Australia’s "Dialogue" website recently issued an article that the global semiconductor shortage has highlighted a trend of concern: the number of chips made in the United States accounted for only 12% of the global market, and it is still declining. U.S. President Biden has issued an executive order requiring a review of the supply chain of key products, which has aroused concern about the decline in domestic semiconductor manufacturing capacity in the United States for decades.
According to data from the American Semiconductor Industry Association in September 2020, 75% of global chip manufacturing capacity has been transferred to East Asia. The US’s share of the global semiconductor manufacturing market has fallen from 37% in 1990 to 12% today. 88% of the semiconductor chips used in the US industry (including the automotive and defense industries) are produced outside the US.
U.S. manufacturing capacity is weakened and government investment is insufficient
American chip companies are increasingly relying on international partners to manufacture the chips they design, which reflects the weakening of American chip manufacturing capabilities.
Although American semiconductor companies have a 47% share of the global chip sales market, only 12% are manufactured in the United States. To meet people's expectations for faster and smarter electronic products, innovative chip design is required, which in turn relies on the most advanced manufacturing technology available.
The advancement of semiconductor manufacturing technology is based on the number of transistors per square millimeter, which are the smallest electronic components in a chip. A fab with the most advanced semiconductor manufacturing technology and equipment can currently produce 5-nanometer chips. This number refers to the process, not any specific chip function. Generally speaking, the smaller the nanometer rating, the more transistors can be accommodated per square millimeter.
South Korea and other countries and regions are currently preparing to build 3-nanometer wafer fabs, while the United States does not even have a 7-nanometer wafer fab. Intel Corporation of the United States announced that its 7-nanometer wafer fab will not be put into production until the end of 2022 or early 2023. This prevented the United States from making the most advanced chips.
According to the article, South Korea, Singapore and China invest tens of billions of dollars in the semiconductor industry every year. These investments include not only the equipment itself, but also the R&D and tool development necessary for the migration to the next-generation fab. In contrast, incentives in the United States are clearly insufficient.
Global demand is strong, the United States is in trouble
With the spread of the new crown pneumonia epidemic, the public's demand for mobile phones, laptops and other home office equipment, as well as the increase in the use of the Internet, will increase the demand for chips, which has put pressure on the production capacity of fabs.
The global automotive industry predicts that the demand for cars will decline during the pandemic, thus reducing orders for semiconductor chips used in vehicle safety, control, emissions, and driver information systems. However, the decline in demand is only temporary. At the end of 2020, new car sales began to rebound rapidly, and the severe shortage of automotive semiconductor chips suddenly became the headline news of major news media.
One of the reasons for the dilemma of insufficient semiconductor chip production capacity is that the barriers to entry into the semiconductor manufacturing industry are surprisingly high. The establishment of a semiconductor foundry needs to meet a very steep learning curve: first, it needs an initial investment of 10 billion to 12 billion U.S. dollars, and then at least 3 years before it can be put into production. Even then, there is no guarantee that the chip output of a new fab will match the current chip output. Chips will iterate rapidly, and price pressure is a major problem in the technology industry, so profitability faces many risks.
The sharp rise in the price of Bitcoin in early 2021 has also increased the demand for graphics processing units traditionally used to mine digital currencies, further exacerbating the problem of semiconductor supply.
All these are enough to cause some manufacturers to run out of energy and significantly delay the delivery date of completing orders, which leads to the "drought condition" of semiconductor supply that we see today.
Recently, the governors of eight states in the United States urged Biden to put pressure on semiconductor companies to temporarily reallocate a small part of the current global production capacity to solve the global shortage of automotive chips. However, the article believes that this redistribution cannot be completed without causing shortages in other places, and it cannot be completed soon.
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