US Chipmaking Capacity to Triple by 2032 with CHIPS Act

The United States is gearing up to significantly boost its domestic chip manufacturing capacity and control a substantial portion of advanced chip production by 2032, a move propelled by the Chips Act subsidy boost. With China lagging behind in advanced chip manufacturing, the US is set to triple its capacity, thanks to measures encouraging key players like TSMC and Samsung to establish cutting-edge fabrication plants on American soil. As the global semiconductor landscape undergoes a transformation, many questions are raised. What challenges has the US faced in semiconductor manufacturing over the past few years, how could this announcement affect China's ability to compete in the semiconductor market, and what advantages would this move introduce to the West as a whole?

• The US semiconductor industry faces challenges in domestic production, skilled labour shortage, global competition, and export controls impacting growth and competitiveness.
• US government funding initiatives like the CHIPS and Science Act of 2022 are crucial in boosting domestic semiconductor manufacturing and reducing reliance on foreign sources, ensuring supply chain security and global competitiveness.
• US's enhanced semiconductor manufacturing capabilities will lead to job creation, technological leadership, national security, and global collaboration in the electronics engineering sector.

Challenges in US Semiconductor Manufacturing

The semiconductor industry has undergone tremendous evolution since its inception, transforming from a niche component industry to a critical driving force in modern technology. These tiny yet mighty devices have revolutionized every aspect of contemporary life, from data processing and communication to entertainment and information management. As a sign of their significance, the semiconductor industry has grown exponentially, with global sales surpassing $400 billion annually. Despite this remarkable growth, the US semiconductor manufacturing industry has been grappling with several challenges over the past few years, highlighting the nation's dependence on foreign producers for advanced chip technology.

One of the primary obstacles faced by the US is its lack of domestic fabrication plants capable of producing cutting-edge chips. Unlike its competitors, such as Taiwan and South Korea, the US does not have enough indigenous foundry systems for high-end devices; instead, it often relies on contract manufacturers primarily located in Asia. This arrangement makes the US vulnerable to disruptions in the supply chain, production delays, and quality control issues affecting the final products. Furthermore, the high-end semiconductor market is highly lucrative, and by not having the ability to produce such devices in-house, the US is forfeiting potential revenue streams.

Challenges in Establishing Domestic Fabrication Plants

The scarcity of skilled labour in the semiconductor industry is another hurdle that US foundries encounter. As the technology becomes more complex, the demand for trained and experienced professionals has increased substantially. However, there is a shortage of qualified individuals, particularly in areas like wafer fabrication and advanced packaging. This skills gap hinders the expansion of semiconductor manufacturing plants in the US, limiting the industry's growth potential.

Geopolitically, the US faces stiff competition from nations like Taiwan and South Korea in the semiconductor sector. These countries have established themselves as reliable suppliers of high-tech components, offering competitive prices and cutting-edge technologies In contrast, the US faces limitations in expanding its market share due to its higher manufacturing costs, regulatory hurdles, and perception of higher prices among consumers. 

Additionally, export controls pose a significant challenge for the US semiconductor industry, impacting both domestic and international sales. Stringent regulations limit the types of components that can be exported to certain countries, thereby restricting trade opportunities. While these controls aim to safeguard national security interests, they also contribute to supply chain complexities and longer production times, making it challenging for manufacturers to meet the growing demand for semiconductors.

In summary, the US semiconductor manufacturing sector has been facing several obstacles in recent years, highlighting the nation's dependence on foreign producers for advanced chip technology. Addressing these challenges will require a comprehensive approach, involving investments in infrastructure, skills development, innovation, and regulatory reforms to bolster the competitiveness of the US semiconductor industry on the global stage.

The Impact of the Announcement on China's Semiconductor Market Competitiveness

To try and rectify this issue, the US government introduced the CHIPS and Science Act of 2022, which provides approximately $280 billion in funding to boost domestic research and manufacturing of semiconductors. With such funding, companies such as Intel have not only been able to expand their facilities stateside, but also move production back to the US. 

The CHIPS and Science Act of 2022 provides approximately $280 billion in funding to boost domestic research and manufacturing of semiconductors. This substantial investment is aimed at not only enhancing the US's manufacturing capacity but also securing its position as a global leader in semiconductor technology. By attracting key industry players like Intel and Samsung to expand their US operations, the Act is set to create thousands of high-paying jobs and stimulate local economies.

According to a recent study by the Semiconductor Industry Association (SIA) and Boston Consulting Group (BCG), the US is expected to more than triple its domestic chip manufacturing capacity by 2032, thereby controlling nearly 30% of advanced chip production globally. While China is expected to manufacture only 2% of the most advanced chips, mainland China is expected to triple its share of chip production in the 10nm to 22nm range, and for chips above 28nm, it is expected to increase from 33% in 2022 to 37% in 2032.

Significance of Research and Development in Semiconductor Advancements

The Act also emphasizes the importance of research and development in maintaining technological leadership. Significant portions of the funding are allocated to advancing semiconductor technologies, including next-generation fields such as quantum computing and artificial intelligence. These investments ensure that the US remains at the cutting edge of semiconductor innovation, capable of producing the most advanced chips domestically.

While the US has been successful in encouraging companies to return with the use of subsidies, other countries have looked towards state-backed funds to try and develop their semiconductor industries. For example, China is planning to launch a new fund that will raise approximately $43 billion to support its chip industry, something which could help China achieve its goal of 70% semiconductor self-sufficiency by 2025.

In addition to financial investments, the CHIPS and Science Act includes provisions for workforce development to address the skilled labour shortage in the semiconductor industry. This involves creating new educational programs and partnerships with academic institutions to train the next generation of semiconductor engineers and technicians. By building a robust talent pipeline, the US can sustain the growth of its semiconductor manufacturing capabilities and reduce its reliance on foreign expertise.

Overall, the semiconductor industry continues to play a critical role in global markets, and having control of the supply chain is of the utmost importance. If the past two years has taught us anything, it's that all components are essential, and having alternatives is always a good idea.

The Benefits of Implementing This Strategic Move in the Western Context

As the electronics engineering sector continues to evolve and advance, the US's increasing chip manufacturing capabilities are poised to make a significant impact on the industry. With the goal of reaching 30% global market share for advanced semiconductors by 2032, the US is strategically positioning itself to enhance its technological leadership and innovation in the semiconductor sector. 

One potential implication of the US's move could be a reduction in China's share of the global market for advanced semiconductors. As the US tightens its control over semiconductor exports, China's access to cutting-edge technology becomes increasingly limited, thereby impacting its ability to compete with other nations in the semiconductor market. This shift in market dynamics could also result in a realignment of global supply chains, with the US assuming a more prominent role in the production and distribution of advanced semiconductors.

The advantages of the US's enhanced semiconductor manufacturing capabilities for the Western world are numerous. Firstly, the US is likely to experience job creation and economic growth in the semiconductor industry, thereby addressing concerns about the impact of automation and technological advancements on employment. The increased demand for skilled workers and engineers in the semiconductor sector could lead to new opportunities for professionals in the field of electronics engineering.

Secondly, the US's enhanced semiconductor capabilities will undoubtedly strengthen its technological leadership and innovation in the field of advanced chip production. By investing in research and development and fostering collaborations between industry stakeholders, academia, and government agencies, the US can stay at the forefront of technological advancements in semiconductors, setting a precedent for other nations to follow.

Thirdly, the US's goal of achieving a 30% global market share for advanced semiconductors by 2032 will enhance its national security. By controlling a significant portion of the global supply of advanced chips, the US can better regulate the distribution of sensitive technology and prevent its misuse by foreign nations or non-state actors. This heightened sense of security will also enable the US to play a more proactive role in shaping the semiconductor industry and guiding its development in alignment with national interests.

Finally, the US's increased chip production capabilities could pave the way for collaboration and partnerships with other Western countries in semiconductor research and development. By pooling resources and expertise, nations such as the UK, Germany, and France can work together to address common challenges in the semiconductor sector, drive innovation, and advance their respective technological agendas.

In conclusion

The US's strategic move to enhance its semiconductor manufacturing capabilities presents a positive outlook for the electronics engineering sector and the broader Western world. From reducing China's competitiveness to fostering technological leadership and national security, the implications of this move will resonate across the globe, shaping the future of the semiconductor industry and beyond.