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Editor’s note: This article first appeared in EETimes.
Chip makers 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. From a supply chain standpoint, said Peggy Carrieres, VP of global sales enablement and supplier development for distributor Avnet Inc., the effort should go well beyond securing a domestic supply of ICs.
“If you look at it from a holistic point of view,” she said, “the act acknowledges how important this technology is to the lifeblood of industry. 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, but 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 points 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
Avnet’s Peggy Carrieres
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 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 explained. “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,” said 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.
Fabs and more fabs
Chip makers 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 manufacturing 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 packaging and assembly.
IDC’s Simon Ellis
Experts are skeptical that the semiconductor supply chain can be duplicated on a national basis. “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 practices. “The supply chain has been intertwined for 50 years and it’s hard to see how that can be deconstructed.”
The CHIPS Act helps American companies look at the longer-term horizon, Carrieres said, such as alternative materials and chip stacking. “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,” stated John Mitchell, IPC president and CEO. “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.
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,” said Carrieres. “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.
“While the U.S. has proven more resilient than most, our supply chains remain strapped due to our dependence on production materials and suppliers hot-button regions,” said Mike Fitzgerald, VP of operations at Pure Storage. “In turn, we must recognize the need for portfolio-type risk management tactics, such as investing in more third-party fabrication plants and multi-geo sourcing across all tiers of the extended supply chain, including those well below the actual semiconductor production itself.”
Maybe it takes a CHIPS Act to drive holistic change, Carrieres concluded. “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 for 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 material science.
- A CHIPS for America Workforce and Education Fund will be funded with $200 million over the next five years.
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