SIA urges Federal chip investment to boost supply chain | Automotive Industry News

America’s Semiconductor Industry Association (SIA) has submitted comments to the US Department of Commerce in response to President Biden’s Executive Order on securing critical supply chains.

The submission highlights the importance of the global semiconductor supply chain to maintaining a strong chips industry and identifies a range of vulnerabilities in the supply chain.

As the semiconductor shortage crisis worsens in the US, the White House is preparing to host a virtual meeting to discuss solutions to supply chain issues, which are disrupting US industrial output, particularly in the automotive sector.

The SIA submission also urges the Biden administration and Congress to enact Federal incentives for domestic chip production and investments in chip research to ensure the long-term strength and resilience of America’s semiconductor supply chain.

“Semiconductors are foundational to America’s economy, national security, health care system and digital infrastructure and they will be critical for US leadership in the essential technologies of the future, including artificial intelligence, quantum computing and advanced wireless communications,” said SIA president and CEO, John Neuffer.

“We appreciate President Biden’s focus on ensuring the strength and resilience of America’s semiconductor supply chains. As part of this effort, we look forward to working with the Biden administration and Congress to enact federal investments in domestic chip production and innovation so more of the semiconductors our country needs will be manufactured on US shores.”

SIA’s comments include the following highlights:

• About 75% of semiconductor manufacturing capacity, as well as many suppliers of key materials, are concentrated in China and East Asia, a region exposed to high seismic activity, geopolitical tensions and lack of fresh water and power
• 100% of the world’s highly advanced (below 10 nanometers) logic semiconductor manufacturing capacity is currently located in Taiwan (92%) and South Korea (8%), due in no small part to healthy incentives and government support from these host nations
• There are more than 50 points across the value chain where one region holds more than 65% of the global market share. Some of these single points in the value chain could be disrupted by natural disasters, infrastructure shutdowns, or geopolitical conflicts and may cause large-scale interruptions in the supply of essential chips
• In addition, geopolitical tensions may result in trade restrictions that impair access to crucial providers of essential technology, unique raw materials, tools, and products that are clustered in certain countries. Such restrictions could also restrict access to important end markets, potentially resulting in a significant loss of scale and compromising the industry’s ability to sustain the current levels of R&D and capital intensity

To address supply chain vulnerabilities, SIA’s comments call on government to:

• Enact targeted Federal investments in domestic semiconductor manufacturing and research
• Guarantee a level global playing field, as well as strong protection of IP rights
• Promote global trade and international collaboration on R&D and technology standards, particularly with allied countries
• Step up efforts to address the shortage of talent through further investment in science and engineering education, as well as immigration policies that enable leading global semiconductor clusters to attract world-class talent; and
• Establish a clear, stable and targeted framework for any controls on semiconductors that avoid broad unilateral restrictions on technologies and vendors, while establishing market incentives for more assured sources for our military and critical infrastructure needs

These vulnerabilities and required government actions to address them are also highlighted in a new study by SIA and the Boston Consulting Group, titled: Strengthening the Global Semiconductor Supply Chain in an Uncertain Era.

The SIA adds the share of global semiconductor manufacturing capacity in the US has decreased from 37% in 1990 to 12% today.

In January, the American Congress enacted the CHIPS for America Act as part of the FY 2021 National Defense Authorization Act (NDAA). The SIA says the new law calls for incentives for domestic semiconductor manufacturing and investments in chip research, but funding must be provided to make these provisions a reality.

In February, the SIA board of directors, and later a coalition of business leaders led by the Association, called on President Biden to work with Congress to fund semiconductor manufacturing and research initiatives as part of his infrastructure plan.

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