Serving Whitman County since 1877

Restore U.S. semiconductor edge

Surprisingly, recent U.S. Presidents and congressional Democrats and Republicans agree America’s economic and national security hinge upon tiny, yet powerful semiconductors.

Semiconductor computer chips are the brains of modern electronics that operate our laptop computers, vehicles, and smart phones. They permeate every sector of our lives from farming and manufacturing to health care and public safety. They are embedded in our most advanced military equipment and weapons.

Sophisticated semiconductors are so small they can fit on the tip of your finger.

Our conundrum is the U.S. share of the worldwide chip manufacturing has declined from 37% in 1990 to 12% today, according to the Semiconductor Industry Association. Not only has the chip shortage disrupted our economy but created a defense vulnerability since eight of every 10 cutting-edge semiconductors are produced in Asia---most notably Taiwan and South Korea.

Our long-held dominance in semiconductors is challenged by China whose government heavily subsidizes the industry. The Chinese are investing over $150 billion to become the global semiconductor leader in research, design and production by 2030.

That has not gone unnoticed by our presidents as China flexes its military muscle.

For example, Donald Trump imposed trade restrictions and introduced bipartisan measures to reduce the industry’s taxes and authorized a $25 billion increase in research and development (R&D). Joe Biden identifies semiconductors as ground zero in economic and strategic competition with China.

The core problem is only six percent of the new global capacity is planned in the U.S. In contrast, it is projected that during the next decade, China will add 40 percent and become the largest semiconductor location in the world, according to the Congressional Research Service (CRS). That is the impetus behind a new accelerated push in Congress to add incentives which range from $76 billion-to-$250 billion.

When considering investment locations, CRS found the U.S. ranks high in factors, including protection of intellectual property, skilled talent, and synergy with existing facilities and ecosystems, but the total costs are 37-50 percent higher than in China. Compared to Taiwan, South Korea and Singapore, we are nearly one-third higher.

Costs are glaring issues for companies faced with spending billions. They are driving fabricators in our country to locate in Arizona, Texas and Ohio which offer lucrative incentives and lower costs. That trend is a reversal from 20 years ago when investors flocked to the Portland-Vancouver metropolitan area —the core of the “Silicon Forest.”

Bottom line: Incentives and operating costs are deciding factors.

For example, the Wafertech plant built 25 years ago cost $1.2 billion. Washington’s Legislature provided incentives, such as sales tax exemptions for equipment. Even though there is room for additional capacity at the Camas site, the company’s parent, Taiwan Semiconductor Manufacturing Company, invested $12 billion in a 5-nanometer chip facility in Phoenix. The new plant will mirror production at its Hsinchu, Taiwan, manufacturing hub.

Intel, the world’s largest semiconductor producers, has four fabs in Hillsboro, OR, but also invested in Arizona. Its $7 billion plant in the Phoenix-area is up, running and expanding. Intel also announced two fabrication lines in Ohio costing $20 billion. Samsung built a $17 billion plant in Texas.

Two decades ago, Washington and Oregon with their abundance of clean water, low-cost dependable electricity, and skilled, trained and well-educated workers, were the investment “hot spots” for semiconductor producers. Today, high costs and a shortage of suitable industrial sites hamper our states.

The silver-lining is global manufacturing capacity is expected to increase by 50 percent in the next decade. So, there will be opportunities to bring new facilities to the Pacific Northwest if we can whittle away at our competitive disadvantages. That will take a concerted, coordinated effort by our elected officials and community leaders.

— Don C. Brunell is a business analyst, writer and columnist. He can be contacted at theBrunells@msn.com.

 

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