Chips Act Won’t Work Without Every Part of the Chip

The US was awakened by the pandemic to the gaping holes in its supply chains for crucial medical supplies and electronics. One of the most significant was semiconductors, the pieces of silicon that hold millions of tiny transistors that are needed in everything from automobiles to toys.

The Chips and Science Act devotes $52 billion to begin to remedy a decades-long trend of US production drifting away to lower cost regions, mostly to Asia and especially to China. The rebuilding of that supply chain and manufacturing capacity will take years, but it will come to naught unless all the components, even the low-margin ones, have a presence in the Americas, if not the US.

The production of semiconductors is arguably the most globalized industry, and the small size and higher value of chips make them ideal for ferrying around the globe by aircraft. The ability to move materials and components at a negligible cost and time of transport made them an early candidate for moving manufacturing overseas.

The combination of this mobility and the push of US chipmakers to improve profit margins resulted over the decades in the industry being broken down into several distinct activities, with specialized manufacturers at each stage. US companies have kept the research and design, which is the most lucrative part of the business. Although there are some integrated chipmakers, most of the manufacturing has migrated overseas: the raw materials; silicon substrates on which the chips are built; the wafers on which chips are engraved; and a final production process than encases and tests the chips.