A pandemic issue has led to a $52 billion plan to help chipmakers such as Intel. But Taiwan and South Korea’s spending on chip manufacturing tools is already three times that of the United States.

Intel's Fab 42 in Chandler, Arizona cost $7 billion. The chip maker has already started building No. 52 and No. 62 fabs, which are scheduled to go online in 2024 and employ more than 3,000 employees.

When you can't buy a Ford F-150 pickup or a Sony PS5, blame it on a shortage of chips. The global problem caused by the COVID-19 pandemic has evolved into a multi-year electronic product disruption. Product shortages are causing problems for the most impressive consumer power-the US holiday shopping season.

If you can't buy a game console or laptop that you like, then you are not the only one being irritated. The shortage is causing the technology industry and politicians to try to reverse the decline in the importance of the United States in the microprocessor industry. The US government is dissatisfied with the country's economic and military dependence on Asia's high-tech manufacturing industry. Chip manufacturers are salivating on government subsidies for research and new factories, and predict that chip demand will generally increase, and they are investing in unprecedented ways.

Overall, the shortage of chips has made the state of the US manufacturing industry and how much of it moved abroad to become a new focus. Intel fell to Taiwan Semiconductor Manufacturing Co. (TSMC) and Samsung's foundry in third place, hoping to take advantage of rising demand and government funds and other tailwinds to regain its leadership.

Al Thompson, who is in charge of Intel's US government relations, said: "We don't want to create a situation where the United States, which created the semiconductor industry and Silicon Valley, will be completely dependent on products from other countries."

The new route of the chip industry is part of what some people call the decoupling, at least to some extent separating the Chinese and American economies. No one expects the supply chain to be unconnected overseas, but the response to the chip shortage must be nationalistic.

This is what is happening and what is at stake.

In short, the COVID-19 pandemic and the massive shock waves sweeping the world economy. The demand for work-at-home technologies such as personal computers, tablets, and webcams has soared beyond the semiconductor manufacturing industry’s chip supply capacity-not only the large CPU brains of laptops, but also the production of dishwashers, baby products and other products A large number of supports chip displays and LED lamps. The chip shortage quickly expanded from remote work and school needs to home entertainment products such as tablets, game consoles, TVs and graphics cards for gaming PCs, all of which were purchased by people trapped at home to a record high. Compounding the problem is that the fire at Japanese chip maker Renesas Electronics and the severe winter weather in Texas caused power outages in more than 70 power plants and cut off the power to Samsung's chip factory.

The COVID lockdown has caused automakers to suspend chip orders. These companies rely too much on cheap processors that do not require cutting-edge chip manufacturing technology. When they realized that demand was picking up, the chip factory had allocated capacity to other customers.

This is not all. Excess transportation and shortage of containers not only hinder the delivery of finished products, but also hinder the delivery of their components and raw materials. Cars and computers require hundreds of electronic components, but the lack of just one component means that the product cannot be sold. For advanced processors, there may only be one company manufacturing it.

It may not get worse, but it may last for several months. Chip manufacturers have been trying to squeeze as much new capacity out of manufacturing facilities or "fabs" as possible, but it will take years to build new fabs and increase production.

Intel CEO Pat Gelsinger told CNET that he thinks we have almost passed the most severe period of chip shortages, which will continue until the second half of 2021. He predicts that it will gradually ease by 2022 and subside in 2023.

The mismatch between supply and demand of chips has been common for decades, but this is not the case. "We always go through cycles. This time is different," AMD CEO Lisa Su said at the Code conference in September. She also expects this chip shortage will ease in 2022. But IBM CEO Arvind Krishna believes that the chip shortage is more likely to continue until 2023 or even 2024.

It is easier to say what was not affected. Nowadays, almost everything with a power cord uses chips, so the shortage has affected cameras, microwave ovens, TVs, pacemakers, washing machines, etc.

The most severely affected is the automotive industry. Cars are now full of computer chips that control everything from infotainment systems to anti-lock braking systems. The auto manufacturing industry relies heavily on "just in time" purchases to reduce costs, but this means that there is no large inventory of parts to cushion shortages. According to AlixPartners According to a study by, this situation will reduce their income by about 210 billion US dollars in 2021, and the automobile manufacturing industry may be affected in 2023. 

The shortage forced automakers to stop production, including Ford, General Motors, Toyota, Nissan, Subaru and Stellattis (formerly Fiat Chrysler). Some car manufacturers ship cars without accessories that require missing chips, leaving customers' new cars without touch screens. Tesla is praised for weathering the storm better than most companies, but it is still affected by chip limitations.

Game consoles were also hit hard. The shortage of chips means intermittent availability and poachers are pushing up the prices of Sony PS5 and Microsoft Xbox Series X. Nintendo Switch and Valve’s Steam Deck are also late.

Despite being led by supply chain guru Tim Cook and influential in placing a large number of orders years in advance, even Apple has suffered. The iPhone 12 was released several weeks late, and the chip shortage has been plagued by Apple until 2021.

CEO Nirav Patel said that in order to solve this problem, the PC manufacturer Framework had to make a "risk purchase" by purchasing additional component inventory in advance, even though it has weathered the storm so far. "This is definitely a long-term, long-term challenge for everyone," he said.

Semiconductor manufacturers are working harder to squeeze every wafer through their fabs. But they can do nothing about the immediate shortage.

It takes several years to build a fab. Intel has just started building two new factories in Arizona, Fab 52 and 62, at a cost of US$20 billion. But Keyvan Esfarjani, head of Intel's manufacturing and supply chain, said that they will not start mass manufacturing until the second half of 2024.

But today’s shortage is accelerating tomorrow’s investment. As digital technology extends far beyond computers and smartphones, chip makers such as Samsung, GlobalFoundries, Intel, and TSMC are seeing a surge in demand for semiconductors.

"We saw the digitization of everything," Gelsinger said.

Gelsinger urges automakers to switch their processors to newer manufacturing technologies, which, due to miniaturization, can squeeze more chips out of a single 300 mm wide silicon wafer. However, considering that most of the automotive industry will select and verify components that have been used for many years, this is not an easy change. However, it can help Intel become a foundry for making other chips, not just its own products.

Hello boy. The upcoming capital investment of chip manufacturers is extraordinary. Intel’s expenditure in the United States this year is as high as 23.5 billion U.S. dollars, and then plans to build two "giant factories" in the next few years, totaling 200 billion U.S. dollars. Esfarjani said: "These are big sites-approximately over 1,000 acres," and each site can accommodate eight fabs.

TSMC is expected to spend US$100 billion in three years, including a new fab in Arizona, and has just announced a new fab partnership with Sony in Japan. Samsung expects to spend US$145 billion by 2030.

"Five years ago, people said we were boring," Su said. "The world has truly realized that this is an important part of what people do now."

In November last year, Samsung announced that one of its investments was a $17 billion wafer fab in Tyler, Texas.

The shortage also provides new impetus for little-known chip manufacturers, who are still using early "traditional node" manufacturing techniques to manufacture chips. This includes ST Microelectronics, Onsemi, Microchip, NXP Semiconductors and Infineon. AMD's spin-off manufacturing unit GlobalFoundries in 2018, despite lack of profitability and withdrew from the competition with the three leading chip manufacturers: Intel, Samsung and TSMC, but still held an IPO.

GlobalFoundries is investing US$1 billion to increase its current fab capacity in New York and build a new fab there. It is also building a fab in Singapore and expanding a fab in Germany.

Fabs are expensive, but chip customers can share the investment costs. In order to ensure the production capacity of future products, "fabless" companies such as Nvidia, AMD and Qualcomm paid billions of dollars to chip manufacturers. Intel hopes to obtain such advance payments through its new foundry business.

Companies that make semiconductor manufacturing tools are benefiting a lot. The trade group Semi said in December that, globally, orders for chip manufacturing equipment have grown at a record rate in the past five quarters. In the third quarter of 2021, chip manufacturing tool orders were 26.8 billion U.S. dollars, an annual growth rate of 38%.

According to Semi, Taiwan and China have the largest customer spending, each at 7.7 billion U.S. dollars, followed by South Korea at 5.6 billion U.S. dollars. The United States ranks fourth with US$2.3 billion, but it has the fastest growth rate, up 67% from the third quarter of 2020.

American politicians who have adapted to the ebb and flow of the economy do not like the situation where consumers cannot consume. The Biden administration has been trying to deal with supply chain issues at the federal government level. It urges companies to be more transparent about their needs and supplies, calls on Congress to develop a critical supply chain resilience plan, and begin efforts to promote the independence of the United States from international suppliers.

The fact that the US military relies so heavily on overseas companies is shocking. As the White House’s 250-page report in June said: “Semiconductors... are critical to the operation of almost all military systems, including communications and navigation systems, and complex weapon systems, such as those used in the F-35 Joint Strike Fighter. Those systems. They are the key to future “must-win” technologies, including artificial intelligence and 5G, which are critical to achieving the goal of “a vibrant, inclusive and innovative national economy.” 2021 Interim National Security Strategy Guide In addition, the development of advanced autonomous systems, cyber security, space and hypersonic speed, and directed energy also rely on semiconductor technology."

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This move is also in line with the Biden administration’s American manufacturing efforts, which is to increase government spending on U.S.-made products and promote U.S. manufacturing more broadly.

The term that contains the expected result? Supply chain flexibility. This means finding problems faster, improving the adaptability of the government and the private sector, and establishing a buffer of inventory supply to cushion supply chain shocks. Overall, this will reduce the likelihood and severity of accidents in the supply chain.

"The industry is begging for de-risking," said Capgemini analyst Darshan Naik.

In short, money. Congress authorized $52 billion in subsidies for chip manufacturers in the CHIPS for America Act, but Congress has not yet allocated actual funding. The Senate passed the United States Innovation and Competition Act (USICA) in June to allocate funds, but it was not until November that House Speaker Nancy Pelosi promoted fundraising in the House of Representatives. On November 29, U.S. Secretary of Commerce Gina Raimondo (Gina Raimondo) asked for funding, saying that without more semiconductor manufacturing, the United States would be "fragile" because "chips are the cornerstone of our entire modern economy."

If USICA is passed, Intel will not be able to collect the entire $52 billion in the bag. However, US$10 billion is earmarked for fab projects, and the upper limit of each project is US$3 billion. Intel may be the beneficiary. Gelsinger said that this 30% discount is comparable to the discounts received by chip makers in South Korea and Taiwan.

Some big names in the technology industry agree with this. In a letter dated December 1, the CEOs of Apple, Google’s parent company Alphabet, Verizon, Dell, Hewlett-Packard, Toyota America, Ford, General Motors, Stellattis and IBM and Intel, AMD, TSMC, Samsung, GlobalFoundries and Chip leaders from other companies urged Congress to provide funding for the CHIPS bill.

"Semiconductors are vital to almost all sectors of the economy-including aerospace, automotive, communications, clean energy, information technology, and medical equipment," the executives said. "Demand for these key components exceeds supply, causing global chip shortages and leading to economic growth and reduced employment opportunities. The shortage exposes the fragility of the semiconductor supply chain and highlights the need to improve domestic manufacturing capabilities."

Intel has stated that it hopes to announce the location of its new US $100 billion Gigafactory later this year. But because USICA has not yet become law, the company has become more cautious about its plans. Spokesperson Krystal Heaton said: "We plan to announce the new site in the United States as soon as possible after the funding of the CHIPS Act is passed."

Gelsinger believes that only companies based in the United States—that is, Intel, not Samsung or TSMC—should benefit from US subsidies. Gelsinger said in an column in June: “Foreign chipmakers competing for US subsidies will keep their valuable intellectual property in their country, ensuring that the most profitable and cutting-edge manufacturing remains there.”

But even fabs owned by overseas companies can help build electronics manufacturing in the United States, train well-trained workers, and generate economic activity and taxes. "In addition to our partners in Texas, we are also grateful to the Biden administration for creating an environment that supports companies such as Samsung, because we are committed to expanding leading semiconductor manufacturing operations in the United States," Chief Executive Officer of Samsung Electronics Executive Officer Kinam Kim said. Solutions department, in a statement.

Intel’s plan is to increase the US’s share in chip manufacturing from today’s 12% to 30% in the next few years, and the European share from 9% to 20%.

No. The EU also hopes to get a bigger piece of the processor production pie. 

"This is not just a question of our competitiveness. It is also a question of technological sovereignty," said Ursula von der Lein, president of the European Commission, who proposed a European chip bill with its own subsidies.

Here, Intel is also a fan. It plans to build another giant US$100 billion factory in Europe.

no way. The electronics industry is not only the manufacture of chips, but also upstream supplies such as wafers and manufacturing equipment and downstream activities such as packaging, testing and assembly, most of which are in Asia. "There are many other aspects of the supply chain, and I believe these aspects also need to be more balanced," Gelsinger said.

This is where $52 billion starts to look like a small expenditure. The Boston Consulting Group estimates that to build a self-sufficient semiconductor supply chain on a global scale, it will cost US$900 billion to US$1.23 trillion. For the United States alone, this figure is between 350 billion and 420 billion U.S. dollars. And this cost runs counter to the capitalist impulse to reward the cheapest supplier.

"This will definitely cause inefficiencies in the supply chain," said BCG analyst Matt Langione. "The cost will go up. But there should be more redundancy in the system."

Nearshoring moved its manufacturing operations closer to the United States, but this has not always been the case. This is another possibility, especially for assembly, testing, and other tasks that are not as high-tech as chip manufacturing itself. "Mexico may be a strong option," CapGemini's Naik said.

A study by the Boston Consulting Group shows that semiconductor manufacturing professions are being developed in different regions around the world, and copying these expertise locally will cost US$900 billion to US$1.2 trillion.

TSMC founder and former CEO Zhang Min is skeptical. "It's impossible to go back in time," Zhang said in October. "If you want to re-establish a complete semiconductor supply chain in the United States, you will find that this is an impossible task."

Rebalancing the global supply chain does not sound so good for companies that have not benefited, such as Chinese telephone and network equipment manufacturer Huawei, which has revenues of $71 billion in the first three quarters of 2021. The Trump administration believes that its network equipment poses a national security threat, and the Biden administration also agrees, so the sales of Huawei products continue to be blocked. Huawei's US Chief Security Officer Andy Purdy said that raising barriers to overseas companies and promoting American companies may lead China or other countries to take the same stance against American companies.

"[Trade barriers] will have some major unintended consequences, and in the long run, these consequences will really hurt the United States," Purdy said. "If the U.S. semiconductor industry is not allowed to sell products to Huawei or Chinese companies, many good things the Biden administration has tried to do will be in vain."

In fact, Huawei has given up some American-made chips.

But even Andrew Feldman, CEO of Cerebras, a maker of artificial intelligence chips and computers, believes that excessive reliance on Samsung and TSMC, their company's chipmakers, is at risk.

Feldman said: "For so many American economies, it is a terrible idea to rely on a fab that you can swim through from China, or you can throw stones from South Korea's demilitarized zone."