Prepared by U.S. Department of Commerc,e Bureau of Industry and Security, Office of Technology Evaluation
Executive Summary
This report provides an initial overview of capabilities and challenges of the U.S. microelectronics industry, carried out pursuant to section 9904 of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021. This initial report is based on a survey of organizations that design, manufacture, or distribute microelectronics in the United States, and aims to summarize key industry attributes and experiences and provide broad guidance on what is needed to support a robust domestic semiconductor manufacturing ecosystem.
Key findings of the report include:
• General Production Capabilities: The United States is an essential leader in the global microelectronics sector, with companies headquartered in the United States accounting for approximately half of worldwide semiconductor revenue. The semiconductor industry is highly globalized with significant regional concentrations. U.S.-based companies maintain approximately half of their facilities internationally, and several large non-U.S. companies have significant U.S. presences. Estimated share of global activity carried out inside the United States for each stage of the semiconductor industry is:
o Research and Development: 47 percent
o Design: 27 percent
o Front-End Fabrication: 12 percent
o Assembly, Test, and Packaging: <2 percent, with an additional estimate that 85 percent of chips sold by U.S.-based companies are packaged in Taiwan, China, South Korea, or Malaysia
• Key Inputs: Survey respondents expressed significant concern about domestic sources of three categories of materials: bare wafers, gases, and wet chemicals. Within gases, the survey found that helium, nitrogen, hydrogen chloride, neon, nitrogen trifluoride, and hydrogen presented the most frequent acquisition concerns. Concerns for wet chemicals were more dispersed. Survey respondents identified 78 unique chemicals of concern, led by sulfuric acid and isopropyl alcohol. For both chemicals ultra-high purity forms are heavily imported. With minimal Assembly, Test, and Packaging in the United States, there are limited domestic sources for assembly and packaging materials.
• Workforce: The semiconductor industry directly employs over 200,000 people in the United States. CHIPS Act investments and industry growth led respondents to expect to add 70,000 additional jobs by 2032. Semiconductor jobs are well paid, with average salaries over 30 percent higher than national averages for related job categories. Respondents identified workforce-related items as both their top business challenges and the most important factors in deciding where to locate a facility.
• Sales and Growth: U.S. semiconductor companies are more reliant on sales to China than any other location, including the United States, with an estimated 30-40 percent of sales shipped to China and approximately 25 percent to the United States. Respondents expected the fastest growth through 2032—exceeding 10 percent per year—in the Aerospace, Defense, and Automotive sectors, which currently combined to represent less than 15 percent of the overall semiconductor market. The Mobile Device and Personal Computer sectors, representing nearly half of all semiconductor revenue, were expected to grow more slowly than the overall industry, though respondents still anticipated growth of more than five percent per year.
• Capital Expenditures: U.S.-based companies are narrowing the gap between their capital expenditures made outside the United States and those made domestically, reversing a trend of declining semiconductor capital investments in the United States. Most capital expenditures are attributable to several large companies with major leadingedge investments; six companies, led by TSMC and Intel, account for over 60 percent of the global value of semiconductor property, plant, and equipment. Respondents have existing plans for over $200 billion in expenditures on capital projects in the United States between 2023 and 2032, with respondents expecting that an average of 19 percent of funding would be provided by federal, state, and local governments. Total expenditures will likely significantly exceed this level as CHIPS Act investments become available.
• Business Challenges: The United States is seen as quite strong in three of respondents’ five most important factors driving investment—Ability to Protect Intellectual Property, Research and Development (R&D) Quality, and Labor Quality—and comparatively weak in the top two factors: Labor Cost and Labor Availability. The three most frequently identified business challenges were Worker/Skills retention, Labor Availability/Costs and Foreign Competition. Respondents were optimistic about the implementation of the CHIPS Act and saw it as crucial to allowing companies to fairly compete.
• Perspectives on U.S. Government Support: The cost of manufacturing in the United States is significantly higher than abroad, where manufacturers benefit from subsidies and lower operating costs. Respondents saw incentives as essential to leveling the playing field for doing business in the United States. Longer-term incentives that support continued fab construction can reduce the overall costs of incentives and the cost of production by maintaining the required worker expertise and supply chains. Companies generally saw education and workforce development as a necessary long-term pillar of support for the U.S. microelectronics industry but also have an immediate need for experienced workers. Drawing in talented workers from around the world further concentrates the skilled workforce in the United States and enhances the competitiveness of U.S. businesses.
The report also contains four categories of recommendations, intended to overlap with and supplement the recommendations provided by the Department in the Semiconductors 100-Day Report carried out in response to Executive Order 14017 (America’s Supply Chains), many of which have already seen significant progress. These recommendations are:
1. Level the Playing Field for Semiconductor Manufacturing in the United States
Companies in the United States for decades have faced higher costs than competitors around the globe. BIS survey respondents identified foreign competition as their third greatest organizational challenge, behind only labor availability/costs and worker/skills retention, with the highest share of respondents listing foreign competition as their single greatest organizational challenge. Low-cost production and foreign subsidies were most frequently mentioned in comments on foreign competition.
There is intense global competition to attract semiconductor fabrication facilities, which serve as a foundation for the entire microelectronics ecosystem, attracting both upstream and downstream investments. Survey responses and existing research indicate that between lower operating and construction costs, direct government funding, tax incentives, and additional funding initiatives in other countries, the cost of manufacturing semiconductors in the United States may be some 30 to 45 percent higher than the rest of the world.
For the United States to manufacture its fair share of semiconductors domestically, companies operating in the United States must be able to compete on a level playing field. Recommendations for allowing semiconductor fabrication to thrive in the United States include: . . .
2. Ensure U.S. Leadership in Advanced Research and Development
In addition to protecting technology developed in the United States, the U.S. government should ensure that the United States remains the world’s leading place to carry out advanced semiconductor research and development. Governments around the world are targeting U.S. leadership, with the share of semiconductor R&D and design funded by public investment estimated to be 2.3 times higher in the rest of the world than in the United States, including 3.5 times higher in China.
Continued U.S. leadership in semiconductor R&D relies on education and workforce leadership and protection of technology but also requires methods to incubate, protect, and commercialize innovative technologies and support for companies developing sensitive technologies. Recommendations to support continued U.S. leadership in advanced R&D include: . . .
3. Support the Availability of High-Quality Manufacturing Materials and Inputs
Manufacturing semiconductors requires hundreds of different materials with stringent quality requirements. Maintaining a healthy domestic semiconductor manufacturing base requires a robust material supply chain that is resilient to regional or company-specific shocks. Manufacturing materials are prone to disruption, with concentrated supply and highly volatile prices. The United States is reliant—and increasingly so—on imports of critical materials; the Department of Defense’s 2021 100-Day Review of Critical Minerals and Materials (Critical Materials 100-Day Report) noted that China “dominates the processing of strategic and critical materials, giving it de facto control over the flow of material.”
The new construction and expansion of semiconductor manufacturing clusters in the United States is already driving expansion of domestic material and input capabilities. Continued investments in U.S. semiconductor manufacturing will help ensure these domestic capabilities are healthy and competitive. Nonetheless, the underlying risks of supply chain concentration and vulnerability remain present. Recommendations to support the availability of high-quality semiconductor manufacturing materials and inputs include: . . .
4. Build a Diverse and Accessible Talent Pipeline for Jobs in the Semiconductor Industry
This category is identical to that of the Semiconductors 100-Day Report to highlight that workforce development is vital, the challenges are ongoing, and the solutions require longterm actions. That report highlighted the need for both immediate increases in the ability of companies in the United States to attract and retain talented workers from around the world and for longer term investments in domestic education. Survey responses have made it clear that workforce challenges are at the forefront of semiconductor industry health and competitiveness, requiring an “all of the above” solution. Recommendations to ensure that U.S. companies have access to the workforce required to thrive include: . . .
2023 Assessment:
https://www.bis.doc.gov/index.php/component/docman/?task=doc_download&gid=3402
2021 100-day Supply Chain Review:
https://www.bis.doc.gov/index.php/component/docman/?task=doc_download&gid=2958
BIS Office of Technology Evaluation:
https://www.bis.doc.gov/index.php/other-areas/office-of-technology-evaluation-ote