Chips Act Funding No Chipmaker Boondoggle, Says SIA CEO
Semiconductor Industry Association CEO John Neuffer is unfazed by criticism that fully funding the Chips Act to promote long-term leadership and resilience in U.S. chipmaking -- as last week’s White House supply chain report recommended (see 2106080008) -- will become a handout to wealthy chip companies, not the incentive the industry seeks to boost U.S. standing in global semiconductors, he told an Information Technology and Innovation Foundation webinar Wednesday.
The U.S. Innovation and Competition Act (S-1260) cleared the Senate last week by “a very strong bipartisan vote” with $52 billion in U.S. chipmaking and R&D incentives (see 2106090007), said Neuffer. “Now the battle goes to the House, and we’re very optimistic that something good is going to come out of that, so that the president will have a bill to sign.”
The way that Chips Act funding in S-1260 is structured, “sure, there’s going to be grants involved, but there’s going to be far more investments required from private sector players,” said Neuffer. “These are solid companies that have to have a lot of capital to be able to do these kinds of investments.” The most “leading-edge” fabs cost $30 billion each to build, he said. “That’s a couple of aircraft carriers.” Domestic chipmaking will “tip” further into the “abyss in terms of our manufacturing unless the U.S. government steps in,” he said.
It’s a “critical fact” that “manufacturing capacity demand” will increase 56% in the next decade “because of the explosion in the demand for chips,” said Neuffer. “We know there’s a huge demand for chips coming at us. It’s not a question of whether these fabs should be built, because there’s market demand for them. It’s a question of where they’re going to be built. Do we want more of them built here, or do we want more of them built overseas?”
SIA is “very excited the White House is looking at the importance of the semiconductor supply chains,” said Neuffer of the administration's 100-day-review report. “I can tell you this was not always that way, and a lot of key issues were not being looked at and addressed” by previous administrations, he said. “We totally agree with the key thrust of the report,” that semiconductors are a “strategic industry,” but fraught with “significant vulnerabilities that need to be addressed, that’s for sure,” he said.
Industry’s top vulnerability is that “we just don’t manufacture enough chips here in the U.S. anymore,” said Neuffer. The U.S. owns 12% of global chip production capacity, down from 37% in 1990, he said. “If no steps are taken to address this shortfall, in another few years we’ll be down to 10%.”
No policymaker should “adopt a goal of decoupling” U.S. chip production from global supply chains that are heavily concentrated in East Asia, said Neuffer. A September SIA-Boston Consulting Group report found that “decoupling our industry and building walled-off supply domestically would cost a trillion dollars, take years and drive the price of chips up 35 to 65%,” he said. “U.S. companies sell 80% of their chips to overseas markets. Bottom line, we need those supply chains and global markets to stay open. These supply chains have been a central reason behind our success over the past five or six decades.”
Governments around the world decades ago began “to pump massive incentives into our sector to lure companies” to build fabs in their countries, said Neuffer. “Our government has not been in that game, and that’s really the big reason why the U.S. is not a great place to be manufacturing chips right now.”