Skeptics question the wisdom of subsidizing new U.S. fabs at the expense of next-generation chip technologies...
Lobbying efforts aimed at gaining federal funding and tax breaks to revive U.S. chip manufacturing are increasing in urgency as congressional conferees meet to consider funding levels and how research funds will be allocated.
Those efforts along with stiff U.S. export controls seek to blunt China’s drive for an indigenous chip industry with a counteroffensive designed to retool fabs, build new ones and advance chip manufacturing capabilities ceded to Asian manufacturers over the last several decades.
Despite bipartisan support for reviving U.S. chip manufacturing, observers note that research focused on next-generation chip technologies would be a better investment than subsidizing new U.S. fabs. The Pentagon’s Electronics Resurgence Initiative looks beyond Moore’s Law scaling, but is heavily focused on weapons.
Either way, legislation aimed at reviving the U.S. semiconductor sector and the industry lobbying campaign underscore a geopolitical reality: The American lead in chip technology is eroding.
Industry groups including the Semiconductor Industry Association (SIA) and the Information Technology & Innovation Foundation (ITIF) have stepped up their efforts in recent days to push proposals like the CHIPS Act across the finish line.
“The increasing expense, complexity and scale required to innovate and manufacture semiconductors means that no single nation or enterprise can go it alone,” concludes a report released by the Information Technology & Innovation Foundation.
“In the face of challenges from China, allied cooperation in semiconductors is critical,” added Stephen Ezell, ITIF’s vice president for global innovation policy and author of the report.
“With a reduced, shrinking manufacturing footprint, the U.S semiconductor industry would be challenged to stay at the forefront of further advances in manufacturing-processing technology, architectures and materials critical for developing the next generations of semiconductors that will make artificial intelligence or quantum computing possible,” SIA added in a separate study.
SIA counts 70 commercial chip fabs currently operating in the U.S. Those facilities account for an estimated 44.3 percent of domestic wafer capacity, much of it classified as “front-end” chip manufacturing. Still, U.S.-based fabs produce only 12 percent of global chip output, down from 37 percent in 1990.
SIA argues in its report that “robust federal incentives” would seed as many as 19 “major” semiconductor manufacturing facilities in the U.S. That would require U.S. manufacturing grants and tax breaks totaling as much as $50 billion, SIA asserted.
ITIF, meanwhile, advocates a collaborative approach among western countries. “Like-minded nations should come together to open trade and fair economic competition and collaborate in ways that collectively empower the competitiveness of their respective semiconductor industries,” Ezell said.
Some observers say the manufacturing emphasis is misguided.
“There’s no doubt that more financial incentives would encourage more onshore manufacturing,” said Chris Miller, assistant professor at the Fletcher School of Law and Diplomacy at Tufts University. “The question is whether that’s the right way of defining the goal.
“Clearly a stronger semiconductor manufacturing base in the U.S. would be good for the entire ecosystem. But if I had to allocate funds to promote the U.S. chip industry over the long run, it’s not clear that our marginal dollar is best spent on subsidies for fabs. “
Miller cites the American exodus from the DRAM market in the 1980s as an example. Rather than subsidizing American memory makers, companies like Intel Corp. exited the memory sector to focus on emerging market like microprocessors.
Intel and others “focused on higher-value products, and cemented several decades of U.S. chip dominance,” Miller noted. “When we think about bolstering the U.S. tech position, we need to consider where we have a competitive advantage.”
In a recent New York Times op-ed, Miller argued the Trump administration’s campaign to “decapitate” Chinese telecommunications equipment vendor Huawei Technologies is another sign of eroding U.S. chip prowess. “Washington’s leverage says more about America’s past success than its future trajectory,” Miller wrote.
Moreover, he warned, hardball trade tactics aimed at Chinese companies could backfire: “The campaign against Huawei works only because other countries rely on American technology,” Miller asserted. “Now they have an incentive to diversify.”