03-03-2021 | | By Robin Mitchell
Recently, both the US and EU have shown interest in becoming independent from far east countries for semiconductor devices. Who currently produce the most semiconductor devices, what do the US and EU want, and why is silicon sovereignty important?
During the development of the first transistors, the United States of America was the worlds biggest producer of semiconductor devices. As companies around the world began to explore how semiconductors worked and were manufactured, the US consistently remained at the top of semiconductor technology. However, other nations around the world eventually caught up with the US, and the tables have now turned so much that the US now export less than 5% of all devices.
While the US is responsible for just under 50% of the entire semiconductor industry, this must not be confused with semiconductor manufacture. Just like how major brands exist all over the world, China is generally responsible for the manufacture of most goods. The same applies to the semiconductor industry, the US and EU have many brands (such as Intel, ARM, and AMD), but these brands are made elsewhere.
Taiwan currently stands as the worlds largest exporter of devices at greater than 23%, South Korea stands at just over 11%, and Singapore also at around 11%. These figures change when looking at discrete devices (such as transistors), which sees China being the largest semiconductor exporter at around 25%.
While the US may make up almost half of the entire semiconductor market globally, the US is only responsible for 12% of the world’s production of semiconductors. These figures are even lower for the EU, and yet both the US and EU are major consumers of semiconductors. This means that both the US and EU have to import their devices from other nations around the globe.
What the US and EU own in the semiconductor industry is more intellectual property and fabless businesses which design semiconductor devices but outsource their production to other nations. The fabless model for businesses has proven to be very successful, but it can make a nation extremely vulnerable to nations that produce those devices.
For example, TSMC is one of the worlds biggest players in the production of semiconductors, and TSMC operates in Taiwan. Tensions between Taiwan and China are increasing, and if China decides to “repatriate” Taiwan, the semiconductor industry could receive a devastating blow.
Like food and water, semiconductor devices are a key resource whose supply chain must be protected and ensured. If a nation’s technological capabilities are faltered then they are open to attack on multiple fronts including militarily, economically, and socially.
It is clear that semiconductors are extremely important to the development of a nation, and nations such as the EU and US which are major consumers of such products would do well to rely less on outsourced production. As such, there have been calls on both the US and EU governments for the respective nations to develop their own foundries and move manufacture away from foreign entities.
In the US, a group of US chip designers and manufacturers approached the new Biden administration asking for increased funding to start the creation of new semiconductor foundries. According to the group, the demand for increased funding would also help with COVID-19 recovery as jobs would be created in the construction and semiconductor industries. The response from the Biden administration is that key areas of the supply chain that hinder semiconductor production will be identified.
While this may seem like reasonable action by a government, the truth is that simply identifying choke points in a supply chain does very little to help with the fundamental issue. If semiconductor production is to be incentivised in the US then consumers need to be given a reason to only purchase locally develop products while producers also need to be given incentives to set up foundries locally. Such legislation that has proven to be effective include tax deductions, lower minimum wages, and less red tape when opening new facilities.
The EU is responsible for less than 10% of the worlds semiconductor manufacturing market despite the EU being one of the leaders in technological development with brands including ARM, NXP, and STMicroelectronics. Recognising the lack of semiconductor production and hence the reliance on outside nations, the EU is looking to initiate a project that will increase the total chip production of the EU from 10% to 20%.
One key area that the EU are exploring is 5G technologies, and the EU has recently announced that it is looking to work in conjunction with either Samsung or TSMC to achieve this goal. The factory that would be designed in collaboration with one of these two companies would be responsible for creating devices down to the 2nm node and primarily focus on 5G.
A nation is only as strong as its weakest link, and it is thinking that sees many nations always hold stockpiles of key resources such as food and oil. In fact, it is generally believed that agricultural subsidiaries in the UK exist solely so that in the event of a war the UK is able to kickstart its food production capabilities.
Now that semiconductors have become as important as food, the ability for a nation to produce its own devices has never been more important.