How Will the CHIPS Act Impact Engineers?

Article By : C.D. McGrady

EE Times asked two design engineers to weigh in on the implications of the CHIPS Act for engineers in the U.S., in the short and long term.

The $52 billion spending plan outlined in the CHIPS and Science Act that has been signed into law has significant implications for the semiconductor ecosystem—from chip manufacturers to engineers and production teams.

EE Times asked two design engineers to weigh in on the implications of the Act for engineers in the U.S., in the short and long term. Will it simply help return the design engineering process to status quo pre-2020? Or are there greater changes afoot that will drive a significant shakeup of the semiconductor design and manufacturing process? The answer lies somewhere in between.

A disrupted industry stabilized?

As it stands today—and has been highlighted in our article “Supply Chain Experts Weigh In on CHIPS Act”—you can’t overstate how disrupted the global semiconductor supply chain has been over the last two years. Semiconductors, in particular, have a uniquely interconnected infrastructure that has touchpoints across just about every market.

Zachariah Wendt (Source: Nimble Gravity)

“The absence of one part can have ripple effects through not just one vertical or market, but across many,” said Zachariah Wendt, a former Arrow Electronics applications engineer and now a business engineer at Nimble Gravity. “For example, a MOSFET manufacturer that has a materials shortage can impact the auto industry, the solar industry, the computer industry. Maybe your town is building a new concert venue and suddenly they can’t get the sound system to complete the project. And we’re talking about delays that are not measured in days or weeks, but possibly months and even years.”

Miguel Gudino, applications engineer at Allied Electronics, added, “We have been impacted in our ability to find and source parts. Many of our advanced automation products have important semiconductors that make that device function. To deal with those issues, we frequently needed to find alternative parts. We would cross over to other brands that customers might have not considered at first. Fortunately, we carry plenty of brands to cross to, but it would increase the engineering time on researching to see if it’s a good cross.”

While huge players in the semiconductor space—whether distributors or OEMs with direct connections to electronics manufacturers—have been better able to weather the storm, small organizations can see disruptions in their ability to manufacture components completely decimate their businesses.

According to research from Deloitte, in mid-2021, some organizations were looking at 20- to 52-week lead times for semiconductor components—a time period that smaller organizations simply can’t stomach. The same research indicates that by the end of this year, the market will be closer to a 10- to 20-week lead time—better, but not fully stabilized. So will the CHIPS Act impact this delivery frame?

First of all, the CHIPS Act is largely directed at supporting large organizations—companies like Intel. The belief is that by focusing growth efforts at the top of the food chain, there will be a bigger impact to the entire marketplace, including small companies.

“The semiconductor industry is so interconnected that changes at the macro scale will have impacts all the way down the chain,” Wendt said. “A significant amount of funds, around $10 billion, is aimed at increasing manufacturing capacity for not only current technologies but emerging semiconductor technology like silicon carbide. The ‘trickle down’ impact of these investments will be felt far and wide.”

The timeline for impact

However, these sorts of investments in infrastructure and manufacturing take time, and the impact of these changes may not be felt for years.

Miguel Gudino (Source: Allied Electronics)

“I don’t see an impact on me, as the CHIPS Act recently passed and won’t directly affect the shortage issues that we currently have,” Gudino said. “Long term, I do see the impact, as lead times will be cut considerably. It will make sourcing parts easier and advance quickly to building when helping customers design a system—instead of worrying if the parts that I chose will have a long lead time and will not meet the customer’s timeline.”

The CHIPS Act was signed into law on Aug. 9. With $52 billion slated to be channeled into semiconductor companies, manufacturing capabilities, and other science- and technology-related endeavors, the initiative is going to require a significant amount of time to get off the ground.

“Several organizations have already committed to opening or expanding manufacturing facilities in different locations across the country, but building those facilities will take years,” Wendt said. “Further, there are supply chain disruptions in many other industries negatively impacting construction projects. Raw materials like lumber and steel are tough to come by and construction will be slowed. On top of that is the well-documented labor shortage. Once these facilities are built, you will need to staff them. Where is that workforce going to come from? So short term, I don’t really expect to see any significant changes in the way engineers conduct their day-to-day design.”

In the long term, however, there are significant changes that will impact design and application engineers for years—some of them negative and some positive.

As part of the CHIPS Act, organizations that receive funding to expand their U.S. operations also face some restrictions on how and where they can expand their businesses in the future. Specifically, companies that take CHIPS funding will face restrictions for expanding into countries that are considered a threat to U.S. national security—which means China. With so much of the global semiconductor supply chain tied into Chinese manufacturing capabilities, that has the potential to significantly change the way design engineers source semiconductors for their products.

Industrial impact

On the other hand, some industries stand to benefit significantly from this legislation.

“I believe this can have a big impact on the automotive industry,” Gudino said. “That industry is having a hard time getting semiconductors to produce their vehicle while they are also increasing the complexity of their design. Semiconductors are becoming even more essential as vehicles are getting smarter [autonomous vehicles with AI] and need more electronics [electric vehicles]. This is going to boost the advancement in the automotive industry.”

With increased focus from nearly every major automotive manufacturer on building the next generation of electric vehicles, as well as significant investments in autonomous-vehicle technology, there is no better time than the present for an influx of money—footed by the U.S. government or otherwise—to help support what is certain to be a booming industry over the next 10 years and beyond.

What does remain to be seen is the impact from a geopolitical perspective and how it will affect design engineers who may find themselves caught in the middle of a political-economic tug of war.

The semiconductor industry is very, very important to China, and the geopolitical uncertainty of the relationship between the United States and China is always a bit fragile,” Wendt said. “How will China respond to this if it makes a significant dent in their semiconductor market?

“But overall, I think it’s a good move both for the United States and for the engineering community at large, if for nothing else than supply chain stability,” he added.

 

This article was originally published on EE Times.

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