The world is currently facing a shortage of semiconductors – also known as microchips, due to bottlenecks in the manufacturing supply chain. Semiconductors are used in all parts of modern life, from phones to AI, and vehicles.
The Asia Pacific region manufactures over 60% of all semiconductors, making it the largest semiconductor manufacturer in the world. Asia Pacific’s dominance has created a dependence for many countries, including the US who have been importing semiconductors for many years.
The semiconductor supply chain is both extremely complex and globally interconnected, the production of a single computer chip often requires more than 1,000 steps passing international borders over 70 times. Due to its complexity, a shortage in semiconductors was predicted long before covid, but as the world emerged from lockdown, demand for electronics spiked, meaning the already struggling supply chain could not meet this demand.
In 2020, only 13% of all semiconductors created for US products were manufactured there, highlighting a gap in the US’s own tech supply chain. TheUS Semiconductor Industry Association (SIA), which includes the likes of IBM, Nvidia, and Intel, wrote a letter to President Joe Biden detailing policy suggestions to fix the current US shortage and prevent it from happening again. The group urged Biden and his administration to include “substantial funding for incentives for semiconductor manufacturing, in the form of grants and /or tax credits, and for basic and applied semiconductor research” in their recovery plan.
The US government has subsequently invested over USD$130 million into the domestic production of semiconductors since October 2020, and more are expected to come to establish more FABs (Semiconductor Fabrication Plants) in the country. The US government and US businesses are not the only parties interested in establishing more FABs, Asian companies such as Samsung have revealed plans to open a $17 million semiconductor plant and create 1,800 jobs in the US too.
What does this mean for your state?
The US government’s push to bring semiconductor manufacturing back into the US has meant that additional funding has been created for states to establish FABs. A state with good infrastructure, tax incentives, and a large available talent pool is well-positioned to attract investment.
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