U.S. Semiconductor Market Poised for Long-Term Growth
By Karen Savala, president, SEMI Americas
Six years ago, the outlook for U.S. semiconductor manufacturing was dim and dimmer. At the time, Intel was building their Dalian fab, AMD was ramping up their Dresden facilities, TI was transitioning to a fab-lite model, and the U.S.-based fabless giants were growing their business through foundries based in Asia. It was common for people to see semiconductors like other manufactured goods, inevitably moving to Asia, just another example of merciless globalization.
Today, the outlook for U.S. semiconductor manufacturing couldn’t be more promising.
The United States has rebounded to become once again one of the largest and fastest growing regions of the world for semiconductor manufacturing. In 2007, the percentage of equipment spending for chip manufacturing in the US had dropped to 15 percent, an all-time low. Today, the U.S. market represents over 20 percent of world equipment spending with promising expectations for continued growth. U.S. fabs and their supply chains are now seen as leading a high-tech manufacturing renaissance, and no less than the President of the United States has taken notice. Earlier this month, President Barack Obama visited Applied Materials in Austin, saying, “We’ve got to do everything we can to help the kind of high-tech manufacturing that you’re doing right here at Applied.”
Leading this rebound are chip giants Intel and GLOBALFOUNDRIES, but robust equipment and material spending will also occur at Micron, TI, Samsung, and Maxim. This year, Intel will spend up to $3.5 billion, primarily at their Fab 42 in Arizona and Dx1 Fab in Oregon; and GLOBALFOUNDRIES will invest $1.2-$1.8 billion on equipment at their new fab in New York. Samsung will spend $1.8-$2.5 billion to increase capacity at their Austin facility by 60 percent. In addition, Micron, CNSE (NanofabX for G450C), IBM, and Maxim may collectively spend up to $1.5 billion in equipment this year. Over $8 billion will be spent in equipment in the U.S. in 2013, nearly as much as South Korea and well over double the spending in China, Europe or Japan. Spending will further increase in 2014.
In materials, we project that spending will increase 3 percent in North America to $4.85 billion. This number is overwhelmingly dominated by front-end materials, as back-end operations are mostly located in Asia. In photomask materials, for example, the U.S. represents approximately 20 percent of the world’s demand.
The renaissance in semiconductor manufacturing is good for the industry, SEMI members and the U.S. economy. According to the latest Bureau of Labor Statistics data, the semiconductor industry has added jobs three times faster than the rest of the U.S. economy in 2011. The semiconductor industry’s manufacturing workforce grew by 3.7 percent over the previous year, while jobs throughout the broader U.S. economy increased by 1.2 percent over the same time period. And semiconductor industry jobs have an enormous ripple effect on the broader U.S. economy. As reported by the SIA, the semiconductor industry’s employment multiplier figure (number of jobs beyond direct industry employment) is higher than that of the construction industry (1.90), the communications industry (2.52), and the automobile industry (4.64), among many others.
Looking ahead, the industry transition to 450mm wafer processing will also help sustain the U.S. central role in the industry. Currently, U.S.-based pilot lines for 450mm manufacturing are scheduled for 2015 and 2016 with high-volume manufacturing targeted for 2018. While no decision has been made, the knowledge infrastructure for 450mm manufacturing will reside in the U.S., and the challenges of bringing larger wafers online synchronously with an advanced node, indicates the first generation 450 mega fabs will be located in North America.
Another key trend that favors the U.S. microelectronics industry is the growing complexity semiconductor manufacturing and the interdependencies with the supply chain. In addition to geometric scaling and the planned transition to 450mm wafer processing, the industry is implementing complex new transistor architectures based on new materials and processes, 3D stacked ICs, and other technologies requiring complex co-design, co-development and joint development agreements. Increasingly, these challenges are being addressed through new collaboration models involving leading fabless chip firms like Qualcomm and NVIDIA and top EDA companies such as Synopsys and Mentor Graphics. These new collaboration models are extending to the key subsystem and component suppliers.
Entrepreneurialism is another key asset of the U.S. semiconductor ecosystem. Approximately one billion annually in venture capital is invested in new U.S. semiconductor firms and technologies, more than any other region by far. Many of the technologies that will drive next generation semiconductor demand and enable next generation manufacturing will be delivered by firms that do not even exist yet, many of whom will move to the U.S. from overseas to be near leading-edge customers and investors.
While the winds are blowing favorably for U.S. semiconductor manufacturers and their suppliers, critical policy initiatives are still required to ensure continued growth of the US microelectronics industry. We desperately need to see the passage of immigration reform, especially high-skilled immigration reform to allow more H1-B visas and green cards for those in the STEM fields. In addition, manufacturing would benefit from additional policy support, including corporate tax reform to incentivize more production in the U.S., While most can agree that would need some kind of fiscal reform from the federal government, it shouldn’t come at the expense of R&D investment. Respect for intellectual property rights is a strength in America, and the government should be doing what it can to bolster those credentials as well as ensuring a level playing field around the globe.
With President Obama making high-tech manufacturing a centerpiece of his second term with his National Network for Manufacturing Innovation (NNMI) proposal, the political conversation is turning in positive and non-partisan ways in favor of our industry. Perhaps at no time in recent memory has the contributions of our industry been so widely understood, recognized and supported. As the economy and political environment improve, we should all be excited about the prospects and promises of the U.S. semiconductor industry in the coming years.
June 4, 2013