The United States invests heavily in the chip industry

In September, chip giant Intel convened officials on a piece of land near Columbus, Ohio, and pledged to invest at least $20 billion in two new semiconductor factories.

A month later, Micron Technology celebrated a new manufacturing site near Syracuse, N.Y., where the chip company expects to spend $20 billion by the end of the decade and could end up spending five times that amount.

In December, TSMC held a grand event in Phoenix with plans to triple investment to $40 billion and build a second new factory to produce advanced chips.

The commitments are part of a massive increase in U.S. chip manufacturing plans over the past 18 months that rivals investment in the space race during the Cold War. The boom has implications for global technology leadership and geopolitics, with the United States aiming to prevent China from becoming an advanced power in the chips that power innovative computing devices such as smartphones and virtual reality goggles.

Today, chips are an essential part of modern life, even beyond the tech industry's creations, from military gear and cars to kitchen appliances and toys.

Since spring 2020, more than 35 companies across the country have committed to investing nearly $200 billion in chip-related manufacturing projects, according to the Semiconductor Industry Association, an industry group. The funds will be used in 16 states, including Texas, Arizona and New York, for 23 new chip factories, nine factory expansions, and investments in companies that provide equipment and materials to the industry.

The move is one aspect of the Biden administration's industrial policy initiative, which includes at least $76 billion in pending grants, tax credits and other subsidies to encourage domestic chip production. In addition to sweeping funding for infrastructure and clean energy, these efforts constitute the largest U.S. investment in manufacturing, arguably since World War II, with the federal government spending heavily on new ships, pipelines and factories to make aluminum and rubber.

"I've never seen a tsunami like this," said Daniel Armbrust, former CEO of Sematech. Sematech was a now-defunct chip consortium formed in 1987 with the Department of Defense, with funding provided by member companies.

President Joe Biden has staked a significant part of his economic agenda on stimulating U.S. chip production, but his reasons go beyond financial gain. Many of the world's cutting-edge chips today are made in Taiwan, a geopolitical focal point.

Industry executives say new U.S. production efforts could correct some of those imbalances — but only up to a point.

New chip factories take years to build and may not offer the industry's most advanced manufacturing technology when they begin operations. Companies could also delay or cancel projects if the White House doesn't provide enough subsidies. A severe skills shortage threatens to undermine prosperity, as complex factories require far more engineers than can be graduated from U.S. colleges and universities.

Chris Miller, an associate professor of international history at Tufts University's Fletcher School of Law and Diplomacy, said the vast amount of money U.S. chip production is "not going to try or succeed in achieving self-sufficiency."

White House officials argue that investment in chip manufacturing will improve U.S. economic security by significantly reducing the proportion of chips that need to be purchased from abroad. At a TSMC event in December, Mr. Biden also highlighted the potential impact on technology companies such as Apple that rely on TSMC for their chip manufacturing needs. "This could be a game changer" as more companies "bring more of their supply chain home," he said.

American companies led chip production for decades, starting in the late 1950s. But as Asian countries offered incentives to move manufacturing there, the country's share of global production capacity gradually declined from about 37% in 1990 to about 12%.

Today, Taiwan accounts for about 22% of total chip production and more than 90% of the most advanced chip production, according to industry analysts and the Semiconductor Industry Association.

New spending will improve America's standing. According to a 2020 study by the Boston Consulting Group commissioned by the Semiconductor Industry Association, $50 billion in government investment could spur business spending, boosting the U.S.'s share of global production to 14% by 2030.

“This really puts us on the map for the first time in decades,” said John Newfer, the association’s president, adding that the estimate is likely conservative because Congress approved $76 billion through legislation called the CHIPS Act. of subsidies.

Still, such growth is unlikely to eliminate U.S. dependence on Taiwan for the most advanced chips. Such chips are the most powerful because they pack the largest number of transistors on each piece of silicon, and they are often seen as a sign of technological progress in a country and region.

Intel has long been at the forefront of the race to shrink transistor sizes to fit more of them on chips. The pace of miniaturization is often described in nanometers, or billionths of a meter, with smaller numbers indicating the most advanced production technology. However, TSMC has been making rapid progress in recent years.

But at its Phoenix factory, TSMC may not bring in its most advanced manufacturing technology. The company initially announced it would make 5-nanometer chips at the Phoenix factory, then said last month it would also make 4-nanometer chips there by 2024 and build a second factory that would open for production in 2026. 3 nanochips. It did not discuss further advances.

In contrast, TSMC's factories in Taiwan will begin production of three-nanometer technology in late 2022. International Business Strategies CEO Handel Jones said Taiwanese factories could start supplying Apple with two-nanometer chips by 2025.

TSMC and Apple declined to comment.

It's unclear whether other chip companies will bring more advanced cutting-edge chip technology to their new sites. Samsung Electronics plans to invest $17 billion in a new factory in Texas, but has not disclosed its production technology. Intel is making chips around 7 nanometers, although it says its U.S. factories will produce 3-nanometer chips by 2024 and more advanced products soon after.

The spending boom will also reduce, but not eliminate, U.S. dependence on Asia for other types of chips. Domestic factories produce only about 4% of the world's memory chips - needed for computers, smartphones and other consumer devices - and Micron's planned investments could eventually increase that share.

But there may still be gaps in a variety of older, simpler chips that have been in such short supply for the past two years that U.S. automakers have had to close factories and produce partially finished cars. TSMC is a major producer of some of these chips, but it is focusing new investments on more profitable advanced chip factories.

"We still have a dependency that's not impacted in any way shape or form," said Michael Hurlston, CEO of Synaptics, a Silicon Valley chip design company that relies heavily on TSMC's old factories in Taiwan.

According to the Semiconductor Industry Association, the chip manufacturing boom is expected to create 40,000 new jobs in the factories and companies that supply these chips. This will add approximately 277,000 U.S. semiconductor industry employees.

But filling so many technical positions isn't easy. Chip factories typically require technicians to run the factory machines, as well as scientists in fields such as electrical and chemical engineering. According to a recent survey of executives, talent shortages are one of the industry's most critical challenges.

The CHIPS Act includes funding for workforce development. The Commerce Department, which oversees allocations from CHIPS Act funds, also made clear that organizations hoping to receive funds should develop plans to train and educate their employees.

In response to this problem, Intel plans to invest $100 million to promote training and research among universities, community colleges, and other technology educators. Purdue University, which is building a new semiconductor laboratory, has set a goal of training 1,000 engineers a year and has attracted chipmaker SkyWater Technology to build a $1.8 billion manufacturing plant near its Indiana campus.

However, as chip companies compete with other industries desperate for workers, training may only go so far.

"We're going to have to build a semiconductor economy that attracts people with lots of other options," Mitch Daniels, then-Purdue president, said at an event in September.

Because training efforts can take years to bear fruit, industry executives want to make it easier for highly educated foreign workers to obtain visas to work in the United States or stay in the country after earning their degrees. Officials in Washington are aware that rhetoric encouraging more immigration could draw political fire.

But Commerce Secretary Gina Raimondo didn't mince words in a speech at MIT in November.

Attracting the world's best scientific talent is "the advantage America has lost," she said. "And we're not going to let that happen."