By Greg Slater, vice president, Global Government Affairs, and Tom Quillin, senior director, Global Government Affairs for Intel
America stands at a critical inflection point: The U.S. must regain its leadership on both semiconductor logic process and advanced manufacturing. They are critical to increasing American technology leadership and to providing greater supply chain assurance.
Semiconductors power the internet, are the building blocks of the digital economy, are vital to national security, and provide the foundation for critical technologies such as artificial intelligence, 5G, and autonomous vehicles. We appreciate the Biden Administration’s efforts to increase the domestic supply of semiconductors; measures such as those detailed in today’s review of America’s critical supply chains can help the United States can reduce its reliance on technology from Asia.
To accomplish the Administration’s goals, the U.S. must focus not just on increasing our manufacturing capacity to produce semiconductors, but also on enhancing technological capability that powers the manufacturing process. As the only American advanced semiconductor manufacturer, Intel fully understands that breakthrough innovations and know how are essential for manufacturing advanced semiconductors needed for emerging technologies. In fact, Intel spent $220 billion in the last decade developing the innovations that have extended Moore’s Law, resulting in manufacturing process breakthroughs such as strained silicon, Hi-K metal gate, and 3D transistors that the industry at large uses today. We know that domestic technology and innovation leadership are critical to maintaining America’s economic strength and national security.
In recent years the U.S. has allowed semiconductor leadership to erode. The U.S. share of semiconductor manufacturing has decreased from 37% several decades ago to just 12% today. Today’s White House fact sheet on the report notes that the U.S. relies on a single part of Asia for 92 percent of leading-edge logic in concluding that “Our reliance on imported chips introduces new vulnerabilities into the critical semiconductor supply chain.”
We need to reverse the trends that caused this erosion, which include:
Cost Disadvantages – U.S.-based manufacturers face a 25% to 40% cost disadvantage compared to their competitors in Asia, which are heavily subsidized by their governments.
- Too much reliance on foreign investment – Investment by foreign governments of tens of billions of dollars to help develop domestically owned semiconductor manufacturing, packaging and assembly test capabilities has made us dependent on foreign companies’ IP for our economic competitiveness and national security.
- Not enough support of US businesses – Inadequate U.S. government support of R&D for advanced logic and underinvestment in workforce development.
Going forward, the U.S. government can most effectively address these negative trends by helping to ensure that the know-how for advanced semiconductor manufacturing and packaging technologies remains here in the US. This strategy empowers the U.S. industry to scale technology that is homegrown so that it contributes to American technology leadership and avoids reliance on intellectual property that is held overseas. The report appreciates this reality: “In addition to supply chain risks due to the geographic concentration of production, the lack of domestic capability at the most advanced technology also raises concerns for national security, as secure access to state-of-the-art technology is needed to provide technical superiority for some military applications” (p. 39).
Foreign companies that set up manufacturing plants in the United States certainly will help add needed manufacturing capacity, but they won’t contribute much to American technology leadership because their critical know-how stays overseas — just as Intel’s critical manufacturing know-how has always been housed in the U.S. And full supply chain assurance can be created only when both manufacturing capacity and capability are developed at home. This is one of the goals of the Administration, as stated in the report: “We recommend that Congress support at least $50 billion in investments to . . . promote R&D to ensure the next generation of semiconductors is developed and produced in the United States” (pp. 12-13, emphasis added).
Urgent Action Required
This week the U.S. Senate is taking additional steps toward resolving these problems. Bipartisan leaders, including Senate Majority Leader Chuck Schumer and Senator John Cornyn, have driven legislation known as the U.S. Innovation and Competition Act that is an important investment in American technology leadership.
We believe this legislation is a necessary first step toward rebuilding innovation leadership in semiconductors. As President Biden said in introducing the Administration’s 100-day supply chain assessments, “the United States is the birthplace of this technology and has always been a leader in semiconductor development. However, over the years we have underinvested in production—hurting our innovative edge—while other countries have learned from our example and increased their investments in the industry.”
To address this challenge, Intel recently announced plans to invest over $20 billion in advanced manufacturing in the U.S., demonstrating the company’s ongoing commitment to manufacturing and technology leadership. But this will not be enough. To regain leadership on the international stage, the U.S. needs to champion American innovation at home, to build comprehensive manufacturing capabilities, and to protect the U.S. supply chain that supports such capabilities. The U.S. Innovation and Competition Act that is before the Senate this week also will help strengthen Intel’s more than 4,000 American suppliers, including 800 small and medium sized companies who supply Intel with critical parts and materials.
We appreciate the work of the Biden Administration in providing concrete solutions that will establish America’s leadership in semiconductor manufacturing capacity and innovation capabilities.