archy13 -

To secure supply chain, US needs semiconductor chip sites

To make U.S. semiconductor chip fabrication facilities successful long-term, experts say chip buyers such as Apple need to be included at the table during the planning process.

Boosting semiconductor production in the U.S. remains top of mind for experts focused on securing U.S. supply chains for critical technologies and increasing competition with China.

China produces over one-third of essential components imported into the U.S. for building technology goods, said John VerWey, East Asia national security advisor at the Pacific Northwest National Laboratory. VerWey was speaking during a hearing on U.S. and China competition in global supply chains held by the U.S. China Economic and Security Review Commission.

"Chinese firms maintain monopolies or near monopolies in many critical technology supply chain segments," VerWey said during the hearing. "Particularly in raw materials, mining, refining and processing, where in some cases, U.S. reliance is 100%."

Semiconductor production has drawn the most attention in the U.S. and Europe. China is becoming one of the world's largest semiconductor chip producers. In the U.S., proposed legislation such as the CHIPS Act includes $52 million to kick-start semiconductor manufacturing in the U.S.

Securing the semiconductor supply chain and becoming more competitive with China means building more chip fabrication facilities in the U.S., and seeing what it would take to convince firms such as Apple and Google to buy U.S.-made chips, VerWey said.

Chinese firms maintain monopolies or near monopolies in many critical technology supply chain segments.
John VerWeyEast Asia national security advisor, Pacific Northwest National Laboratory

Investing in semiconductor fabrication facilities

Building semiconductor fabrication facilities in the U.S. would help meet growing demand for chips needed by numerous industries, including smartphone, computer, cloud and auto manufacturers.

Such a facility would also serve as a draw for other companies supplying materials and, subsequently, a workforce.

"When you build a leading-edge fabrication facility, you're not getting just a leading-edge fabrication facility," VerWey said. "You're getting the ecosystem of chemical suppliers, material suppliers, mask suppliers, equipment suppliers that fill that factory. In addition, you're also getting a workforce that goes into that factory and the high-skilled jobs that come with it." 

A crucial part of making U.S.-based chip facilities successful would be working with chip buyers, said Jan-Peter Kleinhans, head of technology and geopolitics at Stiftung Neue Verantwortung, a German nonprofit think tank. Ultimately, Kleinhans said it comes down to chip manufacturing costs for most companies.

The big question is simple, Kleinhans said. "What is the cost difference between manufacturing in the U.S. compared to manufacturing in Taiwan that you as an end customer could live with to make a purchasing decision in favor of the new plant in the U.S. or in Europe?"

Challenges with mining raw materials for chips

The U.S. could also consider mining raw materials for chips, which would improve supply chain resilience, VerWey said.

However, establishing a mining site can take years due to regulatory requirements from agencies like the Environmental Protection Agency, and mining sites can often run into environmental issues that prevent them from coming online.

"The U.S. has abundant raw material resources," VerWey said. "But increasing domestic mining and refining capacity has long wait times, is costly and comes with tradeoffs."

China remains a leader in mining of the raw materials, rare earth elements, used for semiconductors, said Kristin Vekasi, associate professor in the School of Policy and International Affairs at the University of Maine.

Growing interest in green technologies is also increasing demand for raw materials. Solar panels, for example, rely on the raw material silicon, which is also used to make semiconductor chips.

"It is likely that private companies will need to lean on Chinese expertise to develop a real, resilient U.S.-based rare earth industry," she said. "The United States should recognize China's technical leadership in this sector, be pragmatic, and not prohibit private sector cooperation with Chinese commercial entities in order to be eligible for funding opportunities."

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

Dig Deeper on CIO strategy

Cloud Computing
Mobile Computing
Data Center
and ESG