In September, chip giant Intel gathered officials on a plot of land near Columbus, Ohio, where it pledged to invest at least $20 billion in two new semiconductor manufacturing plants.
A month later, Micron Technology celebrated a new manufacturing site near Syracuse, NY, where the chip company expected to spend $20 billion by the end of the decade and perhaps five times that amount eventually.
And in December, Taiwan Semiconductor Manufacturing Company hosted a shindig in Phoenix where it plans to triple its investment to $40 billion and build a second new factory to make advanced chips.
The pledges are part of a massive increase in U.S. chip-making plans over the past 18 months, the size of which has been compared to investments in the Cold War-era Space Race. The boom has implications for global technology leadership and geopolitics, with the United States looking to prevent China from becoming an advanced power in chips, the bits of silicon that have fueled the creation of innovative computing devices such as smartphones and virtual reality goggles.
Today, chips are an essential part of modern life, even beyond the creations of the tech industry, from military gear and cars to kitchen appliances and toys.
As of spring 2020, more than 35 companies across the country have pledged nearly $200 billion for chip manufacturing projects, according to the Semiconductor Industry Association, a trade group. The money will be spent in 16 states, including Texas, Arizona and New York, on 23 new chip factories, the expansion of nine factories and investments from companies that supply equipment and materials to the industry.
The push is one facet of an industrial policy initiative by the Biden administration, which dangles at least $76 billion in grants, tax credits and other subsidies to boost domestic chip production. Along with providing major funding for infrastructure and clean energy, the effort represents the largest U.S. investment in manufacturing since World War II, when the federal government spent on new ships, pipelines and factories to make aluminum and rubber.
“I’ve never seen a tsunami like this,” said Daniel Armbrust, the former CEO of Sematech, a now-defunct chip consortium formed in 1987 with the Department of Defense and funded by member companies.
President Biden has deployed a prominent part of his economic agenda to boost US chip production, but his reasons go beyond economic benefits. Many of the world’s most advanced chips are now made in Taiwan, the island over which China claims territorial rights. That has led to fears that semiconductor supply chains could be disrupted in the event of conflict — and that the United States will be at a technological disadvantage.
The new manufacturing effort in the US may correct some of these imbalances, industry executives said, but only to a certain extent.
The new chip factories would take years to build and they might not be able to offer the industry’s most advanced manufacturing technology when they become operational. Companies could also postpone or cancel the projects if they don’t get enough grants from the White House. And a serious skills shortage could undermine the boom, as the complex factories need far more engineers than the number of students graduating from US colleges and universities.
The money bonanza on U.S. chip manufacturing “will not try or succeed in achieving self-sufficiency,” said Chris Miller, an associate professor of international history at Tufts University’s Fletcher School of Law and Diplomacy, and the author of a recent book about the battles in the chip industry.
White House officials have argued that the investment in chip making will greatly reduce the number of chips that need to be bought abroad, improving US economic security. At the TSMC event in December, Mr. Biden also highlighted the potential impact on tech companies like Apple that rely on TSMC for their chip making needs. He said “it could be a game changer” as more of these companies “bring more of their supply chain home”.
Beginning in the late 1950s, American companies led chip production for decades. But land’s share of global production capacity gradually fell from about 37 percent in 1990 to about 12 percent, as countries in Asia provided incentives to move production to those shores.
Today, Taiwan accounts for about 22 percent of total chip production and more than 90 percent of the most advanced chips made, according to industry analysts and the Semiconductor Industry Association.
The new spending will improve America’s position. A $50 billion government investment is likely to lead to corporate spending that would push the U.S. share of global manufacturing to as much as 14 percent by 2030, according to a 2020 Boston Consulting Group study commissioned by the Semiconductor Industry Association.
“It really puts us in the game for the first time in decades,” said John Neuffer, the association’s president, who added that the estimate may be conservative because Congress approved $76 billion in grants in a piece of legislation known as as the CHIPS Act. .
Still, the ramp-up is unlikely to erase America’s dependence on Taiwan for the most advanced chips. Such chips are the most powerful because they pack the largest number of transistors into each slice of silicon, and they are often held aloft as a sign of a country’s technological progress.
Intel has long led the race to shrink the number of transistors on a chip, which is usually measured in nanometers, or billionths of a meter, with smaller numbers denoting the most advanced manufacturing technology. Then TSMC rocketed forward in recent years.
But at the Phoenix location, TSMC may not be importing the most advanced manufacturing technology. The company initially announced it would produce five-nanometer chips at its Phoenix factory, before saying last month it would also make four-nanometer chips there by 2024 and build a second plant, set to open in 2026, for three-nanometer chips. It stopped discussing further progress.
In contrast, TSMC’s factories in Taiwan began production of three-nanometer technology in late 2022. By 2025, factories in Taiwan are likely to start supplying two-nanometer chips to Apple, says Handel Jones, CEO of International Business Strategies.
TSMC and Apple declined to comment.
Whether other chip companies will bring more advanced advanced chip technology to their new locations is unclear. Samsung Electronics plans to invest $17 billion in a new plant in Texas, but has not disclosed the manufacturing technology. Intel produces chips about seven nanometers, though it has said its U.S. factories will produce three-nanometer chips by 2024 and even more advanced products soon after.
The spending boom will also reduce, but not erase, US reliance on Asia for other types of chips. Domestic factories produce only about 4 percent of the world’s memory chips — needed to store data in computers, smartphones and other consumer devices — and Micron’s planned investments could eventually increase that percentage.
But there are likely still gaps in a wide variety of older, simpler chips, which have been so scarce over the past two years that U.S. automakers have had to close factories and produce partially completed vehicles. TSMC is a major producer of some of these chips, but is focusing its new investments on more profitable advanced chip factories.
“We still have a dependency that’s not affected in any way,” said Michael Hurlston, CEO of Synaptics, a Silicon Valley chip designer that relies heavily on TSMC’s legacy factories in Taiwan.
According to the Semiconductor Industry Association, the chip-making boom is expected to create a job bonanza of 40,000 new jobs in factories and companies that supply them. That would equate to about 277,000 workers in the U.S. semiconductor industry.
But it will not be easy to fulfill so many skilled functions. Chip factories usually need technicians to run factory machines and scientists in fields such as electrical and chemical engineering. The shortage of talent is one of the biggest challenges in the industry, according to recent surveys of executives.
The CHIPS Act includes funding for workforce development. The Department of Commerce, which oversees the disbursement of grant money from CHIPS Act funds, has also made it clear that organizations hoping to get money should come up with plans for educating and educating employees.
Intel, responding to the matter, plans to invest $100 million to boost training and research at universities, community colleges and other technical educators. Purdue University, which has built a new semiconductor lab, has set a goal of graduating 1,000 engineers each year and has tapped chipmaker SkyWater Technology to build a $1.8 billion plant near its Indiana campus .
But training may only go so far, as chip companies compete with other industries in dire need of workers.
“We’re going to have to build a semiconductor economy that attracts people when they have a lot of other choices,” Mitch Daniels, who was president of Purdue at the time, said at a September event.
Since training efforts can take years to pay off, industry executives want to make it easier for highly skilled foreign workers to get a visa to work or stay in the United States after they graduate. Washington officials are aware that comments encouraging more immigration could spark political fire.
But Gina Raimondo, the commerce secretary, was candid in a November speech at the Massachusetts Institute of Technology.
Attracting the world’s best scientific minds is “an advantage America has to lose,” she said. “And we won’t let that happen.”
