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Semiconductor Chip Industry: What's the Sitch?

Updated: Mar 15

The semiconductor industry is a vibrant ecosystem, and for the most part, it’s not homegrown. It’s heavily dependent on a complex, global network. There is a high cost to this: security issues, financial costs and economic resilience.

But what’s the big deal? Why are semiconductors so important?

The Semiconductor Industry Association names these chips the “Brains of Modern Electronics,” being “an essential component of electronic devices, enabling advances in communications, computing, healthcare, military systems, transportation, clean energy and countless other applications.” In other words, to make modern electronics work, we need semiconductor chips.

Despite their importance, semiconductor supply is decreasing. The shortage stems from the COVID lockdown. A long manufacturing process is needed to build these chips. This, combined with dependence on a far-reaching global supply chain, makes our electronics especially vulnerable to crises abroad.

With the risks in mind, the U.S. has proclaimed a new mission: bring semiconductors home.  

U.S. semiconductor manufacturing accounts for about 12% of the global total, a decrease from 37% 30 years ago. The five major semiconductor-producing nations are China, South Korea, Japan, Taiwan and the U.S. The semiconductor ecosystem rests mainly in East Asian countries.

That’s one of the reasons many Americans want to bring semiconductor manufacturing home. U.S. and China relations have become increasingly contentious, bringing the U.S. to question its dependency and trust in Chinese products.

Some argue the distrust spawns from the U.S. struggle for hegemony. Others point to increasing cyber attacks from China-based hackers and China’s deepening relationship with Russia. Perhaps both sides have important insights.

Either way, if Americans want to bring semiconductors home, they can’t do it alone. The new initiative for semiconductor chips needs to invigorate the global supply chain, not dilute it.

At this very moment, the U.S. is playing a game of catch-up on semiconductors. But how did we get into this situation? The U.S. was the place where semiconductors were invented, and it once dominated the industry. Why did this change?

The key word is outsourcing: either the boon or mortal folly of capitalism, depending on whom you ask. We shifted from a focus on domestic markets to foreign markets, decreasing our sense of innovation and increasing our reliability on distant countries. 

Problems have arisen from this shift. This is not to say isolationism or economic independence is the way to go, but we’ve allowed industries to enrich themselves while leaving U.S. workers behind. We must bring some of the industry back to reinvigorate ourselves, and we must do so without naively trying to abandon the global economy.

The CHIPS and Science Act provided the U.S. Department of Commerce with $52.7 billion to spur innovation in semiconductor research. With assistance from this act, the Taiwan Semiconductor Manufacturing Company is attempting to build plants in Arizona.

The act is also working in tandem with further, strategic partnerships abroad.

During a September visit to Vietnam, President Joe Biden announced that the “...U.S. State Department is partnering with the Government of Vietnam to explore opportunities to grow and diversify the global semiconductor ecosystem.”

This partnership symbolizes a new approach to the U.S. workforce and economy, one where we work with but are not as dependent on foreign countries: one where we fuel our domestic economy.

Still, we face obstacles. The challenges of meeting the pace of China, South Korea, Japan and Taiwan include establishing more semiconductor manufacturing plants and, especially, getting more STEM workers.

The lack of STEM graduates that stay in the United States is remarkably low, with about 80% of master's graduates and 25% of Ph.D. graduates leaving the country after graduation. We must reform immigration laws that deter students from working in the U.S. We should invest in STEM programs for children and young adults.

The global partnerships and domestic industry the U.S. seeks must innovate, create a pipeline of STEM workers and allow for the growth of U.S. resilience.

The opinions expressed in this article are those of the individual author.


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