Early on Thursday, a bunch of US chip designers and producers despatched a letter to the White Home, asking that the federal government embrace “substantial funding for incentives for semiconductor manufacturing” as a part of the general COVID-19 financial restoration plan. The Biden Administration has now pledged to take motion to assist treatment the state of affairs by “figuring out choke factors in provide chains.” President Biden will signal an government order directing a government-wide overview of provide chains for essential items.
Each the request and the Biden Administration’s response are mostly grandstanding. There is no such thing as a sensible approach that any motion taken by the Biden Administration goes to have a near-term affect on silicon provides. Rising foundry capability takes months to years, not weeks. TSMC has already acknowledged that whereas it should allocate more room for automotive manufacturing, it will likely be taking that house away from different clients. The modern foundries are transport each wafer that they’ll.
In response to the 21 CEOs who signed the letter, together with these representing Intel, AMD, Micron, and Qualcomm, the rationale the US has not retained a bigger share of the worldwide chip manufacturing market is as a result of “the governments of our international rivals provide important incentives and subsidies to draw new semiconductor manufacturing services, whereas the U.S. doesn’t.” That is the supposed rationalization for why the US manufactured 37 % of the world’s semiconductors in 1990, however simply 12 % at present.
That is ridiculous twaddle. Samsung has actually simply proposed constructing a foundry in Austin. In return for this grand act of company benevolence, it desires the county handy over a 20-year 100 % tax abatement. It desires the town of Austin to offer a 50 % abatement over the identical time period, for a complete worth of over $800 million dollars. Not content material with that, Samsung additionally desires to be excused from the estimated $252 million it might pay in class taxes over the identical interval. If it succeeds, the state of Texas shall be answerable for making up the shortfall to the college district, leaving taxpayers actually on the hook.
The US federal authorities might not, as a rule, present huge incentive packages. That doesn’t change the truth that Samsung feels completely high quality asking for over a billion dollars in tax aid at a time when it earned greater than $34 billion in revenue the earlier yr. Intel additionally set income data final yr. It could be true that different international locations present aggressive help for silicon manufacturing on the federal stage, however silicon producers clearly haven’t any qualms about demanding particular therapy.
There are completely issues the Biden Administration may do to encourage better semiconductor manufacturing in the US, however simplistically tying the drop in US semiconductor market share to the presence or absence of presidency subsidies isn’t persuasive. This chart of forefront foundries over time is helpful:
Again at 90nm, when the price of advancing to a brand new node was far smaller and chip designs value a fraction of what they do at present, there have been much more firms on the vanguard — and most of them weren’t within the US. Of the 18 firms listed within the 90nm column, solely Freescale, Texas Devices, IBM, AMD (GlobalFoundries) and Intel have been American firms. Simply 5, out of 18 companies — and that was practically twenty years in the past.
The explanation why the US accounts for simply 12 % of chip manufacturing at present is as a result of partly as a result of the primary and most profitable pure-play foundry was based in Taiwan. When cell chip designers like Qualcomm wanted somebody to fabricate their chips, they turned to the likes of TSMC and Samsung. The next explosion in cell SoCs and now AI and edge processors has favored the international locations the place large pure-play foundries have been established. Intel tried to undertake the foundry mannequin and accumulate its personal secure of shoppers, however the effort was unsuccessful and the corporate might have quietly deserted it.
The explanation you see firms leaving the vanguard with each technology is twofold. First, the price of new foundry upgrades and chip designs rises each technology. Not all sorts of transistors profit from new nodes, and never all chips promote in excessive sufficient volumes to justify node transitions. Loads of firms are like GlobalFoundries: Off the vanguard and incomes a tidy revenue.
The second cause is that the variety of clients accessible at any given node has traditionally shrunk from one node to the subsequent. This will likely have modified not too long ago, given the sudden inflow of spending from plenty of varied AI firms propped up with VC dollars, however for a lot of the previous twenty years, fewer and fewer firms have jumped to the vanguard with each technology. With fewer clients accessible, greater prices, greater design prices, and smaller positive aspects from every passing technology, we’ve seen repeated waves of consolidation within the foundry trade. When GlobalFoundries introduced it was leaving the vanguard a number of years in the past, it didn’t blame a scarcity of subsidies. It blamed a scarcity of shoppers and an incapability to make the maths work when AMD was its solely public big-name 7nm buyer.
If the Biden Administration can discover provide chain bottlenecks it will possibly tackle, like boosting the provision of uncooked supplies used to fabricate elements, that might be helpful, however the likelihood of a near-term enchancment to the state of affairs might be nil. Constructing new factories takes time. Bringing new capability on-line takes time. There aren’t any fast options in semiconductor manufacturing, irrespective of how a lot the auto trade squawks to Congress.