When you think of the phrase “small, yet mighty”, do semiconductors come to mind? While the size of these electronic chips continues to decrease, their status as the powerful building blocks of modern electronics only increases. The Semiconductor Industry Association recently released their official “2022 State of the U.S. Semiconductor Industry” report detailing the status of this multifaceted industry within the United States and on a global scale. As we reflect on the past year, what are some events and innovations that made a big impact on the industry overall?
The CHIPS and Science Act
Perhaps the most notable and impactful moment for the U.S. semiconductor industry in 2022 was the passing of the CHIPS and Science Act– bipartisan legislation that offers vital incentives for the production of semiconductors as well as research funding. The goal for the legislation (signed into law on August 9, 2022) is to boost the American economy, bolster national security, and provide supply chain resiliency.
The CHIPS and Science Act allocates a total of $52.7 billion for research and development, including manufacturing incentives that amount to $39 billion.The act also designates $13.2 billion to R&D and workforce development, $2 billion for legacy chips (such as those in cars / systems of defense), and $500 million meant for increased security with international information communications technology. Additionally, a 25% investment tax credit is offered for costs incurred in the production of semiconductors and associated machinery.
These incentives have already begun to make an impact on domestic manufacturing within the U.S. The 2022 state of the industry report found at least 46 new projects focused on developing the semiconductor ecosystem across the U.S. These projects include expanding 9 existing semiconductor manufacturing facilities (fabs), in addition to building 15 new facilities. These projects had been in 12 states so far, reportedly resulting in the creation of at least 36,000 jobs directly related to the semiconductor industry.
Innovation in Semiconductor Design
While the financial incentives of the CHIPS and Science Act have undeniable benefits on domestic manufacturing, the true strength of the U.S. semiconductor industry depends upon our ability to innovate within the field of design. Innovation with semiconductor chip design provides the crucial first step towards future development possibilities. According to the 2022 report, the U.S. is currently the industry leader in chip design, with 94,000 chip designers working for U.S. based semiconductor firms in 2021 (out of a total 187,000 designers globally). The report breaks down these U.S. based companies into fabless (47%), IDMs (about 51%), and OEMs (less than 2%).
The complicated process of chip design revolves around transistors. The higher the amount of transistors, the more complex the functionality. What is one of the biggest obstacles to putting more transistors on a chip? Physics. The size and proximity of smaller and smaller transistors not only makes it more difficult to stamp on the chip, but it impacts the electrical signals between them. As Mukesh Khare (VP of the Research Semiconductor Group at IBM) explains, “It’s about innovation, not scaling. At a physical level, we still want to make things smaller, but how we do that requires very different concepts and ideas at more fundamental and materials level… it used to be more [about] geometry.”
In 2022, the M1 Ultra from Apple was the commercially available microprocessor with the highest number of transistors- 114 billion. These transistors had a diameter of just 5 nm. For comparison, the average diameter of a human hair is 100 nm.
The Recovering Supply Chain
In 2020, the lockdowns and uncertainties caused by the COVID-19 pandemic resulted in unprecedented disruptions to supply and demand and a global chip shortage. 2022 saw some much needed relief from the effects of the COVID-19 pandemic as manufacturing increased. While the heightened demand for semiconductors is anticipated to last for years, the global semiconductor industry is making plans and investments to satisfy this anticipated market expansion. From 2020 through the end of 2022, the world’s fab capacity has been projected to increase by 30%, and it is anticipated to increase even more in 2023. Despite the fact that fabs are often unable to sustain utilization rates above 80% for an extended period of time, the industry maintained high levels of output exceeding “full utilization” until 2022 to meet the expanding demand. As a result, it is projected that the sector would achieve record levels of output, if not surpass them.
The far-reaching impact of the shortage served as a reminder of the crucial role semiconductors play in several important industries, from transportation to communication. The 2022 report points out that this dependence will likely only increase with the anticipated rise of electric vehicles. In the long run, demand for chips will increase due to the increasing importance of semiconductor chips in an ever-growing range of goods.
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