Boosting the U.S. Semiconductor Supply Chain

Download this article in PDF format.

Last month, right around the time that most Americans were gearing up for the holiday season, the U.S. Department of Commerce (DOC) revealed its new plans for both bolstering the national semiconductor supply chain and protecting U.S. national security. 

At the heart of the effort is a new survey that launches this month and is focused on identifying how organizations nationwide are sourcing current-generation and mature-node (aka, “legacy”) chips. The DOC says the results of the survey will help it bolster the semiconductor supply chain, promote a level playing field for legacy chip production and reduce national security risks posed by the People’s Republic of China (PRC).

“Legacy chips are essential to supporting critical U.S. industries, like telecommunications, automotive and the defense industrial base. Addressing non-market actions by foreign governments that threaten the U.S. legacy chip supply chain is a matter of national security,” said Secretary Gina Raimondo in a press release. 

“Over the last few years, we’ve seen potential signs of concerning practices from the PRC to expand their firms’ legacy chip production and make it harder for U.S. companies to compete. To get ahead of these concerns, the [DOC] is taking proactive measures to assess the U.S. semiconductor supply chain by collecting data from U.S. companies on the sourcing of their legacy chips,” said Raimondo, who reminds interested parties that government alone cannot “create and sustain a robust supply chain,” and that industry also needs to have a seat at the table. 

PRC-Manufactured Legacy Chips  

The DOC’s new survey is being launched by the Bureau of Industry and Security (BIS) and will center on the use and sourcing of PRC-manufactured legacy chips in the supply chains of critical U.S. industries. The survey was developed in response to findings in a recent congressionally mandated report that assesses the capabilities of the U.S. microelectronics industrial base to support the country’s national defense.  

In its report, the BIS said survey respondents expressed significant concern about domestic sources of three categories of materials: bare wafers, gases and wet chemicals. Within gases, the survey found that helium, nitrogen, hydrogen chloride, neon, nitrogen trifluoride and hydrogen presented the most frequent acquisition concerns. It also discusses CHIPS Act investments and said industry growth is expected to add 70,000 additional jobs by 2032. “Semiconductor jobs are well paid, with average salaries over 30 percent higher than national averages for related job categories,” the BIS points out. “Respondents identified workforce-related items as both their top business challenges and the most important factors in deciding where to locate a facility.”

The BIS’ report also details how U.S. semiconductor companies are more reliant on sales to China than any other location—the U.S. itself included—with an estimated 30-40% of sales shipped to China and approximately 25% being used domestically. It says U.S.-based companies are “narrowing the gap” between their capital expenditures made outside the United States and those made domestically, effectively reversing a trend of declining domestic semiconductor capital investments. 

Four Steps in the Right Direction

The BIS’ report also offers these four high-level recommendations, each of which is focused on bolstering domestic semiconductor production:

1. Level the playing field for semiconductor manufacturing in the U.S. “Companies in the United States for decades have faced higher costs than competitors around the globe,” according to the BIS. “For the United States to manufacture its fair share of semiconductors domestically, companies operating in the United States must be able to compete on a level playing field.”

2. Ensure U.S. leadership in advanced research and development. The BIS says continued U.S. leadership in semiconductor R&D relies on education and workforce leadership and protection of technology, and that it also requires methods to incubate, protect and commercialize innovative technologies and support for companies developing sensitive technologies.  

3. Support the availability of high-quality manufacturing materials and inputs. “Manufacturing semiconductors requires hundreds of different materials with stringent quality requirements,” the BIS said in its report. “Maintaining a healthy domestic semiconductor manufacturing base requires a robust material supply chain that is resilient to regional or company-specific shocks.”

4. Build a diverse and accessible talent pipeline for jobs in the semiconductor industry. The BIS says that the strength of the U.S. semiconductor industry relies on the strength of its workforce. “Survey respondents consistently indicated that their ability to find, hire, and retain highly skilled workers was both of key importance in making business decisions,” it adds, “and a major challenge to their operations.”