Current and Emerging U.S. Federal Policy Response
The U.S. government has already taken several steps to address the semiconductor shortage that largely aligns with this targeted approach.
CHIPS for America Act in the FY2021 NDAA
The FY2021 National Defense Authorization Act (NDAA) which became law on January 1, 2021, contained semiconductor provisions adopted from the previously introduced CHIPS for America Act. Several key provisions included:
- Section 9902: Authorization for the Secretary of Commerce to establish a program that “provides Federal financial assistance to covered entities to incentivize investment in facilities and equipment in the United States for semiconductor fabrication, assembly, testing, advanced packaging, or research and development.”
- Section 9905: Authorization for the Secretary of the Treasury to establish a “Multilateral Semiconductors Security Fund” that provides financing for coordinated, multilateral programs with allies and partners which support the development of secure semiconductor supply chains and creates joint semiconductor R&D collaborations.
- Section 9906: Establishes a National Semiconductor Technology Center to serve as a hub for semiconductor research and development that supports startups, encourages collaboration among academia, the public sector, and the private sector, attempts to commercialize semiconductor innovations, and supports educational and workforce training programs in the semiconductor field.
However, while the FY2021 NDAA authorized these items, the bill did not appropriate funds for any of these programs.
U.S. Innovation and Competition Act
The U.S. Innovation and Competition Act (also referred to as the Endless Frontiers Act) passed the Senate in a bipartisan vote on June 8, 2021. It is a $250 billion spending bill aimed at promoting research and innovation in advanced technologies and U.S. industrial capacity. The bill appropriates $52 billion in funding over five years for several of the semiconductor provisions in the FY2021 NDAA/CHIPS for America Act. $39 billion would be allocated to specifically incentivize semiconductor manufacturers to build new chipmaking capacity in the United States as a counter to current dependence on China.
In his sponsorship of the bill, Senate Majority Leader Chuck Schumer argued that the current lack of domestic semiconductor production capacity represents “a dangerous weak spot in our economy and in our national security.” The bill is supported by President Biden and it is expected to eventually become law. However, the $52 billion in funding is only for the domestic industrial support provisions (Section 9902) and research provisions (Section 9906) of the 2021 NDAA and does not include funding for the Multilateral Semiconductors Security Fund (Section 9905).
White House Report on Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth
Following Executive Order 14017’s mandate of a 100-day review of U.S. critical supply chains, the White House released a report on Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth in June 2021. The report contained seven key recommendations for securing semiconductor supply chains. Although these have yet to be implemented, they provide clues as to likely policy initiatives of the Biden Administration.
- The Federal government should facilitate enhanced cooperation, collaboration, information-sharing, and communication among the U.S. semiconductor private sector as well as with international partners and encourage U.S. companies to internally attempt to strengthen and diversify their individual supply chains.
- Fully fund the CHIPS for America provisions in the FY2021 NDAA. This includes at least $50 billion for domestic production incentives and R&D as well as funding for the Multilateral Semiconductors Security Fund.
- Strengthen the entire U.S. semiconductor manufacturing ecosystem by investing in infrastructure, clean energy, power generation, etc. and provide incentives to industries along the entire semiconductor supply chain from manufacturing equipment to gases and other inputs.
- Support small and medium-sized semiconductor businesses, including disadvantaged businesses.
- Enhance the semiconductor workforce through training programs for skilled manufacturing workers, promoting STEM education in schools and universities, and increasing the number of high-skilled visa allowances to attract foreign talent.
- Coordinate with international allies and partners (particularly the Quad) on information-sharing, policy harmonization, and joint R&D and encourage allied companies to invest in the U.S.
- Protect the U.S. technological advantage in semiconductors (design, advanced packaging technologies, equipment manufacturing, etc.) by using export controls and CIFIUS regulations to limit advanced capabilities in countries of concern.
Ongoing Industry Actions
With the slew of Federal activity on semiconductors, the global semiconductor industry is already responding and planning new facilities and expansions in the U.S. In May 2020, Taiwan’s largest semiconductor manufacturer TSMC announced a plan facilitated by the Undersecretary of State for Economic Growth, Energy, and the Environment Keith Krach to construct a $12 billion fabrication facility in Arizona capable of producing highly advanced 5nm chips. Yet less than $1 for every $6 invested in semiconductors is going towards the older “legacy chip” type that is currently experiencing the most acute shortage. TSMC and Sony announced in November 2021 that they’ll build a $7 billion chip plant in Japan to make semiconductors based on older technology to try to fill the gap. In 2021, Intel also announced a $20 billion investment in two fabrication facilities in Arizona and Samsung is considering a $17 billion investment to expand its production capacity in the U.S. However, Intel, Samsung, and TSMC have threatened to halt their planned semiconductor factory expansions in the United States unless they receive significant government subsidies.
Additionally, once the U.S. Innovation and Competition Act is signed into law, Secretary of Commerce Gina Raimondo reportedly aims to use its funding provisions to support the opening of six to eight new semiconductor chip factories in the U.S. within 18 months.
Conclusion
While recent efforts on Capitol Hill and from the White House on the semiconductor supply chain are heading in the right direction and are beginning to take the necessary steps to address this issue, the actual implementation of these policies will take years to complete and requires a sustained, cooperative effort among researchers, the U.S. semiconductor industry, the Federal government, and global partners.