The U.S. Is Falling Behind in Semiconductor Manufacturing and Congress Must Act Now to Address It

The Problem

Semiconductors are the brains behind the technology that permeates all our interactions―the global communications network, every social media interaction, every retail experience, and every vehicle, hospital, farm and factory floor― creating societal and economic value around the globe. They also power the advanced technologies that keep us safe.

The U.S. once led the world in semiconductor manufacturing, but we have fallen behind. Other countries, especially in Asia, made deliberate investments to build powerful chipmakers in their own countries. Their focus delivered results. Foreign state subsidies created a ~30% cost advantage for foreign chipmaking plants, and the result of that advantage is startling: in 1990, the U.S. supplied 37% of the world’s chips, but that has fallen to 12% today, undermining U.S. technology leadership with significant economic and national security implications.

Semiconductors have never been more essential to our economic and national security. Semiconductors represent the fifth-largest U.S. export sector, supporting a quarter million U.S. jobs directly and over a million indirectly.

The problem is so severe that a recent White House study on supply chains concluded, “Our reliance on imported chips introduces new vulnerabilities into the critical semiconductor supply chain.”

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Why We Need Public-Private Partnerships

According to Boston Consulting Group and the Semiconductor Industry Association, “the ten year cost of a state-of-the-art fab, including both initial investment and annual operating costs, ranges between $10 billion and $40 billion.” As Moore’s Law drives the need for manufacturing innovation, each successive generation of semiconductors becomes increasingly expensive to build. These cost increases have left fewer companies able to continue driving leading edge technology. That’s why some foreign governments invested in their own chipmakers to help them lead.

The only way for the U.S. to address these growing economic and national security risks is to increase domestic semiconductor manufacturing capacity and capability. Incentives here in the U.S. also level the playing field for American companies, who compete with foreign-based companies heavily subsidized by their own governments. Government incentives for domestic semiconductor industries in the U.S. are essential to grow local economies, to strengthen national security and supply chains, and to cultivate the skills required to renew this engineering and innovation ecosystem.

A recent nationwide poll of Americans indicated a widespread understanding of the importance of the chipmaking industry to the U.S. economy and national security, and the urgent need for Congressional action to address the semiconductor shortage. Acting now would grow the U.S. semiconductor manufacturing industry, and represent a great opportunity for a bipartisan coalition to address an issue that has strong public support.