Resources | Market Trends | March 28, 2022

Can the US Revive Semiconductor Manufacturing – and Will It Matter?

Supply chain woes are leading the US and other countries to reinvest in domestic production.

Supply chain woes are leading the US and other countries to reinvest in domestic production.

Around the world, supply chains are slowing down because of a shortage in semiconductor chips, the vital electronic components that serve as the digital brains of everything from automobiles to washing machines. 

That’s why it’s taking months to get new cars shipped to dealership lots, and why it’s a feat to score the hottest video game consoles or grab the latest smartphone and tablet models.

Demand for semiconductors is hot. According to the Semiconductor Industry Association, global semiconductor industry sales hit $50.7 billion in January 2022, up 26.8% year over year (YoY). C2FO data, based on millions of invoices loaded into its platform, shows semiconductor spend was up 18.2% in March on a YoY basis.

There are several compounding factors that are driving the shortage in semiconductors: pandemic lockdowns of factories and seaports, more people clamoring for consumer electronics, and fires and extreme weather impacting semiconductor plants. For example, extreme droughts last year in Taiwan, a major center for semiconductor manufacturing, further exacerbated supply chain issues. 

The Russian invasion of Ukraine is projected to further impact the semiconductor supply chain because Ukraine is responsible for 50% of the world’s neon gas, which is used in the manufacturing process, Wired reports. As a result, prices for neon gas are expected to increase, which could create a ripple effect that both restricts availability and drives prices even higher for some electronics.

Because of these pressures, countries such as India and Canada are scrambling to strengthen their semiconductor supply chains by building up their own homegrown industries for chipmaking, the majority of which happens in Taiwan.

The United States is no different. There has been a slew of recent activity, both public and private, to boost the chip industry. What are the potential benefits — and pitfalls — of this push? Let’s take a closer look. 

How we got here

While Asia leads as a producer of semiconductors, the technology was pioneered by American engineers and companies, from Bell Telephone Laboratories’ development of the transistor in 1947 to the creation of the microchip in 1958 by engineers at Texas Instruments and Fairchild Semiconductor Corp.

“America invented these chips. And federal research and development led to the creation of these chips — taxpayer dollars. These chips helped power NASA’s mission to the moon,” said President Joseph Biden at a speech on Jan. 21, 2022.

“And federal investment helped bring down the cost of making chips — to build a market and an entire industry,” Biden continued. “As a result, over 30 years ago, America had about 40 percent of the global production. But since that time, something happened. American manufacturing — the backbone of our economy — got hollowed out. Companies moved jobs and production overseas, especially from the industrial Midwest.”

The Semiconductor Industry Association (SIA), an organization devoted to the chip business in America, has said that the country owns only 12% of the global semiconductor manufacturing capacity. The erosion of American competitiveness in semiconductors happened due to other countries offering manufacturing incentives.

“Additionally, federal investment in semiconductor research has been flat as a share of GDP, while other governments have invested substantially in research initiatives to strengthen their own semiconductor capabilities, and existing US tax incentives for R&D lag those of other countries,” the SIA reported.

Public efforts to boost semiconductors


The latest and biggest effort to boost the US supply of semiconductor chips is the $52 billion CHIPS for America Act, which Congress passed in January 2021. 

CHIPS, an acronym for Creating Helpful Incentives to Produce Semiconductors, is a series of initiatives and programs to increase research, development and manufacturing of semiconductors in the country, according to the Center for Strategic & International Studies. It was passed as part of the National Defense Authorization Act for Fiscal Year 2021.

The CHIPS Act also calls for:

  • Federal grants to public institutions and private companies, whether acting alone or in a public-private partnership. Grantees would use the money to build, expand or improve semiconductor manufacturing facilities. 

  • A fund for the buildup of “secure semiconductors and secure microelectronic supply chains.” 

  • A subcommittee to create a nationwide strategy for an expanded and robust semiconductor industry and to set goals for research and development. 

  • The establishment of a National Semiconductor Technology Center and other programs for research, development and manufacturing.

Both the House and Senate have passed legislation to appropriate money for the act, but differences are still being hammered out in committee, according to CNET. Then the legislation will finally land on President Biden’s desk for a signing.

The FABS Act

In March 2022, Congress introduced the Facilitating American-Built Semiconductors (FABS) Act, which would “establish an investment tax credit to incentivize semiconductor manufacturing, design, and research in the United States,” according to the SIA.

“Given their importance, securing the United States’ supply of these chips is an economic and national security imperative,” trumpeted a Lawfare op-ed by Emily Kilcrease, senior fellow and director of the Energy, Economics and Security Program at the Center for a New American Security, and Sarah V. Stewart, executive director of Silverado Policy Accelerator.

Private efforts to boost semiconductors

Along with legislation, private companies are working to boost domestic production of semiconductors.


Earlier this year, Intel revealed its plans to build two computer chip plants near Columbus, Ohio. Intel will be pouring in $20 billion for the construction of these plants, which are slated to “employ 3,000 workers at an average salary of $135,000 per year,” The Columbus Dispatch reported. And that doesn’t include 7,000 construction jobs and 10,000 indirect jobs associated with the program. 


TSMC (Taiwan Semiconductor Manufacturing Co.) is building a new $12 billion semiconductor plant in north Phoenix. TSMC is an Apple partner, according to AppleInsider. This is in addition to Intel building two plants for $20 billion in Chandler, Arizona. 


Samsung recently announced its plans to build a $17 billion semiconductor facility in Taylor, Texas, just outside of Austin, which is already a regional tech hub. Semiconductors in that plant will be slated for smartphones, high-performance computing and artificial intelligence technologies.

Balancing benefits against potential pitfalls

Industry experts and policy leaders are understandably excited about all this development: It’s a chance for America to reclaim its crown as a major semiconductor manufacturing hub, grow high-paying jobs and strengthen the resilience of supply chains for chips.

Semiconductors will not only go into consumer electronics but also into technologies for national security, such as top-flight fighter jets and artificial intelligence for information gathering.

But there are potential pitfalls in expanding the domestic capacity for semiconductor fabrication.

Environmental impact

Chip fabrication requires enormous amounts of water, as seen in Taiwan’s water woes. Some of these new plants are being built in areas with arid climates or drought issues. To allay these concerns, TSMC said it will build “an on-site water treatment plant capable of recycling up to 90 percent of the water used in the fabrication process,” Built In reports.

Higher costs

Labor costs are going to have an impact as well. Chip engineers in Taiwan make substantially less, $35,200 versus the average of $118,300 for a semiconductor engineer in America, according to Built In. Coupled with a labor shortage in the semiconductor industry, American-made chips will be more expensive, and thus certain electronics will be pricier, too. 


Another concern is that these new semiconductor plants won’t be open until after this chip shortage is over, which is projected to end in late 2022. The TSMC move-in date for its Arizona location is March 2023. The Intel Ohio plants are slated to start churning out chips in 2025. This is on top of the delayed appropriations for the CHIPS Act.

“Some might think that today’s shortage is a one-off,” a recent Deloitte report stated. “As long as we don’t have a once-in-a-century global pandemic, a massive fire at a key Japanese chip plant, a Texas freeze, and a ship stuck in the Suez Canal—all coinciding—the next shortage couldn’t possibly be as severe.”

But some industry experts think more shortages will occur due to climate change, recessions and transportation disruptions. Thus, there’s still a need for building manufacturing capacity and finding alternative sources for materials such as neon gas.

Asia will continue to produce the majority of chips in the near future.

The bottom line

No matter what happens in the future, securing the supply chain for semiconductors will remain a key strategic focus for many countries, with the potential for the industry’s big players to be disrupted by new entrants. Semiconductors are so important that every nation needs to ensure a steady supply chain for this critical technology.

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