In the era of digitalization, the demand for semiconductors has skyrocketed. As per the Semiconductor Industry Association (SIA), the semiconductor industry “shipped a record 1.15 trillion semiconductor units in 2021.” The total estimated value of these units was $555.9 billion. This exponential growth emphasizes the pivotal role of semiconductor industry, often referred to as the ‘brains of modern electronics.’ Over the past 50 years, they have enabled electronic gadgets to become quicker, smaller, and more reliable. They can now power smartphones and laptops.
In a similar vein, semiconductors are the brains behind contemporary electronics, allowing technologies essential to national security, economic success, and U.S. competitiveness in the world market.
State of the US Semiconductor Industry in the Recent Past
Countries all around the globe have been increasing government funding in an attempt to entice the growth of the semiconductor industry, innovation, and manufacturing within their borders as chip demand grows. To tackle this situation, the U.S. government took action in 2022. It passed the historic CHIPS and Science Act, which strengthened the nation’s supply chains, economy, and national security by providing industrial incentives and funding for semiconductor research.
Global corporations have reacted positively to the introduction of the CHIPS Act, announcing dozens of new semiconductor ecosystem projects in the United States that would need well over $200 billion in private capital. In addition to supporting hundreds of thousands of extra employment throughout the U.S. economy, these initiatives will generate tens of thousands of new jobs in the semiconductor ecosystem. Starting in 2023, the CHIPS Act is being implemented in earnest. The SIA aims to contribute positively to the law’s implementation in order to maximize its advantages for the US economy, national security, and supply chain resilience.
Introduction of the SIA-BCG Report
The Semiconductor Industry Association (SIA) and the Boston Consulting Group (BCG) joined forces on May 9th, 2024, to conduct a thorough analysis of the worldwide chip supply chain. According to this research, the capacity of domestic U.S. chip manufacturing is expected to rise thrice by 2032. Commencing in 2022 with the enactment of the CHIPS and Science Act, this noteworthy increase signifies an astounding 203% rise. Within this time frame, stakeholders expect this spike to represent the largest percentage increase globally, providing them with a credible and reliable projection.
Projected Growth and Global Impact of Semiconductor Industry
The “Emerging Resilience in the Semiconductor Supply Chain” study anticipates significant semiconductor industry growth in the United States. It predicts that by 2032, the US will account for 28% of the world’s capacity for advanced logic manufacture (below 10nm), a substantial increase from 0% in 2022. Furthermore, from 2024 to 2032, the United States is predicted to receive 28% of all capital expenditures (capex) worldwide, behind only Taiwan, which is slated to get 31%. According to the results, the United States would have only attained 9% of global capital expenditure by 2032 if not for the CHIPS Act.
Figure 1:Global semiconductor capacity increase by location
Industry Investments and CHIPS Incentives
It highlights how industry investments, supported by CHIPS incentives, have the potential to boost local chip supply chains and revive semiconductor manufacturing in the United States. It also describes legislative steps intended to strengthen supply chains, advance research & development and chip design, increase employment opportunities in the semiconductor industry, and guarantee that the CHIPS Act maximizes its advantages for the economic and national security of the United States, instilling confidence in its potential.
Risks and Recommendations for Policy Measures
Potential risks associated with industrial policies that unintentionally create bottlenecks and increase supply chain vulnerabilities. It’s important to be cautious of non-market-based investments that come from incentive programs and large-scale industrial policies, as these can lead to overconcentration or oversupply in certain parts of the semiconductor supply chain. Instead, government incentives should focus on promoting targeted, distributed, and market-based investments.
- Extend present incentives: By prolonging the terms of the CHIPS Act’s incentives, such as the advanced manufacturing investment credit, the United States should take action to fortify the semiconductor supply chain even further.
- To encourage more of this crucial stage of manufacturing to take place in the United States, policymakers should extend the CHIPS tax credit to include chip design and increase incentives for important areas.
- Expand the STEM talent pipeline: In order to support the expanding semiconductor sector and the country’s overall economy, America has to produce a skilled labor force that includes engineers, computer scientists, and technicians. The United States needs to enact laws to strengthen the workforce development initiatives the sector has long undertaken, increase the number of STEM graduates in the country, and attract and keep more of the world’s best scientists and engineers.
- Invest in research to keep the United States at the forefront of technology: To keep the United States at the forefront of technology, the country should keep funding the research initiatives approved by the Science Act and CHIPS Act.
- Keep accessibility to international markets: Maintaining access to international markets is essential to the U.S. semiconductor industry’s competitiveness as well as its ability to make significant investments in Research and Development.
Global Efforts to Enhance Semiconductor Resilience
The analysis also highlights the cooperative efforts between businesses and governments to strengthen resilience in the semiconductor sector. For instance, the U.S. CHIPS Act includes an advanced manufacturing investment tax credit in addition to USD 39 billion in incentives for the semiconductor industry. Comparably, China launched the third phase of its Integrated Circuit (IC) Industry Investment Fund, while the European Union launched its version of the CHIPS Act. In addition, nations such as Taiwan, Korea, Japan, India, and others have implemented other incentive schemes. Furthermore, businesses have made significant investments in both established and developing areas. 
Figure 2: Advanced Logic Chip Production Market Share
Economic Impact and Job Creation
According to the analysis, the semiconductor sector’s capital expenditure (capex) is predicted to increase significantly in the coming years, from USD 720 billion in the previous decade to around USD 2.3 trillion between 2024 and 2032. Although there has been a noticeable improvement in supporting semiconductor manufacturing in the United States, the research emphasizes the need for more government policy initiatives to resolve lingering supply chain vulnerabilities and guarantee further expansion of fabrication capacity. Additionally, given the increasing level of global competition, steps must be taken to strengthen American competitiveness in advanced logic, design, electronic design automation (EDA), and equipment.
Important investment announcements have been sparked nationwide by the incentives offered by the CHIPS Act. Semiconductor businesses have launched over 80 new projects in 25 states since the Act’s enactment, bringing the total amount of private investments to around USD 450 billion. These initiatives are expected to create hundreds of thousands of new jobs across various sectors of the U.S. economy, in addition to generating over 56,000 jobs within the semiconductor ecosystem. The United States must address the question of long-term planning.
Why does the US need to triple its semiconductor resources by 2032?
Economic Security and Growth:
With a major contribution to GDP and jobs, the semiconductor sector is essential to the U.S. economy. The COVID-19 epidemic has made the worldwide chip shortage worse, bringing attention to the financial risks involved with largely depending on foreign semiconductor manufacturing. For instance, disruptions in chip supply chains have caused primary production halts in the United States automotive and other sectors, impacting economic development and stability.
National Security:
Semiconductors are essential for applications related to the military and other aspects of national security. The United States may lessen its reliance on foreign suppliers—especially those from areas that might present geopolitical risks—by boosting home production. Maintaining national security and the operational preparedness of military systems depends on a steady and secure supply of semiconductors.
Technological Leadership:
The United States must make investments in cutting-edge semiconductor manufacturing capabilities to preserve and grow its position as the world leader in technology. This includes being a leader in manufacturing state-of-the-art chips smaller than 10 nm, which are essential for developing technologies like advanced computing, 5G, and artificial intelligence. The CHIPS and Science Act offers significant incentives for domestic manufacturing and research and development to increase U.S. competitiveness in these high-tech sectors.
Supply Chain Resilience:
To reduce the risks associated with concentrated manufacturing in other regions of the globe, we can achieve this by diversifying and fortifying the growth of the semiconductor industry and its supply chain in the United States. The CHIPS Act and related laws in the EU and Asia are part of a larger initiative to strengthen the resilience of the global supply chain, making the sector more resilient to shocks in the future.
conclusion
In conclusion, the CHIPS and Science Act-driven ambitious goal by the United States to treble its semiconductor manufacturing capacity by 2032 is an important step toward strengthening national security, economic security, and technical leadership. This program aims to address the vulnerabilities that the COVID-19 epidemic brought to light, emphasizing the dangers of relying too much on foreign semiconductor fabrication.
The United States may improve national security by securing a consistent supply of chips needed for various sectors, including the military and automobiles, by greatly expanding its chip manufacturing sector. Furthermore, this expansion will put the United States at the forefront of developing cutting-edge technologies, especially in crucial fields like 5G and AI. The SIA-BCG study advocates for policies that support Research and Development, cultivate a skilled workforce, and preserve access to international markets, emphasizing the significance of ongoing and enhanced incentives to retain this momentum. Even though the CHIPS Act has already significantly increased private investment and created jobs, we need to continue making efforts to ensure the competitiveness and resilience of supply chains in the long run. Overall, these calculated actions will support global stability and technological innovation by boosting U.S. chip output and stimulating the semiconductor industry.
Fatima Razzaq is a freelance technical writer who served as an electrical engineering lecturer at Air University—a federally chartered public sector research university in Pakistan. Razzaq holds a Bachelor’s degree with distinction in electronic engineering from Ghulam Ishaq Khan Institute of Engineering Sciences and Technology (GIKI) and a Master’s degree in Sustainable Transportation and Electrical Power Systems from the University of Nottingham, Universidad de Oviedo, and La Sapienza University of Rome. Razzaq’s diverse work experiences in academia and industry continue to inform her prolific technical writing journey in the areas of electrical engineering, storage mechanisms, power electronics, electric vehicles, energy, and related topics.
