The Biden Administration Pledges to deal with the Semiconductor Shortage
Early on Thursday, a group of US chip designers and manufacturers sent instructions towards the White House, asking that the government include “substantial funding for incentives for semiconductor manufacturing” included in the overall COVID-19 economic recovery plan. The Biden Administration has pledged to take action to remedy the problem by “identifying choke points in supply chains.” President Biden will sign an executive order directing a government-wide review of supply chains for critical goods.
Both the request and the Biden Administration’s response are mainly grandstanding. There is no practical method in which any action taken by the Biden Administration will have a near-term impact on silicon supplies. Increasing foundry capacity takes months to years, not weeks. TSMC has stated that although it'll allocate more space for automotive production, it will be taking that space from some other clients. The leading-edge foundries are shipping every wafer that they'll.
According towards the 21 CEOs who signed the letter, including those representing Intel, AMD, Micron, and Qualcomm, the main reason the United States has not retained a bigger share from the global chip manufacturing marketplace is because “the governments in our global competitors offer significant incentives and subsidies to attract new semiconductor manufacturing facilities, while the U.S. doesn't.” This is actually the supposed explanation for why the United States manufactured 37 percent of the world’s semiconductors in 1990, but simply 12 % today.
This is ridiculous twaddle. Samsung has literally just proposed creating a foundry in Austin. To acquire this grand act of corporate benevolence, it wants the county at hand on the 20-year 100 % tax abatement. It wants the town of Austin to provide a 50 percent abatement over the same time period, for a total value of over $800 million dollars. Not content with that, Samsung also wants to be excused in the estimated $252 million it would pay in class taxes over the same period. Whether it succeeds, texas is going to be accountable for creating the shortfall to the school district, leaving taxpayers literally responsible.
The US authorities might not, as a rule, provide enormous incentive packages. That doesn’t alter the proven fact that Samsung feels perfectly fine requesting on the billion dollars in tax relief at any given time when it earned a lot more than $34 billion in profit the previous year. Intel also set revenue records last year. It might be correct that other countries provide aggressive support for silicon manufacturing in the federal level, but silicon manufacturers clearly don't have any qualms about demanding special treatment.
There are absolutely things the Biden Administration could do to encourage greater semiconductor manufacturing in the usa, but simplistically tying the stop by US semiconductor share of the market towards the presence or absence of government subsidies isn’t persuasive. This chart of innovative foundries over time is useful:
Back at 90nm, when the cost of advancing to a different node was far smaller and chip designs cost you a fraction of the items they are doing today, there were much more companies around the innovative — and most of them weren’t in america. Of the 18 companies indexed by the 90nm column, only Freescale, Texas Instruments, IBM, AMD (GlobalFoundries) and Intel were American companies. Just five, from 18 firms — and that was nearly twenty years ago.
The reason the United States makes up about just 12 percent of chip manufacturing today is because partly since the first and most successful pure-play foundry was founded in Taiwan. When mobile chip designers like Qualcomm needed anyone to manufacture their chips, they considered the likes of TSMC and Samsung. The subsequent explosion in mobile SoCs and today AI and edge processors has favored the countries where massive pure-play foundries were established. Intel tried to adopt the foundry model and collect its own stable of customers, but the effort was unsuccessful and the company might have quietly abandoned it.
The reason you see companies leaving the key edge with every generation is twofold. First, the price of new foundry upgrades and chip designs rises every generation. Not all types of transistors take advantage of new nodes, and never all chips sell in high enough volumes to warrant node transitions. Lots of information mill like GlobalFoundries: From the innovative and earning a tidy profit.
The second reason would be that the number of customers available at a node has historically shrunk in one node to another. This may have changed recently, because of the sudden influx of spending from a lot of various AI companies propped up with VC dollars, however for the majority of the past two decades, fewer and fewer companies have jumped to the innovative each and every generation. With fewer customers available, higher costs, higher design costs, and smaller gains from each passing generation, we’ve seen repeated waves of consolidation in the foundry industry. When GlobalFoundries announced it had been leaving the key edge not too long ago, it didn’t blame deficiencies in subsidies. It blamed a lack of customers as well as an inability to result in the math work when AMD was its only public big-name 7nm customer.
If the Biden Administration can find supply chain bottlenecks it may address, like boosting the supply of raw materials used to manufacture components, that would be useful, however the possibility of a near-term improvement to the situation is most likely nil. Building new factories takes time. Bringing new capacity online needs time to work. There aren't any quick solutions in semiconductor manufacturing, regardless of how much the auto industry squawks to Congress.