The global journey of a SiC chip: Semiconductors cannot fight alone

Latest update time：2024-03-22

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Semiconductors are vital to the modern economy, powering everything from video games and cars to supercomputers and weapons systems. The Biden administration is investing $39 billion to help companies build more factories in the United States and bring more supply chains back home.

But even after the U.S. factories are built, chipmaking will remain distinctly global.

The international journey of a chip made by U.S. semiconductor maker Onsemi for use in electric vehicles shows how difficult it is to decouple from East Asia and other regions that dominate the chip market.

The first step in making this special semiconductor, called a silicon carbide chip, takes place at a factory in New Hampshire. The chip eventually found its way into cars on U.S. roads and elsewhere. But in the meantime, the process will depend on raw materials, machinery and intellectual property from dozens of foreign suppliers and factories.

The first step begins at Onsemi's facility in New Hampshire, using deep black silicon and carbon powders sourced from Norway, Germany and Taiwan. The powder is added to graphite and gas sourced from the United States, Germany and Japan and then heated to temperatures close to the sun, creating a crystal that will form the backbone of millions of chips.

The crystals, which are almost as hard as diamonds, are sent to a factory in the Czech Republic where they are sliced using special machines from the United States, Germany, Italy and Japan.

The wafers are shipped to an ultra-clean factory in South Korea, where mechanized buckets move the wafers between complex machines from the Netherlands, the United States and Japan. These machines use chemicals, gases and complex patterns of light to create channels just a few atoms wide for electrons to pass through as they deliver information.

The wafers are then cut into tiny chiplets and shipped to factories in China, Malaysia and Vietnam for final packaging and testing. The chips are then shipped to global distribution centers in China and Singapore.

Eventually, the chips are sent to Hyundai, BMW and other automakers in Asia and Europe, which put them into the powertrains of electric vehicles. Other chips are sold to auto parts suppliers in Canada, China and the United States.

The first computer chips were invented in the United States, but by the late 1960s, parts of the supply chain began to move overseas as companies sought to save costs. Helped by generous subsidies, Asian companies eventually began making chips that were cheaper and more advanced than those made in the West.

The U.S. share of world chip manufacturing has fallen from 37% in 1990 to 12% today, according to industry data.

The United States is trying to recapture more chip production to make its supply chain more resilient and avoid the kind of costly and economically damaging semiconductor shortages seen during the pandemic. But as other countries also continue to invest heavily in the chip industry, U.S. investment - however large - can only go so far in changing the global landscape.

A 2020 study by the Boston Consulting Group and the Semiconductor Industry Association estimated that an infusion of $50 billion would increase U.S. manufacturing share to 13% or 14% by 2030, helping the U.S. retain at least some of its global share. Without funding, the U.S. share would fall to 10%, the study said.

For the most cutting-edge chips, including those that will help fuel the artificial intelligence boom, U.S. officials now say new investments will put the country on track to produce about 20% of the world's cutting-edge logic chips by the end of this decade.

Moody's Analytics said in a recent report that chip and electronics production is likely to be concentrated in Asia for the foreseeable future. Chance Finley, vice president of global supply chain at Onsemi, said technology companies face intense competitive pressure to innovate while reducing costs, which means they are forced to work with the most skilled manufacturers in Asia.

He said the construction costs of chip manufacturing facilities are mind-boggling, ranging from $5 billion to $20 billion, more than a nuclear power plant, prompting domestic chipmakers to outsource manufacturing to foreign factories rather than build them themselves. Chips are small and light, which makes them easy to move around the world.

Onsemi is seeking new U.S. investment in the chip industry to help it grow, while also considering investing $2 billion in expansion in the U.S., Czech Republic and South Korea.

Many stages of Onsemi's manufacturing process are completed in-house. This is somewhat unusual for chip companies, which often outsource certain stages of production. Other chip supply chains are different but equally international. Many factories are produced in Taiwan, China, which produces more than 60% of the world's chips and more than 90% of the most advanced chips.

A 2020 study by the Global Semiconductor Alliance and Accenture found that chips and their components may cross international borders 70 or more times before reaching the end consumer, traveling more than 25,000 miles in the process.

Another study by the Boston Consulting Group and the Semiconductor Industry Association looked at creating a self-sufficient chip supply chain in the United States and estimated that it would cost $1 trillion and significantly increase the price of chips and the products they make.

“The idea that we will be somehow self-sufficient is unrealistic,” said Bindiya Vakil, chief executive of Resilinc, which maps supply chains for semiconductor and other industries. "Whether we like it or not, we are part of the global supply chain."

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https://www.nytimes.com/interactive/2024/03/20/business/economy/semiconductor-chip-manufacturing-us.html

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