'Smart' Chip Policies Needed to Reduce Supply Chain's ‘Vulnerabilities’: SIA
The U.S. should adopt “smart policies” to eliminate or reduce “vulnerabilities” in the global semiconductor supply chain “and enhance the U.S. economy, national security, and supply chain resilience,” the Semiconductor Industry Association told the Commerce Department’s Bureau of Industry and Security. Comments due Monday in docket BIS-2021-0011 will help shape recommendations to the White House on President Joe Biden’s Feb. 24 executive order to relieve supply chain bottlenecks (see 2103110054).
Though “geographic specialization” in semiconductor production “served the industry and its consumers well, it has also created potential vulnerabilities in the global value chain,” said SIA. The industry features more than 50 “points” across the value chain “where one region holds more than 65% of the global market share,” it said. About three-quarters of global chip manufacturing capacity is concentrated in China and East Asia, “a region significantly exposed to high seismic activity and geopolitical tensions and lack of fresh water and power,” it said.
Virtually all the world’s “highly advanced” semiconductor manufacturing capacity is based in Taiwan (92%) and South Korea (8%), “due in no small part to healthy incentives and government support from these host nations,” said SIA. More than 60% of the world’s “back-end” semiconductor assembly, packaging and testing capacity is in China and Taiwan, it said. “The U.S. lacks any large-scale, commercial state-of-the-art advanced packaging capability.”
The global value chain features “single points of failure” susceptible to “natural disasters, infrastructure shutdowns, or geopolitical conflicts and may cause large-scale interruptions in the supply of essential chips,” said SIA. “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.” The association fears those 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 needed to maintain the current pace of innovation.”
The smart policies the U.S. government will need to deploy to mitigate the multiple vulnerabilities should include “targeted investments to fill high-risk gaps,” plus collaborating with “allies and partners globally to strengthen supply chains,” said SIA. “The semiconductor industry needs targeted government policies and incentives that strengthen supply chain resiliency and expand market access while balancing the needs of national security.”
There’s “no one company or country that can achieve self-sufficiency in semiconductors,” said SIA. “Many U.S. allies share similar concerns that the semiconductor supply chain is particularly vulnerable to geographic concentration in parts of East Asia, especially Taiwan.” The U.S. government should work through existing “multilateral and plurilateral forums,” including the World Trade Organization and the Organisation for Economic Co-operation and Development, “to coordinate key semiconductor supply-chain related issues,” it said: Supply-chain resilience, cybersecurity, joint R&D, export controls, intellectual property protection, subsidies and market access barriers should top the list of priorities.
SIA urged “focused” attention on “competitive government incentive programs” to support domestic U.S. semiconductor research. The goal would be to “achieve a more diversified geographical footprint by building additional semiconductor and unique raw material manufacturing capacity in the U.S. and expanding the production sites and domestic sources of supply for unique and critical materials,” it said.