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US Commerce Department eyeing policy solutions for semiconductor shortage


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US Commerce Department eyeing policy solutions for semiconductor shortage

The U.S. Department of Commerce will hold a virtual forum on April 8 to discuss policy designed to mitigate risks associated with the shortage of semiconductors used in critical defense systems.

Feedback from the forum, held by the department's Bureau of Industry and Security Office of Technology Evaluation, will be used to create policy recommendations for the White House on how to strengthen domestic manufacturing and lessen the country's reliance on east Asia, where semiconductor production is concentrated.

Commerce officials are holding the forum at a time when the U.S.' dependence on Asian nations for semiconductors has been magnified during the pandemic, which wreaked havoc on global supply chains and impacted production of North America's Big Three automakers.

Semiconductors are the main component of electronic devices. They power the sensors and computers used in fighter jets and other weapons systems critical to national security.

"We are really import-dependent," said Nazak Nikakhtar, co-chair of the national security practice at Wiley Rein LLP in Washington, D.C. "If we don't have access to that supply chain, we can't make many of the high-tech products we need in the United States."

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An Intel manufacturing facility. U.S. chip manufacturing capacity is expected to decline in the coming years.
Source: Intel

Despite efforts by domestic players like Intel Corp. to boost chip production, U.S. chip manufacturing capacity is projected to further erode behind Asia, where Taiwan Semiconductor Manufacturing Co. Ltd. is an industry leader along with Semiconductor Manufacturing International Corp. in China. The U.S. share of global chip production has declined from 37% in 1990 to 12% as of 2020 and is projected to decline to 9% in 2030, according to the Semiconductor Industry Association. Meanwhile, China is projected to grow its share of global chip manufacturing from 12% in 2020 to 28% by 2030.

"This [domestic] decline is largely due to substantial subsidies offered by the governments of our global competitors, which have placed the U.S. at a competitive disadvantage in attracting new construction of semiconductor manufacturing facilities, or 'fabs,'" the association said in a statement.

Additionally, the group noted that U.S. federal investment in semiconductor research has been flat as a share of GDP, while other governments have invested substantially in research initiatives to strengthen their own semiconductor capabilities.

President Joe Biden has already moved to strengthen America's supply chains for critical goods. He signed an executive order Feb. 24 to conduct 100-day reviews of potential risks within domestic semiconductor manufacturing, high-capacity battery production and extraction of critical minerals such as rare earth elements. Biden is also calling on Congress to invest $50 billion in semiconductor manufacturing and research as part of his $2 trillion infrastructure plan.

But building necessary chip capacity will require support from U.S. allies such as Canada and countries in Europe, said Nikakhtar, also former under secretary for the Commerce Department's Bureau of Industry and Security. "I don't envision a world in which the United States is saying 'we can do it alone' but we're saying we've got to build our domestic capacity and trade with one another and build scale," she said.

The clock is ticking as China amps up efforts to further control the semiconductor industry and supply chain, Nikakhtar said. "This is a really dangerous spot to be in — time isn't on our side," she said.