The Semiconductor Industry Association (SIA) recently recommended the U.S. government invest $50 billion in the domestic electronic components industry. The SIA, with the Boston Consulting Group, conducted a study that found America is at risk of losing its technological leadership within the sector.
At present, the trade organization represents 95 percent of the U.S. components industry by revenue.
Why the SIA Wants Washington to Invest in the US Semiconductor Sector
The SIA’s report uncovered a self-evident truth regarding the U.S. semiconductor industry; its development will significantly impact America’s future.
Specifically, the study noted innovations like 5G, quantum computing, and artificial intelligence (AI) are transformative technologies enabled by semiconductors. Therefore, countries leading the way in developing components that support the advancement of those fields will thrive. However, nations that do not prioritize their chip industries today will face significant economic and national security challenges tomorrow.
The SIA determined the United States of America currently falls into the latter category.
The organization found U.S. based chipmakers sell almost half of the world’s semiconductors, but only 12 percent of their production capacity is located in-country. Moreover, the group noted overseas government incentive programs make America an unappealing place to build new chip foundries.
In addition, the study states chipmakers have to spend 30 percent more to establish and operate part factories in the U.S. than they do in South Korea, Singapore, and Taiwan.
The SIA predicts China will be the world’s semiconductor manufacturing hub by 2030 because of its industry investments. Since Beijing is dedicating an estimated $100 billion to incentive programs, it will be the most affordable place on earth to fabricate electronic components.
The $50 Billion Recommendation
Having identified the problem, the SIA also offered a potential solution for America’s semiconductor woes.
The group argues $20 billion-$50 billion in federal grants and tax incentives, spread out over ten years, could greatly aid the U.S electronic components industry. The organization forecasts the global semiconductor sector will expand its manufacturing activity by 56 percent through 2030. By taking action now, Washington could ensure a quarter of that production capacity increase comes to America.
If the U.S. government provides subsidies for global chipmakers, America would be a more attractive place to build new factories. The SIA states the multibillion-dollar cash injection could prompt the establishment of up to 19 domestic foundries within the decade. By doing so, Washington would theoretically help create up to 70,000 jobs for engineers, equipment operators, and materials specialists.
The U.S. semiconductor stimulus program could also help American components makers develop leading-edge 5G, quantum computing, and AI offerings.
Will the SIA’s Proposal Gain Traction?
Although the SIA’s $50 billion electronic components industry improvement recommendation is ambitious, it is not inconceivable.
The group’s assertion that semiconductors will power tomorrow’s most important technological advances is correct. The organization is also right about government support as critical to ensuring global leadership within the sector.
Recently, China, India, South Korea, and Taiwan have unveiled massive financial initiatives to help their national components industries. Within a decade, those programs will bear fruit that will bolster their respective local economies and technological sophistication.
U.S. politicians have also recently demonstrated their understanding of the importance of American semiconductor development.
This summer, members of Congress introduced bills that would earmark $47.5 billion in government funding to expand America’s components sector. The legislation received support from members of both of the country’s major political parties.
The combination of mounting international competition and bipartisan cooperation could influence Washington to launch a new semiconductor stimulus program. Given its industry reach, the SIA’s recent research and recommendation would undoubtedly play a part in creating such an initiative.