The CHIP act

The long form article appears here.

I am including the salient features from their policy idea.

The CHIPS and Science Act appropriated over $52 billion to promote the domestic U.S. semiconductor industry. This includes incentives for new semiconductor fabrication facilities and funding for advanced packaging, research and development, workforce support, and wireless supply chain innovation.
While most CHIPS Act funds are focused on re-shoring semiconductor manufacturing capacity, agencies can use the $15.2 billion made available for other microelectronics-related initiatives to maximize overall semiconductor supply chain resilience.
Spending $39 billion to re-shore leading-edge logic and memory manufacturing will do little to materially increase U.S. semiconductor supply chain resilience if accompanying efforts to re-shore and near-shore the broader ecosystem are not made.
Upstream materials used in semiconductor fabrication include highly purified elements, chemicals, common gases, specialty electronic-grade gases, bonding wire, ceramics, substrates, lead frames, and resins. Downstream semiconductor ATP is almost entirely located in Asia, and the U.S. workforce lacks the skills to meet these industries’ needs.
There are many materials used to make semiconductors, and many of these materials go through supplemental processing to meet the stringent purity and performance requirements associated with semiconductor manufacturing.
Chemicals and gases are used in semiconductor manufacturing. There are fewer than five suppliers of these specialty chemical products globally.
Though headquartered in the United States or allied countries, many chemical and gas firms maintain a considerable production footprint in Asia, and China in particular. This is due to the increasing demand from semiconductor firms operating in China, but also the supply that China’s other industrial assets offer.
The CHIPS Act may introduce demand shocks for materials, gases, and chemicals, and the United States should leverage CHIPS Act funds to increase domestic or allied production capacity.
TSMC, a Taiwanese semiconductor manufacturer, has announced its intention to establish a $100 million facility in Arizona near its new fab. This facility will produce high purity grade industrial chemicals used in the manufacturing of semiconductors.
Policymakers should encourage key suppliers of substrates used in advanced packaging to establish production in Texas near Samsung’s existing foundry, and craft incentives to attract leading firms back to the United States.
There is little to no ATP capacity in the United States due to a multi-decade trend of semiconductor manufacturers choosing to locate these facilities in Asia due to favorable costs and proximity to electronics assembly firms.
There are no commercially and technologically competitive U.S. suppliers of printed circuit boards and substrates, so most U.S.-fabricated semiconductors must be sent overseas to Asia for ATP.
If a complete electronic assembly is a house, PCBs are the foundation and substrates are the plumbing and framing. The United States has a limited number of substrate and printed circuit board suppliers that cannot compete with Asian firms.
Specific chokepoints in the back end of the semiconductor supply chain exist, including a shortage of Ajinomoto build-up film in Asia and a need for $32 billion in global investment in substrate capacity expansion to meet forecast demand by 2025.
The United States is lacking in capacity and technical competitiveness for PCB production, and there is “negligible capacity” in the United States to produce high-density interconnect PCBs necessary for advanced packaging.
Only 3 percent of global assembly and test capacity resides in the United States, and most chips made in the United States are sent to OSATs based in Southeast Asia and China or at company-internal facilities based in the same region.
Fund innovation in upstream materials supply chains, and encourage re-shoring or near-shoring of ATP capacity and the associated ATP ecosystem to improve supply chain resilience.
CHIPS Act funds should focus on promoting innovation in semiconductor materials, beginning with hydrofluorocarbons. The use of HFCs in semiconductor fabrication is expected to increase substantially as the United States re-shores semiconductor fabrication in the coming years.
The semiconductor industry has not yet identified an alternative to photoresist, a family of customized chemicals that is used to manufacture chips. The production of EUV photoresist is almost entirely concentrated in Asia, with Dupont expanding its capacity in South Korea.
CHIPS Act funds should be used to encourage investment in recycling technologies at fabs, including supplemental equipment as well as ongoing operating expenses, in addition to developing the know-how. This could be accomplished through two mechanisms: (1) preference receipt of CHIPS Act funds on proposed fab projects; and (2) funding an industry consortium.
CHIPS Act funds should be directed to encourage creation of a commercially competitive advanced packaging ecosystem in the U.S. However, because the U.S. ATP ecosystem is almost nonexistent, it is difficult to assess what it would cost to establish a high-volume advanced packaging facility.
Given China’s low labor rates and favorable subsidies, re-shoring high volume ATP capacity to the United States would cost between $750 million and $1.5 billion.
A state-of-the-art substrate facility in the United States would cost over $1 billion and take two years to build, according to industry analysts. The United States could consider near-shoring ATP capacity, PCB and substrate production, and the broader materials ecosystem.
These observations suggest the U.S. government should leverage this unique opportunity to promote near-shoring of the U.S. semiconductor supply chain and encourage innovative efforts to increase overall supply chain resilience.