Biden’s chip goals face actuality verify of provide chain complexity By Reuters


© Reuters. FILE PHOTO: U.S. President Biden indicators an government order on the economic system on the White Home in Washington

By Hyunjoo Jin and Stephen Nellis

SAN FRANCISCO (Reuters) – To grasp President Joe Biden’s problem in taming a semiconductor scarcity bedeviling automakers and different industries, take into account a chip equipped by a U.S. agency for Hyundai Motor Co’s new electrical automobile, the IONIQ 5.

Manufacturing of the chip, a digital camera picture sensor designed by On Semiconductor, begins at a manufacturing unit in Italy, the place uncooked silicon wafers are imprinted with complicated circuitry.

The wafers are then despatched first to Taiwan for packaging and testing, then to Singapore for storage, then on to China for meeting right into a digital camera unit, and at last to a Hyundai element provider in Korea earlier than reaching Hyundai’s auto factories.

A scarcity of that picture sensor has led to the idling of Hyundai Motor’s plant in South Korea, making it the most recent automaker to endure from international provide woes that crippled manufacturing at most automakers together with Common Motors Co (NYSE:) and Ford Motors Co and Volkswagen (DE:).

And the winding journey of the picture sensor exhibits simply how difficult it will likely be for the chip {industry} to each ramp up capability to deal with the present scarcity and re-invigorate U.S. chip manufacturing. For a graphic, click on

U.S. President Joe Biden on Monday convened semiconductor {industry} executives in Washington to debate options to the chip disaster, the most recent transfer in a broader effort to bolster the home chip {industry}. He is additionally proposed $50 billion to help chip manufacturing and analysis as a part of his $2 trillion infrastructure proposal, which he mentioned would assist the US win the worldwide competitors with China.

A lot of that cash will doubtless go in direction of the development of multi-billion-dollar superior chip vegetation by Intel (NASDAQ:), Samsung (KS:) and TSMC. However {industry} executives say addressing the broader provide chain is essential, and the Biden administration faces difficult selections on which parts of it to subsidize.

“Attempting to reconstruct a whole provide chain from upstream to downstream in a single given location simply isn’t a chance,” David Somo, senior vp at ON Semiconductor, instructed Reuters. “It could be prohibitively costly.”

The USA now solely accounts for about 12% of worldwide semiconductor manufacturing capability, down from 37% in 1990. Greater than 80% of worldwide chip manufacturing now occurs in Asia, in response to {industry} knowledge.


Producing a single pc chip can contain greater than 1,000 steps, 70 separate border crossings and a bunch of specialised corporations, most of them in Asia and largely unknown to the general public.

The method begins with plate-size discs of uncooked silicon. At chip factories referred to as ‘fabs,’ circuits are etched into the silicon and constructed up on its floor by means of a sequence of difficult chemical processes.

The subsequent step – packaging – affords a great illustration of the availability chain challenges.

Wafers emerge from fabs with tons of and even 1000’s of fingernail-sized chips on every disc. They have to be minimize up into particular person chips and put right into a bundle.

Historically that meant inserting every chip onto a “lead body” and soldering it to a circuit board. The complete meeting would then be packaged in a resin case to guard it. 

That course of may be very labor intensive, main chip corporations to outsource it many years in the past to international locations together with Taiwan, Malaysia, the Philippines and China.

The packaging step itself has its personal provide chain: South Korea’s Haesung DS, for instance, makes packaging parts for automotive chips, exporting them to Malaysia or Thailand for clients together with Infineon (OTC:) and NXP (NASDAQ:). These corporations, or in some instances a sub-contractor, then assemble and bundle chips for automotive suppliers like Bosch and Continental, which in flip provide remaining merchandise to automakers.

“In the event that they (the Biden administration) are going to achieve success with this, they’re going to have to assist rebuild the bundle {industry} right here in the United States,” mentioned Dick Otte, CEO of Promex, a California-based chip packaging agency.

“In any other case it’s a waste of time. It’s like constructing a automotive and never having a physique to placed on it.” 

However newer chip packaging processes are far much less labor intensive, main some U.S. chipmakers to consider they are often introduced again from overseas.

In October, Minnesota-based chip foundry, SkyWater Know-how took over a facility in Florida the place it plans to construct out superior packaging traces.

“There’s type of an industry-wide settlement that every one this must occur right here,” Thomas Sonderman, chief government, SkyWater Know-how, mentioned.


Rebuilding the U.S. packaging {industry} wouldn’t solely insulate chip corporations and their clients from political danger, it might additionally assist them break freed from the lengthy cycles concerned in creating new chips, mentioned Tony Levi, a professor {of electrical} and pc engineering on the College of Southern California.

By doing extra work regionally, U.S. chip companies might create smaller manufacturing runs of chips extra steadily, rushing innovation and doubtlessly creating the aptitude to extra shortly regulate to demand.

Levi mentioned that Arizona, Texas and New York – the place Intel, TSMC, Samsung and GlobalFoundries all have present or deliberate services – could be suited to cluster provide chain parts like packaging.  

“What the U.S. is superb at is shut collaboration between system design, product design and the manufacturing itself,” Levi mentioned.

Nonetheless, it stays to be seen how the Biden Administration will stability the calls for of the various sub-sectors of the chip {industry}.

Quite a few companies, lots of them abroad, present vital foundry supplies together with wafers and gases. The delicate instruments used for superior chip manufacturing are principally made in the US, however that is not the case for manufacturing unit parts such because the robotic techniques that whisk chips among the many numerous course of steps.

On prime of that, some within the {industry} argue that the U.S. must help not solely new cutting-edge fabs, however older expertise too. It is the extra mature chips which can be in extreme scarcity, famous Tyson Tuttle, CEO of Austin-based silicon design agency, Silicon Labs.

“We’ve got a mismatch of capital within the semiconductor {industry},” he mentioned, with an excessive amount of of the cash going to essentially the most superior applied sciences.

E. Jan Vardaman, President at TechSearch Worldwide Inc, mentioned the chip packaging {industry} has been beneath extreme value strain, resulting in smaller margins than chip factories and chip design companies. “From a monetary and economics standpoint, it doesn’t make sense for them to make a giant funding.”

“Merely throwing cash at this doesn’t clear up the issue. It’s a extra complicated downside.”

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