A Future-Proof Semiconductor Innovation Strategy

Western governments are considering generous packages to boost semiconductor manufacturing due to growing geopolitical concerns and a global chip shortage.

FREMONT, CA: In response to escalating geopolitical tensions and a worldwide chip scarcity, Western governments are mulling adopting hefty incentives to stimulate semiconductor production.

Late in the 1980s, the United States established a partnership that received $500 million in government support to restore competitiveness in the semiconductor manufacturing business.

A successful approach must recognize the complexity of the semiconductor business and target the areas where domestic efforts can have the most impact. And although the pending law appears promising, its implementation is to maximize its benefits in the long run advantages.

The $52 billion U.S. CHIPS Act emphasizes creating foundries for three-nanometer transistor techniques to compete with the semiconductor foundry giants of Taiwan and South Korea. Extremely resource-intensive, these three-nanometer fabs generate cutting-edge integrated circuits (ICs) that power the newest smartphones. A single three-nanometer fab can cost up to $25 billion to construct and requires large quantities of water and energy to run, resulting in ICs that cost hundreds or more.

A lack of inexpensive ICs based on older transistor technologies, such as heated seat controllers for automobiles or LED/LCD display drivers, is currently causing supply chain challenges. The domestic production of these chips is crucial and might be considerably more cost-effective and economically scalable.

Governments should support innovation across the entire electronics ecosystem rather than focusing primarily on how to domesticate three-nanometer semiconductor technology. Developing world-leading capabilities in silicon and other semiconductor materials involves supporting a wide range of process methods.

Moore's law is approaching its physical limit (or at least its economic limit in terms of continuing to lower the cost per transistor), necessitating new approaches such as chip-scale packaging, photonic integrated circuits, and rapid hardware customization for future innovation. Reducing its environmental imprint, which is currently a significant contributor to global carbon emissions, is a second area in which the industry must innovate immediately.

The U.K. would benefit immensely from a trade group like the Semiconductor Industry Association in the U.S., which effectively communicates the strengths and needs of industry players. Through training and apprenticeship programs at all educational levels, the government must also support industry plans for upskilling the domestic workforce to fill the new positions in the pipeline.

Setting up a three-nanometer fab capable of producing cutting-edge AI chips might make for a catchy headline. Still, it would not contribute to developing a sustainable semiconductor sector that meets the diverse needs of the broader electronic markets. Collaboration with policymakers is essential for supporting the long-term goal of a secure, responsive, and economically sustainable semiconductor supply chain.