Executive Order Paves Way for $37bn to Boost U.S. Chip Capacity
President Biden on Wednesday signed, as expected, an executive order that paves the way for allocation of $37 billion federal government investment to address the chip supply shortfall.
Industry reaction has been positive with both the Semiconductor Industry Association (SIA) and the Information Technology and Innovation Foundation (ITIF) immediately issuing statements showing relief that the President sees the industry as crucial to the nation.
In his speech at the signing of executive order on supply chains, President Biden said, “This is about making sure the United States can meet every challenge we face in this new era — pandemics, but also in defense, cybersecurity, climate change, and so much more. And the best way to do that is by protecting and sharpening America’s competitive edge by investing here at home.”
He highlighted how the shortage of semiconductors had caused delays in production of automobiles that also resulted in reduced hours for American workers. Marveling at the chip he held up, he said, “This semiconductor is smaller than a postage stamp, but it has more than 8 billion transistors —10,000 times thinner than a single human hair in this one chip. These chips are a wonder of innovation and design that powers so much of our country, enables so much of our modern lives to go on — not just our cars, but our smartphones, televisions, radios, medical diagnostic equipment, and so much more.”
Addressing the issue of shortages, he added, “We need to make sure these supply chains are secure and reliable. I’m directing senior officials in my administration to work with industrial leaders to identify solutions to this semiconductor shortfall and work very hard with the House and Senate. They’ve authorized the bill, but they need $37 billion, short term, to make sure we have this capacity. We’ll push for that as well. But we all recognize that the particular problem won’t be solved immediately.”
The President said that his Administration will in the meantime reach out to allies, semiconductor companies, and others in the supply chain to ramp up production to help resolve the bottlenecks. “We need help to stop playing catch up after the supply-chain crisis hit. We need to prevent the supply chain crisis from hitting in the first place. And in some cases, building resilience will mean increasing our production of certain types of elements here at home. In others, it’ll mean working more closely with our trusted friends and partners, nations that share our values, so that our supply chains can’t be used against us as leverage.”
Part of this will involve identifying and building surge capacity that can quickly help ramp up production. He said, “And it will mean investing in research and development, like we did in the ’60s, to ensure long-term competitiveness in our manufacturing base in the decades ahead.”
The first part of the order is an immediate 100-day review of the supply chain for four vital products essential to protecting and strengthening American competitiveness. This covers semiconductors, key minerals and materials, pharmaceuticals, and advanced batteries like those used in electric vehicles. The second part is a long-term review of industry over the next 12 months to identify policy recommendations to fortify the supply chains at every step, and to start implementing those recommendations right away. “We’re not going to wait for a review to be completed before we start closing the existing gaps,” the President added.
A positive industry response
The industry clearly welcomed the order. The SIA released a statement from Bob Bruggeworth, president, CEO & director of Qorvo and 2021 SIA board chair. SIA represents 98 percent of the U.S. semiconductor industry by revenue. He said:
“We welcome today’s executive order and stand ready to work with the Biden administration to ensure the strength and resilience of America’s semiconductor supply chains. As part of this effort, we urge the president and Congress to invest ambitiously in domestic chip manufacturing and research. Doing so will ensure more of the chips our country needs are produced on U.S. shores, while also promoting sustained U.S. leadership in the technology at the heart of America’s economic strength and job creation, national security, and critical infrastructure.”
The ITIF, a think tank for science and technology policy, also released a statement from its vice president for global innovation policy, Stephen Ezell, who said:
This executive order sends an important signal that the Biden administration is committed to strengthening the resilience and security of the supply chains that underpin U.S. competitiveness in advanced industries such as semiconductors, pharmaceuticals, batteries for electric vehicles, and rare-earth elements. Recent semiconductor shortages affecting other strategically important industries underscore the need to get supply chain policy right.
It’s important to investigate supply chains to find where advanced industries may face critical dependencies, vulnerabilities, and gaps. A thorough strategic review will show where trade rules need to be strengthened, and where we need to bolster domestic sources of supply.”
It’s not just one way though, as Ezell points out the need for understanding reciprocity in the industry globally:
“To be effective, the review also must recognize there are reciprocal benefits from global supply chains for advanced technology industries. For instance, players in international supply chains are important customers for manufacturing equipment from the U.S. semiconductor industry, and they provide foundry capacity that supports the business models of U.S. fabless semiconductor producers.”
Ezell added that the executive order is one of many steps the administration and Congress should take to bolster U.S. competitiveness in advanced-technology industries. “America also needs comprehensive innovation and competitiveness strategies to spur needed investments in research and development, infrastructure, and skills. Otherwise, the United States will be at a competitive disadvantage versus China and other rivals.”
Impact of investment
According to a report published by BCG last year, global manufacturing capacity is forecasted to increase by more than 50% from 2020 to 2030, presenting a market opportunity for the U.S. to attract a higher share of the new future fabs. According to its analysis, a $20 billion to $50 billion federal-government program of additional grants and tax incentives for new state-of-the-art fabs built in the next decade would be effective in reversing the last 30 years’ declining trend in US semiconductor manufacturing.
Depending on the size of the program, the US could potentially double or triple its participation in the new additional semiconductor manufacturing capacity that still needs to be developed globally to meet the expected growth in market demand, achieving a 14% to 24% share, as opposed to just the status quo’s 6%.
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