Innovation Lightbulb: Zooming in on Domestic Semiconductor Investments in 2023
In this week's Innovation Lightbulb newsletter, we look at announced domestic investments across the semiconductor supply chain.
Since January 2023, companies throughout the semiconductor supply chain have announced over $24 billion in investments in the United States. This brings the total amount of announced private sector investment in semiconductors and electronics to $231 billion since 2021. Out of this amount, over $166 billion followed the passage of the CHIPS and Science Act, which included $39 billion in subsidies and a 25 percent tax credit to incentivize domestic semiconductor manufacturing. The Semiconductor Industry Association (SIA) has been actively tracking investments in domestic semiconductor manufacturing and its suppliers since the passage of the CHIPS Act, from chip fabrication plants to semiconductor manufacturing equipment and materials operations.
SIA’s data shows that 65 percent of domestic semiconductor investments in 2023 were for the expansion of existing or entirely new chip fabrication plants (or “fabs”). These fabs are located in established and burgeoning semiconductor hubs across ten states. With American “fabless” design firms relying on semiconductor foundries in Taiwan for the majority of their chips, re-shoring chip fabrication is a significant step to secure supply chains amid increasing tensions with China.
There have been two announced investments in semiconductor equipment facilities so far in 2023, both for new facilities located in existing semiconductor regional hubs in California's "Silicon Valley" and Arizona's "Silicon Desert." Equipment facilities near fabrication plants allow for increased collaboration between chipmakers and equipment suppliers, giving chipmakers greater access to leading-edge technology and accelerating innovation. Both facilities will significantly focus on equipment research and development and aim to bolster innovation in the broader domestic semiconductor ecosystem.
This year, five companies announced the expansion of their material facilities. The respective facilities are focused on producing various materials critical to chip manufacturing, including wafers, specialty gases, high-purity graphite, and protective coatings. Increased U.S. participation in materials production and innovation is particularly vital for advancements in the energy efficiency of chips.
A robust domestic semiconductor industry requires leadership across the ecosystem of basic and applied research, designers, manufacturers, equipment makers, materials suppliers, and end-users. Due to the collaborative nature of the industry, excellence in one segment of the domestic supply chain accelerates innovation in others. While an entirely re-shored industry would be undesirably costly, pursuing a reinvigorated domestic ecosystem paired with fruitful partnerships with like-minded allies around the world is a worthwhile goal on the way towards enhanced economic competitiveness and national security. Domestic private sector investments are one indicator of progress in this direction.
Data visualization by Jaeyhun Han