Supply Chain Experts Weigh In on CHIPS Act

Article By : Barbara Jorgensen

Though chipmakers continue to announce plans to build foundries in the U.S. thanks to the CHIPS Act, the effort should go well beyond securing a domestic supply of ICs, supply chain experts predict.

Chipmakers Intel, Micron, Samsung, and TSMC have announced plans to build foundries in the United States thanks largely to the CHIPS Act, which aims to rebuild America’s prowess in semiconductor manufacturing. But the effort should go well beyond securing a domestic supply of ICs, supply chain experts told EE Times.

“If you look at it from a holistic point of view, the Act acknowledges how important this technology is to the lifeblood of industry,” said Peggy Carrieres, VP of global sales enablement and supplier development for distributor Avnet. “It’s also intended to future-proof the semiconductor industry and set it up for sustainability.”

At issue is America’s dependence on foreign sources for materials and services critical to chip production. China controls most of the rare-earth elements (REEs) used in high-tech products. China and Japan produce a significant amount of silicon and silicon wafers. Ukraine supplies most of the neon gas used in chip-manufacturing equipment. And IC test and packaging services are highly concentrated in Southeast Asia.

“What concerns me is the lack of alternatives in the current model,” said Tom McDonough, senior director of supply chain at Anaplan. “If we are dependent on a single source for critical materials or those materials are highly concentrated in a single region, any disruption—be it a natural disaster or political unrest—will have a drastic impact on the availability and price of those goods.”

These limitations were laid bare during the Covid-19 pandemic and Russia’s invasion of Ukraine, and then the chip shortage that began in early 2021 paralyzed production lines across industry sectors. Chip capacity was the main problem, but supply chain disruptions, a dearth of skilled labor, and unreliable logistics have also plagued the industry.

Tech companies innovate, Carrieres pointed out, but these efforts are fractured and take place within multiple sectors. The CHIPS Act offers a way to unify around a common problem: a national semiconductor ecosystem.

Science and human capital

Among its many measures, the CHIPS Act carves out funding for basic energy sciences, including materials sciences and engineering, chemical sciences, physical biosciences, geosciences, and other disciplines. It additionally calls for the formation of a national microelectronics training network for semiconductor workforce development across academic institutions, including minority-serving institutions and community colleges—and for setting a national semiconductor research agenda.

A holistic solution invests in the many skillsets required for a thriving chip industry.

“It takes a while to understand how this industry works backward from the technology,” Carrieres said. “You have specialists in R&D and production, procurement and logistics, and the supply chain.”

Avnet is funding a program with the Arizona SciTech Institute that designates students as chief science officers.

“We have to go back to the grade school level and invest in programs, such as a chief science officer, with the intent of creating the excitement needed to see this industry in action,” Carrieres said.

The University of Central Florida (UCF) School of Modeling, Simulation, and Training is creating a digital twin—a virtual replica—of the real-world semiconductor manufacturing plant and process to be built by a Central Florida coalition, said Grace Bochenek, director and professor at the UCF modeling and simulation school. UCF is simultaneously building and training the workforce that will be required to improve semiconductor designs and increase production capacity in the United States, she added.

The industry’s investment in supply chain human capital, Carrieres added, is historically small. Electronics industry associations, such as the IPC and ECIA, have developed educational programs that engage students at the grade school and university levels.

Planning for new fabs

Chipmakers have announced plans to build nearly 30 fabs worldwide to prevent a recurrence of the unprecedented global chip shortage. “Companies are still making decisions based on the balance sheet,” said Carrieres. “The allocation of funds is going into capital expenditure. But a sustainable supply chain is also mission-critical.”

Increasing domestic chip production without bolstering related test and packaging capabilities will only lengthen the semiconductor supply chain, according to the IPC. Chips made in the U.S. still need to be sent to Taiwan, Japan, or South Korea for final assembly.

Experts are skeptical that the semiconductor supply chain can be duplicated inside any one country.

“Even if chips are assembled in America, there are supplies coming in from all over the world,” said Simon Ellis, head of IDC’s Manufacturing Insights and Global Supply Chain Strategies practices. “The supply chain has been intertwined for 50 years, and it’s hard to see how that can be deconstructed.”

IDC’s Simon Ellis

The CHIPS Act helps North American companies look at the longer-term horizon, such as alternative materials and chip stacking, Carrieres said. “We’d all like to see more innovation at a national level.”

IPC specifically points to the national deficit in IC substrates and packaging capabilities.

“Designers are increasingly relying on advancements in the packaging of silicon chips into ever-smaller integrated devices to achieve the greater functionality and efficiencies that they previously realized through silicon scaling,” IPC president and CEO John Mitchell said in prepared remarks. “Today, packaging is king, and this legislation will help position the United States as a leader in this crucial technology.”

More urgently, America needs to invest in the development and production of advanced IC substrates, such as PCB surfaces—“for which there are only nascent capabilities domestically,” Mitchell added.

Seeing the world through ‘customers’ eyes’

As an electronics distributor, Avnet is a middleman between the companies making chips and the enterprises that consume them.

“This is important for us because we see the world through our customers’ eyes,” Carrieres said. “At the end of the day, we try to solve customers’ problems.”

While distributors may sell hundreds of brands to the market, OEM production lines have stalled for lack of a key component.

Semiconductor manufacturing is a spectrum and can vary greatly by technology and node size. The CHIPS Act opens up the funding, but stakeholders still need to collaborate to ensure a healthy and well-balanced supply chain to ensure the “full board” can be covered to deliver end products.

“Maybe it takes a CHIPS Act to drive holistic change,” Carrieres said. “Different things are going to drive change. This is an opportunity to think differently around a common problem.”

Among the CHIPS appropriations are:

  • $13 billion to the National Science Foundation will fund educational efforts involving science, technology, engineering, and mathematics.
  • $20 billion toward a new directorate for technology, innovation, and partnerships at the NSF. The directorate will accelerate domestic development of national and economic-security critical technologies, such as artificial intelligence, quantum computing, advanced manufacturing, 6G communications, energy, and materials science.
  • A CHIPS for America Workforce and Education Fund will be funded with $200 million over the next five years.


This article was originally published on EE Times.

Barbara Jorgensen is managing editor and co-founder of supply chain publication EPSNews, which was acquired by Aspencore in 2017. Barb has more than 28 years’ experience as a journalist, working for leading electronics industry publications such as Electronic Business, Electronic Buyers’ News (EBN) and EDN. Her focus areas include general business, electronics distribution, supply chain, trade and industry analysis.


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