of grants and tax incentives to strengthen the domestic semiconductor supply chain.
[3]
Highlights of the bill include a 40 per cent tax credit against the purchase of semiconductor equipment, or the construction of new manufacturing facilities, as well as $10bn federal fund specifically earmarked for new foundry facilities. A further $10bn is committed to R&D investment, while NIST and the Department of Defense are compelled to establish specific research and skills-development programmes.
The letter states:
[4]
Semiconductors play a critical role in enabling the products and services that fuel our economy, contribute to American innovation, and enhance our national security. Given the central role of semiconductors, strengthening the U.S. position in semiconductor research, design, and manufacturing is a national priority.
While the governments of our global competitors have invested heavily to attract new semiconductor manufacturing and research facilities, the absence of U.S. incentives has made our country uncompetitive and America’s share of global semiconductor manufacturing has steadily declined as a result.
Signatories to the missive include the Semiconductor Industry Association (SIA), SEMI, the US Chamber of Commerce, and TechNet (which represents the wider US tech industry.) Other bodies representing the defence, medical, and automotive industry also lent their support.
"Increased federal investments in semiconductor research and manufacturing will enable critical innovation that benefits a wide range of industries that rely on semiconductors, as evidenced by the organizations that cosigned this letter," said Ajit Manocha, president and CEO of global industry org the SEMI Foundation, in a statement.
"To reverse the declining US share of global semiconductor manufacturing, we call for funding incentive programs passed last year in the NDAA and enacting an investment tax credit that would be an immediate, broad-based incentive to build new and expanded manufacturing capacity at all technology nodes."
How big is the US's semi sector really?
Determining the US's share of the semiconductor manufacturing industry is a complicated task for several reasons. Firstly, it's a deeply globalised industry, as noted [5]by a 2018 US International Trade Commission report [PDF] , with work shifting between nations across production stages.
While sophisticated components (specifically wafers) are often produced in developed nations like Taiwan, Japan, and the US, the more labour-intensive aspects of production are often outsourced to countries like Malaysia, Vietnam, and the Philippines. For what it's worth, the US had 13 per cent of global wafer manufacturing capacity in 2017, trailing Taiwan, Japan, China, and South Korea. There's also the question about what we consider to be manufacturing. Does photomask production count, for example?
Moreover, semiconductors aren't a single monolithic block, as pointed out by [6]a 2019 Congressional Research Service report [PDF] . This paper highlighted regional strength across four distinct categories of components: logic devices (like CPUs and microprocessors), memory devices, analogue devices, and optoelectronic sensors.
Unsurprisingly, the US dominates in logic and analog semiconductors, thanks to the likes of Intel, Maxim, Analog Devices, and others. However, it's comparatively weaker in memory, for example, which is dominated by South Korea's Samsung and SK Hynix. This division skews things. According to [7]figures from the SIA sales of memory chips in 2018 were worth nearly $158bn. That's almost as much as the combined value of logic devices ($109bn) and analog devices ($59bn) put together.
Production is similarly fragmented, with the US performing strongly in some areas, and weaker in others. In 2018, the US accounted for over half of all revenue for IDMs (integrated device manufacturers - those semiconductor firms that design and make their own chips). It held nearly two-thirds of fabless revenue, thanks to the strength of firms like Qualcomm, AMD, and Nvidia.
The only areas in which the US lags behind are contract manufacturing (which is admittedly important) and outsourced ATP (Assembly, Testing, and Packaging). Taiwan accounted for two-thirds of contract foundry revenue, and half of all ATP revenue.
Moreover, the ascent of Taiwan, China, and South Korea in semiconductor manufacturing hasn't come at the expense of US dominance across the industry overall. Since 1988, the US firms have consistently held around half the global semiconductor market share, [8]according to a 2019 SIA report [PDF] – even if some production has been offshored to Asia.
Still, there's a valid question about how long this hegemony can last. Taiwan's TSMC and South Korea's Samsung are producing chips at a 5nm process, with a [9]move to 3nm expected next year . Meanwhile, Intel is still [10]grappling with a shift to 7nm . This has forced it to start outsourcing production to TSMC.
[11]
The issue isn't necessarily capacity, or revenue. The United States' semiconductor industry is big indeed, and there are areas where it continues to fend off the competition. The issue is the long-term technological viability of domestic production. And that can only really be fixed with a healthy dose of investment. ®
Get our [12]Tech Resources
[1] https://www.semi.org/sites/semi.org/files/2021-02/SEMI%20CHIPS%20Multi%20Assn%20Letter%2002182021.pdf
[2] https://www.congress.gov/bill/116th-congress/house-bill/7178
[3] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=2&c=2YC-up@ysHkOOOeHTv7sYQwAAAEY&t=ct%3Dns%26unitnum%3D2%26raptor%3Dcondor%26pos%3Dtop%26test%3D0
[4] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=3&c=33YC-up@ysHkOOOeHTv7sYQwAAAEY&t=ct%3Dns%26unitnum%3D3%26raptor%3Deagle%26pos%3Dmid%26test%3D0
[5] https://www.usitc.gov/publications/332/journals/barbe_kim_and_riker_-_trade_and_labor_in_the_us_semiconductor_industry_.pdf
[6] https://fas.org/sgp/crs/misc/R46581.pdf
[7] https://www.semiconductors.org/wp-content/uploads/2019/05/2019-SIA-Factbook-FINAL.pdf
[8] https://www.semiconductors.org/wp-content/uploads/2019/05/2019-SIA-Factbook-FINAL.pdf
[9] https://www.theregister.com/2021/01/15/tsmc_q4_2020/
[10] https://www.theregister.com/2020/07/24/intel_7nm_chip_slip/
[11] https://pubads.g.doubleclick.net/gampad/jump?co=1&iu=/6978/reg_business/front&sz=300x50%7C300x100%7C300x250%7C300x251%7C300x252%7C300x600%7C300x601&tile=4&c=44YC-up@ysHkOOOeHTv7sYQwAAAEY&t=ct%3Dns%26unitnum%3D4%26raptor%3Dfalcon%26pos%3Dmid%26test%3D0
[12] https://whitepapers.theregister.com/
Re: In Other Words
Anonymous Coward
Well, handouts from the employed who are paying taxes. If jobs are created as a result, then you could also view it as a handout to the unemployed. Some of whom then become employed, and will have to pay taxes.
IMO this kind of program can be beneficial if done right - as opposed to old school "pork barrel" politics.
But will it? that's an open question...!
Rule one of Economics...
Anonymous Coward
Supply and Demand. If there is a Demand for Semiconductors, companies will be building or extending factories to Supply them.
Let's stick with the Government investing money in things that won't happen automatically. Research, Education, Healthcare - there're lots of things that badly need Government money... Bailing out poor long-term planning in US industry isn't high on that list.
Government handouts wanted
Duncan Macdonald
In other words - US companies (like Intel) who chose to use profits to pay shareholder dividends rather than invest in R&D now want the US taxpayers to pay for their R&D. Intel let TSMC get in front by not being prepared to invest in the expensive tools like EUV equipment until AMD overtook them in performance.
To get a firm to the point where it can compete with TSMC at 7nm and below will require a huge and continuing investment ($100B+ initially then multiple billions per year for newer equipment), highly skilled (expensive) staff and a long startup delay (multi year delays on some EUV equipment) and all with no certainty of making a good profit.
Global Foundries gave up on advanced nodes (10nm and below) because the costs exceeded the revenue that they could get from them - what makes the US semiconductor industry think that they can now do better ? This is just the industry trying to get big handouts from the US government.
In Other Words
Multi Multi Billion dollar rich companies wait for handouts from the less welloff.