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Semiconductor Shortage Crisis: How the CHIPS + Science Act is Helping Industry Meet Demand

Semiconductor Chip

The Biden administration’s aggressive move to boost domestic semiconductor chip manufacturing in the U.S. is drawing more collaboration among several Federal agencies. 

With the prolonged impact from the pandemic that’s caused disruptions in supply chains, delayed production, and increased costs, the goal for these initiatives is to reduce the reliance on a single country for semiconductor manufacturing and increase the domestic supply of semiconductor chips. By doing so, the U.S. can create a more sustainable and stable supply chain for these critical components.

Semiconductor chips are tiny electronic components that are essential for the functioning of various electronic devices, from smartphones and laptops to cars and healthcare equipment. They’re critical for the development of advanced technologies and the growth of the digital economy, and the semiconductor industry is essential to the modern world. The COVID-19 pandemic and geopolitical tensions have highlighted the fragility of global supply chains and the need for more resilient domestic manufacturing.

In May 2021, the Biden administration announced several initiatives aimed at boosting the semiconductor industry in the country. These initiatives include investing $50 billion in semiconductor manufacturing and research and establishing a National Semiconductor Technology Center. This funding would be used to support domestic chip production, research and development, and workforce development.

National Semiconductor Technology Center

The National Semiconductor Technology Center would serve as a hub for research and development in the semiconductor industry. The center would be a partnership between government, industry, and academia and would focus on areas such as advanced packaging, materials science, and design automation. The center would also work to develop new manufacturing processes and technologies that could improve the efficiency and reliability of semiconductor production.

The National Semiconductor Technology Center would be a partnership between government agencies such as the Department of Defense, the Department of Energy, and the National Science Foundation, as well as industry partners such as Intel, IBM, and Texas Instruments. The center plans to also collaborate with universities and research institutions to promote knowledge sharing and collaboration.

While the National Semiconductor Technology Center has not yet been established, there have been several recent developments in the semiconductor industry that could benefit from the proposed funding and partnerships. For example, researchers at the University of California, Los Angeles, have developed a new type of semiconductor material that could improve the energy efficiency of electronic devices. Meanwhile, researchers at the University of Texas at Austin have developed a new method for manufacturing flexible semiconductors that could have applications in wearable devices and medical sensors.

CHIPS+ Science Act

The administration has also called on Congress to provide additional funding for the CHIPS+ Act. The CHIPS+ Science Act, or Creating Helpful Incentives to Produce Semiconductors for America Act, was introduced by President Joe Biden on February 24, 2021. The act aims to boost the semiconductor industry in the United States and ensure that the country remains a global leader in chip manufacturing.

NASA, NIST and Commerce leading the way

The semiconductor industry has become a critical area of focus for several government agencies as the country seeks to maintain its leadership in this key technology. Some of the agencies working to address the semiconductor challenge includes:

National Institute of Standards and Technology (NIST): NIST is a non-regulatory agency within the Department of Commerce that is responsible for promoting innovation and industrial competitiveness. In the semiconductor industry, NIST plays a critical role in developing measurement standards and test methods for semiconductor materials and devices. By establishing standardized testing procedures, NIST helps to ensure the quality and reliability of semiconductors produced in the United States.

Department of Commerce: The Department of Commerce is responsible for promoting economic growth and job creation in the United States. In the semiconductor industry, the department has several programs aimed at supporting domestic chip production and reducing reliance on foreign suppliers. For example, the department’s Office of Industry and Analysis provides market intelligence and analysis to help companies make informed decisions about investment and trade. The department also works with other agencies to promote research and development in the semiconductor industry, as well as to identify and address supply chain vulnerabilities.

National Aeronautics and Space Administration (NASA): NASA is best known for its work in space exploration, but the agency also has a role to play in the semiconductor industry. NASA uses a variety of advanced semiconductor technologies in its spacecraft and other equipment, and the agency has been working to develop new materials and manufacturing processes that could have applications in terrestrial electronics. NASA also collaborates with other agencies and industry partners to promote research and development in the semiconductor field.

A Closer Look at the Semiconductor Crisis

Chips and Science Act

Generally, the shortage of these chips has led to disruptions in supply chains, delayed production, and increased costs for various industries worldwide. Take the automotive industry, for example. The shortage has led to a reduction in the production of cars, and some car manufacturers have had to shut down production temporarily. As a result, car prices have increased, and consumers have had to wait longer for their cars to be delivered. For example, General Motors announced in February 2021 that it would have to shut down production at several of its plants due to the shortage of semiconductor chips. The shutdowns were expected to last for several weeks and would affect the production of various models, including the Chevrolet Silverado and GMC Sierra pickups.

Other industries that have been affected by the shortage include the smartphone industry, which relies heavily on semiconductor chips for the production of their devices. Samsung, one of the largest smartphone manufacturers, has reportedly had to delay the launch of its new Galaxy Note due to the shortage of chips.

The shortage has also affected the healthcare industry, as semiconductor chips are used in medical devices such as MRI machines and pacemakers. The shortage has led to delays in the production and delivery of these critical devices, affecting patients who need them.

One of the proposed solutions is to boost domestic semiconductor chip manufacturing in the US. This approach aims to reduce the reliance on a single country for their manufacturing and increase the supply of semiconductor chips. It could also lead to the creation of jobs in this field, which is a great thing. For example, Japan is home to some of the world’s largest semiconductor chip manufacturers, including Toshiba, Renesas, and Sony. By collaborating with Japan and other countries, the US can increase the supply of semiconductor chips and reduce the likelihood of future supply chain disruptions.

Some people are skeptical about the effectiveness of this approach. They’re concerned about the potential cost of these initiatives and their impact on the global market for semiconductor chips is highly competitive, and it may be challenging for US-based companies to compete with established manufacturers in countries like Taiwan and South Korea. Some suggest that a more collaborative approach involving other countries, such as Japan, could be more effective in addressing the semiconductor shortage.

It’s important to note that the root causes of the semiconductor shortage should also be addressed. One of the main reasons for the shortage is the disruption caused by the COVID-19 pandemic. The sudden surge in demand for electronic devices coupled with the disruption in the supply chain led to the current shortage. Therefore, a comprehensive and long-term strategy is needed to increase the supply of semiconductor chips and reduce the likelihood of future supply chain disruptions.

It’s clear that the semiconductor chip shortage is a significant issue affecting various industries worldwide. While President Biden’s proposed initiatives to boost domestic semiconductor manufacturing in the US are one of the solutions being considered, a more collaborative approach involving other countries and a comprehensive long-term strategy to address the root causes of the semiconductor shortage is also needed.

It’s difficult to say exactly how much production capacity would need to be added in order to meet demand, as the semiconductor market is complex and highly specialized. However, analysts suggest that a combination of increased production capacity, improved supply chain resilience, and greater investment in research and development could help to address the current shortage and support long-term growth in the semiconductor industry. In the meantime, we’ll have to keep our fingers crossed and hope for the best.

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