The U.S. Aims to Become Major Global Competitor in Microchip Manufacturing

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As part of its aim to compete with China’s global green energy and clean technology
dominance, the U.S. government has big plans for the future of American microchip
manufacturing. Public and private spending in the sector has increased significantly over the last year and a half, while Biden looks to strengthen regional supply chains. Further, some states, such as Texas, are backing homegrown microchip production in a big way, aiming to establish themselves as clean tech hubs as the green transition accelerates.

Private Investment in Microchips

Several tech companies have announced major funding into the microchip industry over the
last year. In September, Intel pledged to invest at least $20 billion in two new
semiconductor-producing facilities. Then, in October, Micron Technology launched its new
manufacturing site in Syracuse, N.Y., with plans to spend around $20 billion by 2030. And
just before the end of the year, Taiwan Semiconductor Manufacturing Company announced
plans to invest $40 billion in the sector, constructing a second new factory that produces
advanced chips.

In total, 35 companies across the U.S. have together pledged to invest almost $200 billion in the microchips industry since 2020. Texas, Arizona and New York are just a few of the states backing the rapid expansion of the sector. And it’s not just private companies investing in Microchips, with the Biden administration offering around $76 billion in grants, tax credits and other subsidies to encourage domestic production, as part of an industrial policy initiative. Biden’s CHIPS and Science Act contributes further to the sector, providing $231 billion for the construction of chip manufacturing hubs across the country. This is part of a larger strategy to boost the U.S. manufacturing industry and strengthen regional supply chains to boost national security and counter China’s dominance across several industries.

Countering China and Taiwan’s Dominance

At present, Taiwan is one of the world’s biggest microchip manufacturers, contributing 22%
of the world’s microchip production and over 90% of advanced chip production. As tensions
have built in recent years over China claims of the territorial rights of Taiwan, the U.S. is growing increasingly afraid of supply chain disruptions in the event of conflict. In addition, China has increased its global dominance in several areas of clean tech, in support of its massive green energy push.

During and following the Covid-19 pandemic, the U.S. reliance on China for a wide range of products became clear, particularly as China halted production across several industries to prevent the spreading of the virus. This has encouraged the U.S. to strengthen its regional supply chains, to ensure that any future disruptions to global supply chains do not completely interfere with industrial growth and consumer access to products, such as electronics and electric vehicles. Further, it is of geopolitical significance, as the U.S. seeks to counter China as a global power and boost its self-sufficiency across a range of industries.

technology manufacturing microchipTraining Needed to Fill the U.S. Skills Gap

As the U.S. increases its investment in the microchips industry, there are concerns that the
country lacks the talent required to run new facilities. For example, Taiwan Semiconductor
Manufacturing Company was forced to delay production at its $40 billion Arizona facility
due to a lack of skilled workers in the region. TSMC Arizona President Brian Harrison stated, “We’re still looking for more qualified skilled tradespeople across the board… We are
installing our unique-to-the-United-States and extremely advanced pieces of equipment.”
Harrison added, ″[U.S. workers] just don’t have experience on these specific tools and
techniques.” The company was, therefore, looking to bring skilled workers from Taiwan to
run the plant. This shows the need to fund training programmes and university degrees
specialising in semiconductor engineering, to ensure that U.S. workers can be trained in the
field and fill the thousands of positions that are likely to be created over the next decade.

State-Backed Projects

In addition to national investment, some states are backing the development of the
microchip industry to become clean tech hubs, as the green transition advances. Texas, for
example, announced it would be investing $1.4 billion into microchip research and
manufacturing initiatives to attract new investment, federal grants and create high-value
jobs. In June last year, Gov. Greg Abbott approved the Texas CHIPS Act, which provides the
Texas Semiconductor Innovation Fund.

This month, the White House announced plans to provide $162 million in federal grants to
the firm Microchip Technology, which is based in Arizona – another state aiming to become
a microchip manufacturing hub. Commerce Secretary Gina M. Raimondo stated, “Today’s
announcement with Microchip is a meaningful step in our efforts to bolster the supply chain
for legacy semiconductors that are in everything from cars to washing machines to
missiles.”

The rapid expansion of the U.S. microchips industry over the last 18 months reflects a
significant boost in both public and private funding, supported by federal climate and
industrial policies. As the U.S. continues to invest in the sector and develop its regional
supply chains, the country is expected to become a major competitor against China and
Taiwan’s dominance in the sector to enhance energy security and support a green
transition.

Felicity Bradstock is a freelance writer specializing in Energy and Industry. She has a Master’s in International Development from the University of Birmingham, UK, and is now based in Mexico City.

 

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