Efforts to Bring Chip Manufacturing to U.S. Soil Will Continue in 2021

December 30, 2020 by Luke James

The U.S. government has made big pushes for domestic chip manufacturing in 2020. What does this trajectory look like for 2021?

The United States was once the global leader in semiconductor manufacturing with a huge number of U.S. firms owning and operating fabs that not only served domestic electronics manufacturers but manufacturers worldwide. 

The tide has shifted in recent years, however, as foreign nations have prioritized chip manufacturing—i.e., by dishing out valuable grants to research projects, providing tax relief to their own fabs, and offering help with construction.


Researcher gestures to a wafer while designing semiconductor project

Researcher gestures to a wafer while designing semiconductor project. Image used courtesy of Kim Kyung-Hoon, Reuters

While there’s still plenty of chipmaking activity in the U.S., the industry has prominently moved to overseas markets in places like Taiwan, China, and South Korea with names like Samsung, SK Hynix, and TSMC rapidly growing year-over-year, outpacing U.S. companies like NVIDIA and Qualcomm.

Still, the semiconductor industry remains a core component of the U.S. economy. While it very much leads the way in terms of chip design, it only manufactures roughly 12 percent of the chips themselves, writes Keith Jackson (CEO of ON Semiconductor) in Fortune


The Call for Domestic Manufacturing Continues

2020 has been a significant year in the industry as the U.S. government has called for the return of domestic semiconductor manufacturing amidst the declining relations between the U.S. and China and supply chain disruptions related to the COVID-19 pandemic

And no time has been wasted; several efforts to re-shore semiconductor manufacturing are already underway, spearheaded by the U.S. government, chip manufacturers, and other industry organizations. 

In May, the U.S. government began placing pressure on the three largest chipmakers—TSMC, Intel, and Samsung—to build new chip foundries in the States. While Intel was immediately enthusiastic—with CEO Bob Swan expressing interest in building a specialized foundry in partnership with the U.S. Department of Defense—TSMC responded a few days later with an announcement of its plan to build a $12 billion chip fab in Arizona


Rendering of TSMC's Fab 18

Rendering of TSMC's Fab 18, which is a 5 nm production facility. Image used courtesy of Taiwan Semiconductor Manufacturing Co., Ltd.

If done strategically, developing new cutting-edge chip fabs in the U.S. could change the face of the industry and bring a great deal of manufacturing back to the U.S. from Asia.


The "Space Race of Our Time?"

In his commentary published in Fortune, ON Semiconductor’s Keith Jackson called the rush to bring chip fabs home the “space race of our time." He points to the role that advanced chip design and production will play in getting ahead in the race to deploy new technologies such as 5G, artificial intelligence, and quantum computing. 

The bigger picture is about far more than technological dominance, however. There’s also the challenge of national security and the realization that the country’s future growth and competitiveness may rest on cutting-edge, home-grown sensitive semiconductor IP. 

Policymakers recognize this, and Congress has recently introduced two new bipartisan bills aimed to encourage more U.S.-based semiconductor manufacturing and research—the Creating Helpful Incentives to Produce Semiconductors for America (‘CHIPS for America’) Act and the American Foundries Act


The Outlook for 2021

As we look towards 2021, these and other re-shoring efforts are set to continue. Most recently, as reported by Reuters, the U.S. Department of Defense (DoD) announced that it will soon start soliciting proposals for a program that will provide incentives to boost domestic semiconductor manufacturing capabilities

The foundries developed under this program would handle commercial work from U.S. companies in addition to potentially providing components to the DoD. IBM is one of the first participants in this program, announcing that it had been selected for an award to support advancing U.S. microelectronics technology design capabilities just days before Christmas. 

As for TSMC, the chipmaking giant has just begun an aggressive recruitment campaign that will see a 600-strong initial workforce, primarily made up of engineers and executives, drafted to staff the $12 billion Arizona-based plant. The construction of this facility is scheduled to begin at some point within the next year. 


TSMC plans to bring 600 employees to the new Arizona facility

TSMC plans to bring 600 employees to the new Arizona facility in its first wave of recruitment. Image used courtesy of Reuters, TSMC, and Nikkei Asia

The potential benefits of efforts like these cannot be understated. Not only are there the obvious economic advantages that come with new jobs—engineering jobs that are needed now more than ever—but there’s substantial value to be found in decreasing dependence on foreign chipmakers with U.S.-based firms of all sizes, even the smallest of fabs, able to leverage the benefits.