Intel CEO: The best way to fix America’s chip shortage

Opinion by Pat Gelsinger for CNN Business Perspectives

For almost a year, US companies and consumers have had to navigate a global chip shortage. Even among Covid-19 disruptions, this shortage stands out as uniquely impactful — semiconductors are a critical part of every digital device, powering our phones, cars, hospitals and factory floors.

America’s ability to address the chip shortage is limited. Domestic chipmaking capacity has been declining for decades, as subsidies from other countries continue to drive production elsewhere. Our country’s economic security depends on reliable access to semiconductors — access that requires near-term investment in our capacity and capability to produce more chips.

Federal support would even the playing field and unlock tens of billions of dollars in private investment here at home. That’s why Congress must fund the CHIPS for America Act, which will invest $52 billion in domestic semiconductor capacity and capability. The bill would provide billions in funding for manufacturing and R&D grants, invest heavily in advanced manufacturing and semiconductor research, establish public-private partnerships focused on the development of advanced microelectronics, and secure supply chains.

Funding the CHIPS for America Act requires Congressional action. Though the bill has secured strong bipartisan support in the Senate, the House must vote in favor of funding so it can proceed to the President’s desk.

By design, the CHIPS for America Act incentivizes semiconductor companies to make major investments in the US economy and jobs. Combined public and private sector investment would substantially expand US chip production and open the door to thousands of jobs in construction, manufacturing and R&D. For example, research shows that each job at Intel is estimated to support 13 additional American jobs. Building one semiconductor manufacturing mega site is akin to building a small city, which brings forth a vibrant community of supporting services and suppliers. But, to be successful, this type of investment must be competitive. This bill provides the federal support needed to incentivize domestic chip production, helping to re-establish American technology leadership and secure the country’s access to semiconductors.

Today, for many US companies, it’s simply not financially competitive to produce semiconductors domestically. Chipmakers can face more than a 30% cost disadvantage when making semiconductors in the US instead of Asia. This has driven a steady decline in America’s share of global semiconductor manufacturing, which has dropped from 37% in 1990 to 12% in 2020. Europe’s share has dropped from 44% to just 9% in the same time frame. Without government action, we cannot reach our ultimate goal of a globally balanced silicon capacity and a resilient supply chain.

In September, the President of the European Commission announced the European Chips Act, outlining plans to invest in European research and production capacity. The US and the EU have an opportunity to rebalance silicon capacity globally, but federal investment is essential for US chipmakers and the US to remain competitive. Other countries have actively invested in their own chip manufacturers for years, and as a result, Asia represents 75% of the world’s total semiconductor manufacturing capacity, and China alone is investing $150 billion in semiconductors in the coming years.

Federal support may not erase current chip shortages in the US, but it will be fundamental to avoiding them in the future. Given that so much of the semiconductor and technology industry supply chain resides in Asia, future risks are far greater than the shortages we are experiencing today. Without US investment to make domestic chip manufacturing competitive with other countries, America will not have sustainable access to the chips that power our economy and national defense.

Time is not on our side. It takes at least three years to build state-of-the-art manufacturing facilities and five to 10 years for supply chains to move. As the global shortage has shown, the chip supply is vulnerable, and domestic production is limited. Congress must act now to make sure we don’t fall further behind.

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