Why does the United States use government subsidies to revive the semiconductor industry?

The semiconductor industry is known as the "gold-spitting machine" of modern industry. In 1998, the book "The American Semiconductor Industry is a Multiplier of the American Economy" published in the United States stated: "Semiconductors are a technology that eclipses all other industries and enables other industries to prosper." The book introduces that the US semiconductor industry created $41 billion in wealth in 1996 and increased at an annual rate of 15.7%, more than 13 times faster than the overall US economic growth rate. In addition, in 2017, the US Semiconductor Advisory Committee called the semiconductor industry a "life-and-death industry" in its State of the Union address to then-US President Bush. South Korea calls it "industrial food" and "filial industry." So it is no exaggeration to say that the semiconductor industry is the lifeline of modern industry.

Semiconductors were invented by the United States, and the United States is still the world leader in cutting-edge semiconductor research and development, design, and manufacturing. In 2019, U.S. semiconductor companies accounted for nearly half of the global semiconductor market (about $412.3 billion). However, in order to ensure that the United States will continue to lead in future technology in the next 50 years, the United States recognizes that it still needs to ensure that it continues to lead the world in semiconductor research and development, design, and manufacturing.

The Semiconductor Industry Association (SIA) recently released a report pointing out that in order to meet challenges and ensure that the United States can continue to lead the global semiconductor industry, the United States must increase investment. The SIA report puts forward policy recommendations in three aspects: R&D, talent, and trade. In particular, it is proposed that basic research investment should be led by the government, while application innovation and product development should be invested by enterprises themselves.

A strong, financially sound semiconductor industry is strategically important to the U.S. Breakthroughs in semiconductor technology drive economic growth and are critical to national security.

Why does the U.S. semiconductor industry feel a sense of crisis?

The United States' long-term leadership in semiconductor technology depends on three pillars: pioneering research and development by American companies, top talent, and the ability to sell high-end products to global customers. The overall strength of the U.S. semiconductor industry remains strong, but the United States is experiencing a sense of crisis.

The reason for this is that the global semiconductor industry is progressing rapidly, and the driving force that the industry previously relied on is changing. In such a change, the United States' advantage is no longer as good as before. On the contrary, South Korea's memory and Taiwan's foundry industry have begun to lead in advanced process technology, which has put pressure on the United States. From the perspective of the semiconductor industry chain, although the United States still controls nearly half of the global semiconductor industry's revenue and continues to lead in semiconductor equipment, design and IP, it has no obvious advantage in the pearl of the semiconductor industry - chip process technology, although it has not fallen behind. Due to the rapid progress of TSMC and Samsung in advanced semiconductor technology, Intel, which previously dominated the industry, is no longer as glorious as before. In addition, from the perspective of future industry trends, the United States may not necessarily have a chance of winning in the fields of artificial intelligence, quantum computing, and the Internet of Things.

According to SIA data, the current US semiconductor production capacity accounts for only 12.5% ​​of the world's total, with more than 80% of the capacity located in Asia. In 2019, all six new 12-inch wafer fabs built worldwide were outside the United States. It is predicted that by 2030, the US's share of wafer production capacity will drop to 10%, while Asian countries and regions will account for 83%. By then, mainland China is likely to become the region with the largest production capacity.

The United States is developing a semiconductor revival plan

In order to avoid the situation that people are worried about in the future, the Semiconductor Industry Association of the United States is seeking the federal government to pass a $37 billion subsidy bill to ensure the competitiveness of the U.S. semiconductor industry, including subsidies for new wafer manufacturing plants, assistance to states seeking to attract semiconductor investment, and increased R&D funding.

It is reported that the SIA draft includes a $5 billion federal subsidy for the construction of a new semiconductor plant, which will be jointly operated by the government and private enterprises; another $15 billion as a comprehensive subsidy for the states, mainly as a subsidy for the states to attract investment and set up factories; the remaining $17 billion is for research and development. It is reported that SIA calls for bipartisan support for the proposal. At the same time, Republican and Democratic senators are drafting a bill that will allocate $110 billion for technology expenditures including semiconductor research. Another report mentioned that the new plant built with $5 billion is likely to be operated in cooperation with Intel. Because in April this year, it was reported that Intel CEO Bob Swan wrote to officials of the US Department of Defense, expressing his willingness to cooperate with the Pentagon to build and operate a semiconductor plant.

The US semiconductor industry has sensed the crisis and has tried to use the policy of state subsidies to revive the semiconductor industry. The lesson we learn is that we should fully realize the key role of wafer manufacturing in the semiconductor industry. Only by strengthening the manufacturing industry can we better drive the development of upstream and downstream related industries.

At all times, China's semiconductor industry must adhere to the "two-pronged approach", one hand is globalization, the other hand is localization. Now many people are promoting the realization of localization, but this is not our ultimate goal.