Intel’s newest, leading-edge manufacturing facility is Fab 42 in Ocotillo, Arizona. Fab 42 connects to three other Intel fabrication plants, making the site Intel’s first mega-factory network. It manufactures our newest generation of leadership products that will power hundreds of millions of computing devices worldwide. (Credit: Intel Corporation)By Jeff Rittener, Chief Government Affairs Officer for Intel
Today’s executive order on America’s Supply Chains puts focus on the central role of semiconductor technology as a foundation for U.S. innovation, a key to American manufacturing leadership, and an engine for economic growth.
Intel’s products and manufacturing operations provide a critical foundation for U.S. economic and national security. Intel created the world’s first commercial microprocessor chip, and for more than forty years led the world in driving innovation in power efficient computing. This fueled job growth and development of new technologies with major economic benefits, from high performance computing to 5G to artificial intelligence. During the current pandemic, Intel’s resiliency and business continuity measures have supported efforts by cloud service providers, manufacturers and others to sustain essential services.
The semiconductor industry grows ever more critical. Global demand for semiconductors has increased dramatically over the last two years, and the pandemic increased the demand for products reliant on semiconductors like laptops and wireless communication by 10-20%. According to Semiconductor Industry Association (SIA), overall semiconductor demand is projected to grow 5% annually until 2030. To meet this demand manufacturing capacity must increase by 56%.
However, U.S. leadership in semiconductor manufacturing is at risk. The average rate of chip manufacturing output has grown five times faster overseas than it has in the U.S. over the last decade due to robust incentive programs other countries have put in place to attract and grow semiconductor manufacturing. In fact, 19 EU countries recently agreed to jointly invest in processors and semiconductor technologies to close the gap between Europe and the U.S. and Asia. This targeted aid, which will include state subsidies, could total as much as $60 billion.[1] Meanwhile, the Semiconductor Industry Association estimates that, without government support, U.S. semiconductor production will dip below 10% of the world total in the next decade.[2]
Today, 80% of the world’s semiconductor manufacturing capacity is concentrated in Asia. The Center for Strategic and International Studies’ Jim Lewis noted that the U.S. “has always been willing to spend what is needed for defense,” spending “around $6 trillion over the last 18 years fighting wars in Iraq and Afghanistan.” Lewis concluded, “Indeed, investment in technology is what is needed now.”[3]
Today’s Executive Order can help reinforce the urgency of the work started in Congress with the bipartisan Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act. The CHIPS Act recognizes the importance of using federal grants and expenditures as necessary tools to support American workers and strengthen the domestic semiconductor industry. Today’s Executive Order, combined with full funding for the CHIPS Act, can help level the playing field in the global competition for semiconductor manufacturing leadership, enabling American companies to compete on equal footing with foreign companies heavily subsidized by their governments. A $50 billion incentive program that follows the blueprint outlined in the CHIPS for America Act would increase U.S. semiconductor manufacturing capabilities by 57%.[4] These investments will bolster manufacturing capabilities and technology needed to strengthen U.S. economic and national security.
As America builds back better in the wake of the COVID-19 pandemic, significant investments in essential technologies like semiconductors are essential as part of a coordinated national manufacturing strategy. Virtually all modern technology, from 5G to AI to remote work conference calls, exists today because of the United States’ leadership in the development of the semiconductor industry. Today’s Executive Order will help accelerate whole-of-government efforts to ensure that semiconductor manufacturing leadership continues in the U.S.
[1] Michael Nienaber, “Germany predicts chip investments of up to 50 billion euros in Europe”, Reuters, February 3, 2021
[2] “2020 State of the U.S. Semiconductor Industry”, Semiconductor Industry Association, June 18, 2020
[3] James Andrew Lewis, “America has to invest in advanced chipmakers or lose battle to China”, The Hill, September 3, 2020
[4] Antonio Varas, Raj Varadarajan, Jimmy Goodrich, and Falan Yinug, “Government Incentives and U.S. Competitiveness in Semiconductor Manufacturing”, Semiconductor Industry Association and Boston Consulting Group, September 12, 2020