An Update on the U.S. Semiconductor Industry

 August 4th, 2022 |   By Area51 Electronics |   0 Comments

The semiconductor chip shortage that has plagued supply chains beginning in 2020 and have lasted through this year is expected to linger into 2022, and possibly longer, most industry analysts agree. The COVID-19 pandemic has caused shortages across industries ranging from healthcare equipment, to trampolines, to paper, while demand for semiconductor-equipped technologies has only increased.

Semiconductors & The Pandemic

Semiconductors are often described as the “brains” of electronic devices, necessary for products like automobiles, computers, and even coffee makers. Demand for these devices that empower work-from-home and school-from-home capabilities has caused a significant soar in demand since the COVID-19 pandemic began.

Chips have not only been integral for consumers to continue working and attending school from home, but also empowered the development of life-saving treatments and vaccines. “Semiconductors have been crucial to the pandemic response and the recovery of the global economy,” states the 2021 State of the U.S. Semiconductor Industry report released by the Semiconductor Industry Association (SIA).

The semiconductor shortage began in 2020, where demand for chip-enabled products significantly increased during the pandemic. And most experts foresee the shortage lingering into 2022. While lockdowns at manufacturing facilities have played a role in halting supply, this shortage has caused industry-leaders, Congress and the White House to address other supply chain challenges that have surfaced as a result.

Chipping Away at U.S. Manufacturing

According to the SIA, this shortage has increased the awareness regarding the importance of America’s semiconductor supply chain, highlighting vulnerabilities within that supply chain along with the fact that chip manufacturing has largely moved away from U.S. shores and are produced overseas. There’s a decreasing share of global front-end fab capacity fueled by incentives and subsidies provided by foreign governments that far outstrip similar incentives in the U.S., the SIA report states.

“The U.S. share of global semiconductor manufacturing capacity has eroded from 37% in 1990 to 12% today, mostly because other countries’ governments have invested ambitiously in chip manufacturing incentives and the U.S. government has not. In fact, three-quarters of the world’s chip manufacturing capacity is now concentrated in East Asia, with China projected to command the largest share of global production by 2030, due to its government’s massive investments in this sector,” the SIA report states.

To remain competitive and ensure more semiconductor chips are produced, designed, and manufactured in the U.S., more emphasis needs to be made by Congress and the White House to act swiftly and fund the semiconductor provisions in the CHIPS for America Act, states SIA president and CEO John Neuffer.

The CHIPS for America Act is a bill that establishes investments and incentives to support U.S. semiconductor manufacturing, research and development, and supply chain security. According to Congress.gov, the bill specifically provides an income tax credit for semiconductor equipment or manufacturing facility investment through 2026. The Senate has passed legislation that provides $52 billion in funding for the semiconductor provisions in the CHIPS for America Act. “Now the House must follow suit and send legislation to the president to be signed into law,” the SIA states.

Full Steam Ahead

While shortages continue through 2021, and are expected to linger on, it has highlighted that the semiconductor industry is also expected to continue to grow. More attention has been directed to supply chain challenges and manufacturing in the U.S. Plus, the U.S. remains a global leader in semiconductor research and development (R&D) and design. This shortage has exposed the incredible opportunities that still lie ahead for the semiconductor industry – from the significant market growth it has experienced, to the new innovations that semiconductors will enable.

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