It's a startling figure: TSMC manufactures more than 90 percent of the global supply of advanced microchips at its fabs in Taiwan.
The output from fabs in the U.S. is largely trailing-edge chips made at 1980s- and '90s-era foundries.
But if the CHIPS and Science Act of 2022 succeeds, the domestic semiconductor industry will take a big jump forward. However, it's going to take more than modern fabs: It's also going to require a modern supply chain.
With advanced chip fabs in Arizona, Texas, and other states now under construction, manufacturing equipment is an unavoidably vital link in the supply chain. "A lot of that is already built in the U.S.," says Eric Breckenfeld, director of technology policy for the Semiconductor Industry Association (SIA) in Washington, D.C. "There are some critical parts that are not."
For example, many new fabs will use extreme ultraviolet lithography (EUVL) in the production of advanced chips, and much of that supply chain is entrenched in Europe. Likewise, most of the requisite materials already pass through the U.S., Japan, and/or Europe.
The final step in the semiconductor manufacturing process, packaging -- and, more specifically, advanced packaging -- is something of a missing link in the U.S. "Packaging these chips and assembling them into products has been a labor-intensive process historically," notes Breckenfeld.
That means packaging has traditionally gone to lower-cost labor markets like China. Due to automation, however, advanced packaging is not as labor-intensive, opening the door for domestic suppliers.
Much of the packaging currently takes place at the fabs themselves, but there's demand for third-party companies to take on advanced packaging. Few industry insiders would complain if the U.S. or a friendly country -- say Japan, or even India or Mexico -- emerged as a global hub.
Breckenfeld says a "center of gravity" for advanced packaging is key to continued semiconductor innovation: "Because Moore's Law can’t continue forever, there is an expectation that a lot of system-level improvements over the next 10 to 15 years are going to come from innovations at the packaging level, which I would suspect is correct."
Funded by the 2022 CHIPS Act, the National Advanced Packaging Manufacturing Program (NAPMP) could push the U.S. into a position of leadership in advanced packaging. If that is to happen, the industry will need to upskill its existing workforce. "It's going to demand a little bit more of an educated workforce that can interface with automation," says Breckenfeld.
Like the fabs themselves, the semiconductor supply chain will require an influx of workers in the coming years. "We need a lot of technicians, but we actually think we have a pretty good pipeline to go and pursue that," says Breckenfeld. "We probably need one-tenth as many master's and Ph.D holders, and we need to implement a plan for that."
CoorsTek, a global manufacturer of technical ceramics based in Golden, Colorado, makes components for semiconductor fabrication and wafer processing. Co-CEO Jonathan Coors says he expects growth in the U.S. from the reshoring push, but there's a catch. "The challenge of a company like TSMC coming into Phoenix is we're going to have to build the ecosystem to be able support the expanding semiconductor industry, and that looks like engineering folks, quality engineers, manufacturing engineers, industrial engineers, and ceramics engineers in our case," he says.
"The needs for a company like CoorsTek -- and more broadly, the U.S. -- is continued investment in STEM talent and folks who get excited about designing and engineering parts for cars, parts for semiconductor components," he adds. "That's why we partner with universities like Colorado School of Mines here locally: to enhance that and continue to amplify the need for engineering talent."
Coors isn't alone in this opinion. The industry's talent base is in Asia. Whether that can be replicated in the U.S. is the billion-dollar question.
Brian Watson, founder of HyRel Technologies a provider or semiconductor modification services in Peoria, Arizona, says he sees talent as an industry-wide bottleneck. "I don't feel that we're prepared," says Watson, noting that Arizona is 48th of the 50 states in terms of education spending per student as of 2020. "We don't have a pipeline of employees that are going to be able to fill all the jobs."
This is not a local issue for Arizona alone. There's also a looming need for more workers for both the fabs and their supply chains in other areas. Take North Texas. Texas Instruments (TI) and GlobalWafers are building new facilities in Sherman, with expected job creation targets of 3,000 and 1,500, respectively.
"There is a legacy workforce here, but that legacy workforce is going to have to be completely re-trained to work in the new TI fab," says Kent Sharp, CEO of the Sherman Economic Development Corporation (SEDCO). "The equipment is just not the same."
SEDCO has collaborated with other economic development entities to develop an advanced manufacturing curriculum at local high schools. "We've got a history of developing a platform that addresses education and workforce needs for our manufacturers here in Sherman," says Sharp. "We don't have to rebuild the whole platform, we can just insert a semiconductor module."
TI's legacy plant started up operations in Sherman in the 1960s. In 2020, the company announced its impending closure. "That's 600 jobs," says Sharp. "That's not what I wanted to hear."
His disappointment was short-lived: In 2021, TI officials returned with an opportunity for the aforementioned four-phase, $30 billion fab project expected to create about 3,000 jobs. Sherman ultimately beat out Singapore for the facilities, and the first two phases are underway as of early 2023.
"That was the largest economic development project ever announced in Texas in terms of capital investment," says Sharp. "It's a massive project. All four phases are 4.7 million square feet."
GlobalWafers subsequently announced a new facility in Sherman and broke ground at the end of 2022. The project marks the return of wafer manufacturing to the U.S., notes Sharp. "That production hasn't been in the United States in 20 years, so that was strategic for national interests as well."
As is the case with education, Sherman can build on an existing foundation when it comes to fostering the supply chain. "We have the ecosystem," says Sharp.
While both new facilities will be able to leverage aspects of Sherman's half-century legacy of semiconductor manufacturing, the supply chain needs to evolve to support the modern industry.
"There are common suppliers to both TI and GlobalWafers -- such as gas-chem, the gas and chemicals that are needed for those operations -- and each has individual supply chain needs that the other one doesn't," says Sharp. "We're still learning about that. We're in talks right now with a developer who is wanting to build space for Tokyo Electron. They're a machinery and equipment supplier to Texas Instruments."
Sherman is primed for more investment: SEDCO owns more than 500 acres with the requisite infrastructure for semiconductor manufacturing and the surrounding supply chain.
"We have been told by both TI and GlobalWafers to prepare for the supply chain to show up," says Sharp. "We were told by other industry experts that you're probably not going to get many initial door knocks from suppliers until the companies start going vertical. It's one thing to make an announcement, but it's another thing for the actual dirt work to start turning and building and cranes showing up."
Beyond materials, equipment, and talent, that ecosystem has another critical ingredient: water, and lots of it.
Sharp says "Sherman's ability to deliver massive quantities of water by 2025" has been central to the city's success in landing semiconductor manufacturing facilities. "TI, its first phase, will have almost as much water demand as the entire city of Sherman currently does, including our manufacturing, residential, and retail," he notes.
None of this is lost on SIA's Breckenfeld. "The relationship between water and the fab is a very important and delicate one," he says. "The good news for the Colorado River beneficiary fabs is that, for the most part, they're pursuing advanced fabs, which are run on very high product margins, enabling investment in water filtration and recycling systems."
While it's one of the world's rainiest countries, Taiwan has water issues as well. The number of annual days with precipitation is on the wane, and the dearth of a typhoon landfall in 2021 led to one of the worst droughts on record.
Arizona, on the other hand, is one of the driest states in the U.S. "I don't think we've really diligently looked at that," says Watson. "Even though they're saying that TSMC is only going to consume 10 percent of it and they're going to be able to recycle 90 percent of it, nobody's talking about the 100 percent to get them to start. Semiconductor fabs take an enormous amount of water. TSMC has first dibs on that water coming down now. How are you going to support tens of thousands of families and their housing needs and their water needs?"
Not that Watson isn't bullish on the semiconductor industry's future in the Grand Canyon State. He started HyRel in Southern California in 2021, then relocated the semiconductor modification provider to a $15 million facility in Peoria, Arizona, in 2022. Only five companies worldwide offer the same services, and HyRel is the only one west of the Mississippi.
Watson sees proprietary technology as a competitive advantage that allows HyRel to offer tighter tolerances and faster processing. "We have a microrobotic platform that doesn't exist in the industry," he explains. "Everybody else is using 25-, 30-year-old technology."
And that's the crux of kickstarting U.S. semiconductor manufacturing in a nutshell: The domestic industry is in dire need of an upgrade in the form of leading-edge manufacturing technology.
Whereas legacy fabs in California, New York, and Texas "are supporting businesses that are already there," Watson sees the critical mass of a broader supply chain coalescing in Arizona. "It's a more broad-based supply stream of fabs here," he says. "It's a solid mix of parts."
Just add water.
This story is the first in a series of features about semiconductor manufacturing in the U.S. Previously: Manufacturing America's Semiconductor Workforce.