Article Summary: How the US Can Strengthen the Global Semiconductor Ecosystem

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Any time demand for a product exceeds supply, there’s opportunity. But when the demand is for semiconductors, and manufacturers can’t keep up, there’s an added element of danger. Modern society requires semiconductors to run smoothly. In this report, the Boston Consulting Group describes ongoing efforts to strengthen the semiconductor industry in the United States, along with further actions – from academia, government, investors and private industry – needed to secure the future.

Take-Aways

• The United States passed the CHIPS Act to safeguard against future shortages of semiconductors.
• The NSER (National Semiconductor Economic Roadmap) includes goals for infrastructure, the supply chain, the workforce and entrepreneurship in the US semiconductor industry.
• A strong semiconductor industry needs a reliable supply chain, a steady flow of qualified workers and support for entrepreneurial efforts.

Summary

The United States passed the CHIPS Act to safeguard against future shortages of semiconductors.

The first years of the 2020s were marked by a global shortage of semiconductors. The effects of this lack weren’t purely economic, but flew at the heart of global security. Strengthening the semiconductor industry is necessary to industry, defense, aerospace and infrastructure as a whole. Unfortunately, the global semiconductor supply chain is anything but simple.

“The semiconductor industry has come to rely on a complex global ecosystem to thrive.”

The United States once played a strong role in the semiconductor industry, but it hasn’t maintained that role, particularly when it comes to manufacturing. In 2022, the US manufactured about 10% of the global semiconductor supply, projected to fall to 8% in 2023. In an attempt to limit future decline, the US passed the CHIPS and Science Act in August 2022, equipping the US semiconductor industry with $52 million dollars to spur academics, private firms and industry stakeholders into action. The act also provides tax credits to semiconductor industry investors.

The NSER (National Semiconductor Economic Roadmap) includes goals for infrastructure, the supply chain, the workforce and entrepreneurship in the US semiconductor industry.

The Arizona Commerce Authority, public entities, academic institutions, semiconductor industry leaders and the Boston Consulting Group created NSER with an eye toward helping the United States to capture about 16% of the global industry by 2032. The NSER starts by identifying the current status of each of the four domains (infrastructure, supply chain, workforce and entrepreneurship) then creating a roadmap for future targets.

“If the path laid out in NSER is followed, the US could reasonably capture two to four times more investment than it otherwise would have – 16% to 28% of global industry capital rather than 8% – and anticipate its share of global capacity to be 50% to 200% higher.”

To strengthen infrastructure, the NSER suggests three steps: First, make the United States a more attractive option for investors by creating friendlier regulations and incentives; second, encourage investments and collaborations on R&D; and third, improve industry resiliency by improving water reclamation practices and manufacturing carbon emissions. Investments in infrastructure may well be the most vital step to improving the US semiconductor industry.

A strong semiconductor industry needs a reliable supply chain, a steady flow of qualified workers and support for entrepreneurial efforts.

Semiconductor manufacturing requires materials from around the world. In order to keep the supply chain running smoothly, it’s necessary to secure a diverse array of vendors for the materials and equipment necessary for domestic production of advanced and mature semiconductor products. All the materials in the world won’t do any good if there isn’t an educated workforce ready to advance the industry. This means keeping the pipeline open from educational institutes, and providing a clear career path into the industry. Holding on to skilled workers will require embracing DEI (diversity, equity and inclusion) efforts. Perpetual training will help push the industry into the future.

“Without the necessary workforce, sustainable competitiveness in the industry will be impossible.”

Finally, a healthy semiconductor industry requires healthy funds. Entrepreneurs will need support from private equity firms, academia, government, and companies, in terms of funding but also the use of resources, like workspaces and materials, for R&D. It’s vital that the various branches of the industry collaborate. Now is not the time for silos; innovation is easier when industry players, entrepreneurs and researchers come together.

About the Authors

Ramiro Palma, Trey Sexton, Raj Varadarajan, Thomas Baker and Akash Bhatia are professionals with the Boston Consulting Group.