Global Semiconductor Shortage Underlines U.S. Domestic Manufacturing Woes

Jason Lomberg, North American Editor, PSD



The recent process of buying a new car was a gloomy reminder of the semiconductor shortage, with lots so empty they could host Sunday Night Football. It’s a problem that could linger for awhile – or at least until we establish a domestic chip manufacturing base.

A June White House report laid out our domestic woes, and coming on the heels of a global pandemic that produced historic unemployment and economic repercussions we’re still unpacking, it’s particularly sad....

First, the positives. The U.S. leads the way in R&D and the overall design process, and 40 major semiconductor fabs are located here, with 20 using 300 mm (12 inch) wafers, and the rest using 200 mm (8 inch) wafers or below. 

This should come as no surprise – many of you work in those fabs or are tangentially involved in the process.

But the U.S. is over-reliant on Taiwan for leading edge logic chips and Taiwan, South Korea, and China for mature node chips. In one area, the logic chip segment, the United States produces none of the leading edge (under 10 nm) chips while Taiwan accounts for 92 percent.

This, in turn, creates supply chain vulnerabilities – exacerbated by the global pandemic – and even national security concerns. That, plus a disruptive market shift during Covid-19 (with the increased demand for video-game systems, computers, laptops, and our digital infrastructure and a diminished need for vehicles of all types) wreaked havoc on the global semiconductor supply chain, with particular emphasis on the automotive sector – by the time consumers took to the roads again, auto manufacturers found themselves at “the back of the line.”

And our domestic manufacturing position is getting worse. In 1990, the U.S. share of global semiconductor production stood at 37 percent, while it’s down to 12 percent today, and between 2000 and 2010, the U.S. manufacturing workforce shrunk by 1/3. Many companies have switched to a fabless/foundry business model, which can be a positive development, but it’s another gut punch to domestic manufacturing.

Meanwhile, Asia is heading in the opposite direction. China’s President Xi Jinping has pledged $1.4 trillion over six years to refine their domestic semiconductor capability and lead the world in chips, artificial intelligence and autonomous driving. And South Korea isn’t far behind.

In addition to dominating the battery world – China has over 75 percent of global cell fabrication capacity for advanced batteries, and they refine 60 percent of the world’s lithium and 80 percent of the world’s cobalt – the People’s Republic is gaining ground in every aspect of chip production. It’s to the point where the Semiconductor Industry Association (SIA) predicts that, by 2030, U.S. semiconductor production capacity will drop to 10 percent, with Asia up to 83 percent.

Though to be fair, the U.S. hasn’t been completely stagnant -- as a result of last month’s clarion call from the White House, the U.S. Senate voted to earmark $52 billion towards improving domestic chip manufacturing. But many feel that’s not nearly enough, and it may not help in the short-term, anyway.

Referring to the U.S. automotive slump (due mainly to the chip shortage), the Research Director at the Center for Automotive Research (CAR), Bernard Swiecki, noted that, “Sourcing more microchips from the United States is certainly a possibility … but it’s a long term one because it’s a matter of years from when a new plant is announced to when it’s built to when it actually starts producing output.”

And that’s true across the broad span of domestic semiconductor manufacturing.

Something definitely needs to be done – U.S. chip production is on the downswing and key international rivals are filling the void (and Covid-19 turned a problem into a crisis) – but what exactly, and how much it’ll cost is the trillion-dollar international mystery.