Liberty Intercept Blog

Discussion: CHIPS Act Hurdles

“When you stand for something, you got to stand for it all the way, not half way.” - Kevin Gates, musician

    The CHIPS Act offers great opportunity for American industry and its workforce. Or it could end up being a colossal waste of taxpayers’ money when the US can least afford it. For this investment gamble to be successful, Chips Act subsidies must include fabrication and assembly, testing, and packaging. The United States economy has historically thrived when materials are made into finished products.

    “Government and industry need to work together to force and correct bottlenecks in this supply chain.” - Vishnu Kannan, Jacob Feldgoise, Carnegie Endowment for International Peace. It makes no sense to fabricate chips in the U.S., then ship them to Asia for mounting on printed circuit boards (PCB), when there is a 25% higher operational cost in the United States, as well as freight costs to consider. Foreign chip producers will certainly not decrease their capacity simply because the U.S. increases its own. Chances are the U.S. alone cannot absorb all the newly capacity, exporting will be necessary. The U.S. must be efficient and competitive in for this investment to be successful.

Interview notes from 40 year PCB industry veteran and Summit Interconnect VP John Vaughan The current state of the U.S. PCB Industry:

• In 2000, The U.S. PCB industry held 30% of the worldwide market with approximately 2300 fabricators. Now the U.S. has 4% share and about 150 fabricators, of which five companies have a billion in sales with the DoD spend of 1.3 billion. That means other fabricators are competing for $300 million. The industry is grossly under-capitalized to develop and institute new methods and technology.
• PCB’s have spacers and tracers placed on them, items for which the U.S. does not have any manufacturing.
• Asian manufacturing’s current capabilities are at 25 micron thickness, the U.S. is at 75 micron, which is acceptable for robust DoD needs, but not for other industries. Capital equipment investment is needed and since the industry has been starving for new business so long, it can’t rely only on private investment. They need government investment.
• The industry desperately needs an infusion of new labor. Semiconductor Industry Association reports just in semiconductor design, there will be a 23,000 workers shortage by 2030.
  
      Why should the U.S. government thoughtfully invest in The CHIPS Act :

• Computer chip demand is expected to grow over 50% in the next 10 years. The need is obvious.
• At 98% market share, the United States is the leader in IC (Integrated Circuit) design. It makes sense to build them here.
• There is current legislation to issue 25% tax credits for buyers that purchase American-made PCBs. This is a well-conceived incentive to balance the higher costs of production, in conjunction with governmental investment.
• With a robust electronics industry, other markets outside of DoD security needs are potential buyers, such as the power, networking, financial, transportation, and other infrastructure industries. Going forward new, trustworthy, and sophisticated security will be key in all areas of society.

    This endeavor to rework the United States electronics industry will be a challenge. The United States is behind other countries in capitalization, technology, and supply chain. Other industrial bases are highly competitive and will not roll over in the face of the U.S. government sponsoring. We expect the quality of American chips and assemblies to be highly scrutinized, especially as U.S. PCB manufacturers scale to smaller circuit boards to be sold into areas of high sensitivity, like infrastructure security.

    Going forward, corrosion and electrostatic discharge control are now most urgent concerns with these smaller electronics, assemblies, and equipment.

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