CPA Testifies at Commerce Department Forum on Crisis Facing U.S. Semiconductor Industry

WASHINGTON — The Coalition for a Prosperous America (CPA) today provided expert testimony during a virtual forum held by the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) titled, “Risks in the Semiconductor Manufacturing and Advanced Packaging Supply Chain.” The virtual forum is part of the Department of Commerce’s efforts to produce a report mandated by President Biden’s Executive Order 14017 on “America’s Supply Chains.” The forum identifies risks in the semiconductor manufacturing and advanced packaging supply chains, and also proposes policy recommendations to address these risks.

CPA praised Biden’s February 24 executive order as an “important and far-reaching step” to strengthen the resilience of America’s supply chains. Last month, CPA and China Tech Threat jointly released a white paper titled “Maintaining U.S. Leadership in Semiconductors and Countering China’s Threats.” The paper examines the decline in U.S. market share for global semiconductor manufacturing, including the attendant risks to U.S economic and national security, and why maintaining U.S. leadership in the semiconductor industry is critical for the nation.

You can read CPA Chief Economist Jeff Ferry’s remarks for the BIS virtual forum here. Key excerpts, including policy recommendations are below.

CPA Chief Economist Jeff Ferry: The U.S. is today facing a serious crisis in the semiconductor industry. As the current widespread chip shortage graphically illustrates, the U.S. has become overly dependent on a handful of chip manufacturing houses, known as fabs, primarily in Asia. Today, auto workers are being laid off because auto manufacturers cannot get the chips they need to build vehicles.

The challenge the U.S. faces is threefold: first, China is targeting the chip industry as one of its “Made in China 2025” critical industries where it aims to become a world leader. Secondly, our global supply chains have become longer, more concentrated, and more fragile. Today they are less resilient than they were a decade or two ago, and more susceptible to disruption from unpredictable international events. Finally, the U.S. financial system is driving U.S. chip design companies to sell off or shut down their manufacturing operations, making us even more dependent on foreign chip fabs.

The solution is for the U.S. government to take a leadership role and target rebuilding our chip manufacturing capability. We recommend the U.S. set a target of 50% production capacity within the U.S. for every major segment of the semiconductor market. I mean by this the U.S. should have the capacity to supply the U.S. industry with 50% of the chips needed in logic semiconductors, 50% in memory, 50% in analogue, 50% in power semiconductor, 50% in display, and, crucially, 50% in artificial intelligence/machine learning semiconductors.

There are four crucial steps to making this process successful:

  • First, the U.S. government should set a target objective, which I suggest should be 50% production capacity by market segment. It should not just dispense money to chipmakers and hope they do the right thing. You must know your objective.
  • Second, the U.S. should extend the investment capital to make its target achievable. The $50 billion figure in the CHIPS for America act is a great start. A total of $100 billion would be better. And there is a multiplier effect when you build a consortium, because the other partners would invest alongside the federal government.
  • Third, a new business needs customers. The customers for U.S. fabs are the U.S. fabless chipmakers. There must be incentives to get these customers to favor U.S. fabs. That is in our economic and national security interest. Tax credits, a stake in a consortium, or, if necessary, tariffs, could provide the right incentive to rebuild the U.S. fab industry.
  • Fourth, U.S. fabs need protection from the predatory practices of foreign suppliers, in particular China.

Read Mr. Ferry’s full remarks here.

 

Media Contact:
Nick Iacovella, Communications Director
nick@prosperousamerica.org
(202) 688-5145 ext. 0

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