{"id":19925,"date":"2022-03-28T20:09:16","date_gmt":"2022-03-29T00:09:16","guid":{"rendered":"https:\/\/a2globalelectronics.com\/?p=19925"},"modified":"2022-03-28T20:09:28","modified_gmt":"2022-03-29T00:09:28","slug":"can-onshoring-semiconductor-production-solve-the-global-chip-shortage","status":"publish","type":"post","link":"https:\/\/a2globalelectronics.com\/ja\/defense-aerospace\/can-onshoring-semiconductor-production-solve-the-global-chip-shortage\/","title":{"rendered":"Can Onshoring Semiconductor Production Solve the Global Chip Shortage?"},"content":{"rendered":"

Semiconductor manufacturing has long been an outsourced industry: According to data collected by Statista, Taiwan (65%), Korea (18%), and China (5%) accounted for 88% of global foundry revenue in 2021.<\/a> However, a years-long global shortage has increased prices and made chips hard to come by.<\/h2>\n\n\n\n

One proposed solution: onshoring semiconductor production. In theory, this would increase both domestic chip access and the U.S.\u2019s market share of worldwide fab output. But would it work to alleviate present-day shortages? The idea of onshoring isn\u2019t a viable immediate solution. Long-term, some industries would undoubtedly benefit \u2014 but others would continue struggling and be forced to find alternative solutions.<\/p>\n\n\n\n

Short-Term Challenges for Onshoring Semiconductor Production<\/h2>\n\n\n\n

When viewed holistically, the U.S. semiconductor industry\u2019s hardships are overstated. Considering the different forms that businesses in this sector take \u2014 chip designers and packagers, core intellectual property sellers and licensers, Semiconductor Manufacturing Equipment and Electronic Design Automation software producers, and more \u2014 the country only trails its competitors in chip production.<\/p>\n\n\n\n

Unfortunately, onshoring semiconductor fabrication requires tremendous and consistent investment from the private and public sectors, and such investment demands a profitable return. Bloomberg\u2019s Anjani Trivedi cites a figure of $20 billion to build a large plant and equip it with leading-edge tech<\/a> \u2014 \u201cmore than a new aircraft carrier or nuclear power plant.\u201d Additionally, foundries take significant time to build, ramp up, and operate at full capacity: anywhere from 2\u20133.5 years<\/a>, according to global consulting firm McKinsey and Company. Even immediate investments targeted at onshoring semiconductor production wouldn\u2019t alleviate the current shortage.<\/p>\n\n\n\n

Long-Term Potential<\/h2>\n\n\n\n

Over time, onshoring could potentially improve the U.S.\u2019s standing in the global semiconductor industry and fuel the development of the latest and greatest technologies. Getting there, though, may adversely impact certain industries. Given the massive investment required to build them, domestic fabs would prioritize chips featuring \u201cnext-generation\u201d technology that command higher prices, at the expense of ones utilizing \u201clast-generation\u201d tech.<\/p>\n\n\n\n

While great for business, this would spell disaster for sectors that rely on older semiconductors. Industries like defense and aerospace offer perfect examples: They don\u2019t have the time or resources to regularly update their systems, and from a cost perspective, they want to extend the lifecycle of their chips while more commercially focused industries seek to reduce them. In fact, legacy chips are a key driver of today\u2019s shortage. For instance, Apple has stated<\/a> that current issues with iPhone production stem from the small amounts of legacy chips they require \u2014 chips that don\u2019t drive even performance.<\/p>\n\n\n\n

In conclusion, onshoring semiconductor production has its positives. The U.S. can, and should, invest in fabrication to avoid future shortages. It\u2019s important to note a lack of short-term relief, though, and in the long-term, certain industries would benefit more than others. To remain viable, companies in these sectors would have no choice other than to continue offshoring; establishing robust procurement plans and obsolescence management strategies would take on even greater importance.<\/p>\n\n\n\n

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