global electronics supply chain

As the United States government has expanded semiconductor-related export controls, companies in the global electronics manufacturing and design supply chain have had to spend considerable time and effort navigating restrictions and managing significant new uncertainties emanating from recent policies. On November 9, SEMI submitted comments to the Department of Commerce’s Bureau of Industry and Security (BIS) urging the agency to proceed cautiously and adopt regulatory best practices and microelectronics industry recommendations to ensure that its identification of foundational technologies does not restrain U.S. innovation and exports without furthering essential U.S. national security interests. The comments specifically respond to the August 27 Advance Notice of Proposed Rulemaking (ANPRM), Identification and Review of Controls for Certain Foundational Technologies. The Export Control Reform Act (ECRA) of 2018 required BIS identify certain emerging and foundational technology that is “essential” to U.S. national security and requires such technology to be controlled to China and other nations subject to a U.S. arms embargo. Congress did not provide a specific definition for emerging or foundational technology, nor the term essential, further complicating the process to identify such technology.BIS has already implemented or proposed several emerging technology controls and the ANPRM starts the process to identify potential foundational technology controls. The SEMI comments focus on the fundamental question of how to define foundational technology, and are organized into three main sections: Requirements of ECRA Guidance from ECRA Regulatory best practices and industry recommendations Applying the statutory requirements and guidance, together with best practices and recommendations, to the identification of foundational technology indicates that most semiconductor-related technology, particularly semiconductor manufacturing equipment and materials, should be outside the bounds of the foundational technology initiative. In general, most technology related to semiconductor devices, manufacturing equipment, materials and design software is not essential to U.S. national security and, in cases where such technology does present material national security issues, it is generally subject to the U.S. list review process and multilateral controls. This technology is widely available outside the United States and due to substantial foreign availability, unilateral U.S. controls on such technology are likely to be ineffective in limiting its proliferation and harm U.S. development of or threaten U.S. leadership in this technology.While the SEMI comments focus on the effort to identify foundational technology, the recommendations and best practices apply in all export control contexts. Several of the statements pertain to policy in ECRA, including its imposition of controls to further specific essential U.S. national security interests only after full consideration of their impact on the economy.Other statements derive from factors ECRA requires BIS to consider, such as not seeking to control technology that’s already available outside the U.S. and not imposing controls that would harm U.S. technological development or leadership. An additional key factor is not imposing controls before multilateral controls are agreed to, nor when it is unlikely the relevant multilateral regimes will adopt similar controls, as is likely for technology that has been decontrolled by a regime.Finally, regulatory best practices suggest that technology-based controls should not be imposed when more targeted end-use or end-user controls can address national security concerns and duplicative controls in addition to recent, significant expansions of existing controls are unnecessary.SEMI is pleased to work with the U.S. Department of Commerce and other regulatory agencies, providing industry data, trends and perspectives to ensure export controls effectively serve national security interests without undue harm to technological development and leadership in this dynamic, globally competitive industry.Ways to Stay Connected and Learn MoreSEMI is committed to serving the global electronics manufacturing and design supply chain and present the collective voice of members to governments worldwide.The SEMI Global Update weekly newsletter provides updates on advocacy issues and technology trends and is available to all.Additionally, SEMI hosts live and virtual events that offer analysis and insights of geopolitical trends by industry experts, with the next opportunity to participate coming on December 3 with the SEMI CEO Webinar: Analyzing the Impact of the U.S. Election on the Microelectronics Industry.Joe Pasetti is Vice President of Global Public Policy and Advocacy at SEMI.

Global business conditions continued to improve through October although the rate of improvement slowed a bit as pandemic concerns increased (Chart 1).Electronic Equipment Shipments RecoveringThird-quarter world electronic equipment shipment growth showed a big improvement over the second quarter but was still down an estimated 1.4% compared to the same quarter in 2019 (Chart 2).Based on regional electronic equipment shipment data, October 2020 sales were up 3.5% versus October 2019 and up 6.1% sequentially versus September 2020 (Chart 3). As the traditional autumn busy season winds down, the key impediment to a strong recovery is the rising COVID-19 infection rates, especially in the United States and Europe. The world awaits the deployment of a much-needed vaccine.Semiconductor Growth May be EbbingSemiconductor chip shipments continue to increase but their global rate of growth has leveled off to mid-single digits (Chart 4). Wafer foundry sales growth also appears to be peaking (Chart 5), pointing to slower chip growth in coming months.SEMI Equipment ShinesSemiconductor capital equipment shipments continue to outshine both electronic equipment and semiconductors. Third-quarter 2020 SEMI global sales were up a whopping 31% compared to the same quarter in 2019 and up 16% versus the second quarter of 2020 (Chart 6). SEMI equipment shipments are definitely outpacing semiconductors on a 3/12 growth basis (Chart 7).SEMI Outpaces Electronic Supply ChainGlobal electronic supply chain growth is improving but the semiconductor sector is clearly the winner this autumn (Chart 8).Looking Forward, Pandemic Spread is Biggest WorryBusiness conditions definitely look brighter. Even stronger growth is likely if we can get COVID-19 under control.Walt Custer of Custer Consulting Group is an analyst focused on the global electronics [email protected].

SEMI President and CEO Ajit Manocha has voiced his support for amendments the United States House of Representatives and Senate included in the Fiscal Year 2021 National Defense Authorization Act (NDAA) that would authorize important programs to support semiconductor manufacturing and research in the U.S.“SEMI is very pleased the House and Senate included in the NDAA provisions to support semiconductor manufacturing and research in the United States,” Manocha said. “The U.S. has not kept pace with the growth of semiconductor manufacturing abroad. The U.S. share of global semiconductor manufacturing capacity has been cut in half to just 12 percent over the past 20 years and is forecast to fall to 10 percent by 2023. We applaud the sponsors for their support, leadership and hard work to win House and Senate approval to increase federal government support for the industry. However, this is just the start of what needs to be done to reverse this 20-year decline. The CHIPS for America Act’s investment tax credit for new and expanded semiconductor manufacturing facilities is essential to provide a robust, transparent and reliable federal incentive that will be the foundation of renewed growth of U.S. fabs.”In addition to authorizing a new grant program, the House and Senate amendments would direct the Defense Department to create programs with the private sector to: Direct the Defense Department to create programs with the private sector to encourage the development of advanced, measurably secure microelectronics, Establish a Multilateral Microelectronics Security Fund the U.S., its allies and partners will use to reach agreements promoting consistency in their policies related to microelectronics, Direct the President to establish a subcommittee on semiconductor technology and innovation within the National Science and Technology Council, and Direct the Secretary of Commerce to establish a national semiconductor technology center and other important new programs. The House amendment would authorize an additional $1.2 billion for semiconductor research. Both the House and Senate are expected to complete debate and pass the NDAA bills this week.SEMI members operate semiconductor supply chain facilities across the U.S. Of the 25 states with at least one major facility, 18 boast large semiconductor manufacturing fabs and other facilities while seven offer semiconductor equipment and materials production. Operating for decades, many of these facilities are key pillars of local economies and underpin hundreds of small businesses that supply components and materials. The U.S. semiconductor supply chain accounts for about 240,000 high-skill and high-wage jobs nationwide.Joe Pasetti is Vice President of Global Public Policy and Advocacy at SEMI.

On Monday, SEMI led a statement from a coalition of industry groups calling on governments worldwide to harmonize their policies to safely allow essential international travel by essential workers. Cross-border mobility in the semiconductor and microelectronics industry is vital to maintaining manufacturing critical to the production of semiconductor devices that are the foundation of our modern economy, countless economic sectors and each nation’s response to the COVID-19 pandemic. Uniform cross-border travel rules impacting essential businesses in the electronics supply chain are crucial for semiconductor business infrastructure and supply chains to maintain effective operations.To that end, SEMI is urging governments around the world to permit international travel by semiconductor supply chain engineers, technicians and executives with minimal disruption to ensure any fast-tracked procedures apply directly to the semiconductor industry and that any agreements negotiated among countries harmonize global travel procedures and processes. Global supply chains require cross-border travel by key technical personnel and business continuity decision-makers to ensure that essential industry manufacturing and business operations remain efficient, effective and uninterrupted. While the industry continues to implement safety protocols and minimize non-essential travel to stem the spread of COVID-19, highly sophisticated equipment sets and materials usage from multiple nations will at times require specialized expertise that is not present in-country.For example, technicians from a semiconductor manufacturing equipment company typically must travel to semiconductor factories in other countries to install or repair specialized tools in situations that are beyond the expertise of the local field office and too complicated to handle by video conference. Similarly, at times semiconductor-based solutions, such as cloud computing, must be implemented or optimized on-site for the equipment to achieve full capacity. After months of remote access to their overseas operations, it also is critical that executives are able to visit their facilities to evaluate and manage their ongoing operations. In the past month, several countries central to the global electronics supply chain have engaged in both formal and informal talks to ease travel restrictions on personnel from essential industries. China, for example, is negotiating fast-track travel protocols with countries throughout Asia and Europe. On May 1, China and South Korea formalized an agreement that has made significant accommodations for semiconductor industry personnel to travel between the two countries. Last week, China and Singapore reached a similar deal – planned to take effect in early June – prioritizing travel for both executives and technicians.Beyond China, several ad-hoc negotiations are underway involving countries as varied as Taiwan, Vietnam, South Korea, Thailand, Canada, Australia and New Zealand. Multilateral discussions are also afoot with the aim of setting up bubble travel zones featuring standard health and travel protocols within the country blocs. As these disparate agreements between individual countries or small blocs of countries take shape, however, they are likely to create divergent standards that may complicate efforts of global businesses to effectively service their operations and customers, even if such travel is and has been deemed essential.In March, when U.S. states and many governments around the world began implementing stay-at-home orders and closing non-essential business operations, SEMI immediately took a lead role advocating to ensure that that the entire microelectronics supply chain was deemed essential and able to continue operations. In the U.S., nearly every state followed SEMI’s recommendation to adhere to the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) guidelines that included semiconductor manufacturing and its supply chain as essential, or specifically highlighted semiconductor supply chains as essential. Overseas, SEMI advocacy worked to ensure the semiconductor supply chain was deemed essential in every key jurisdiction.The mobility of essential workers is critical to essential business operations in the electronics supply chain. Just as SEMI led the effort to ensure that critical electronics supply chain operations were deemed essential as economies were closing down, SEMI will continue to advocate for uniform essential travel guidelines for critical infrastructure workers as economies reopen. Karl Kailing is manager of Public Policy and Advocacy at SEMI.

When we entered 2019, our priorities in SEMI Global Advocacy were crystal clear: Continue to advance our public policy priorities under the 4 T’s – Trade, Tax, Talent and Technology – and move toward a global reach. We raised SEMI’s profile on the world stage in representing arguably the most strategic industry sector today as we trained our sights on a number of issues across all four pillars, not the least of which was trade. Along the way, we educated key policymakers about the impact of their decisions on the global semiconductor supply chain, member companies and regional economies.While no one organization can resolve current global trade issues, SEMI did exert its influence effectively on behalf of its members. For example, when Japan’s Ministry of Economy, Trade and Industry (METI) announced its decision to tighten export controls with South Korea in July, SEMI immediately engaged METI and Korea’s Ministry of Trade, Industry and Economy (MOTIE) to make clear to METI the potential repercussions of its decision. In parallel, we worked to prevent a retaliatory escalation by MOTIE. Indeed, significant trade challenges remain as tariffs and export controls continue to take their toll on our industry’s globally integrated supply chain. We have much work ahead to ensure our members’ voices continue to be heard. Our well over 100 meetings with government officials this year is only the start of sustained outreach and engagement to better serve our members’ public policy interests. To that end, and based on member input, in 2019 SEMI Global Advocacy made it a priority to restructure to improve communications among our regions around the globe and strengthen member engagement. Each regional office responsible for government affairs is now staffed with a global advocacy liaison. In addition, we have increased staffing in the SEMI Europe office to better address the ever-changing regulatory environment and develop the European Union’s talent pipeline.In SEMI’s advocacy headquarters in Washington, DC, we have filled a new position – Vice President of Industry Advancement and Government Programs – to place greater focus on identifying opportunities to advance programs aligned with member, industry and government interests. We have also filled two additional positions in DC – a Vice President of Global Public Policy and Advocacy and a new Manager of Public Policy and Advocacy – dedicated to public policy work. Both are steeped in experience in trade, export controls and tax policy. In addition, our new Executive Director of the SEMI Foundation boasts expertise in developing and scaling workforce development programs.The end of 2019 culminates the first phase of strategic personnel and program adjustments we envisioned over a year ago and the beginning of more muscular, adaptive advocacy engagement communications. Today, we are in a much stronger position to support you, our members, and meet the public policy priorities established by the SEMI Board of Directors and Board of Industry Leaders. We’re immensely thankful for your continued engagement and look forward to working to advance your interests in 2020 – SEMI’s 50th anniversary!Mike Russo is Vice President of Industry Advancement and Government Programs at SEMI.

Like all other SEMICON expositions, SEMICON West last month gathered thousands of people to make business connections and learn about the industry and its opportunities. But the events are also great venues for SEMI’s Global Industry Advocacy team to meet with industry leaders from around the world as well as regional SEMI presidents to discuss policy issues we face in each region and best practices for how to address them. The time was also ripe for us to meet with various advisory groups and advocacy committees to examine current issues.Top on our list at SEMICON West was a discussion with SEMI’s International Board of Directors about the then newly announced actions by Japan’s Ministry of Economy, Trade and Industry (METI) to tighten export controls in trade with Korea. SEMI depends heavily on and is grateful for insights from its International Board, Board of Industry Leaders and various Regional Advisory Boards. They are crucial to our ability to develop and execute industry advocacy strategies that take into account regional idiosyncrasies, geopolitical sensitivities and global supply chain complexities. SEMI is unique in its ability to bring a global perspective to engaging governments around the world in real time. In the case of the trade dispute between Japan and South Korea, we engaged SEMI members in Japan and Korea as we developed our strategy.On the SEMI America’s front, the North American Advisory Board and its Public Policy Committee met at SEMICON West for a spirited discussion on how to best manage our lobbying activities and how regional and U.S. companies should be involved. The committee’s perspectives and guidance will be invaluable as we chart a path forward in these challenging times in global trade.Our Global Industry Advocacy team also continues to build out SEMI Works, SEMI’s comprehensive initiative to develop a talent pipeline and overcome the industry’s longstanding shortage of skilled workers. SEMI Works focuses on stimulating greater interest in STEM careers, aligning STEM course curriculum and industry needs, and connecting students with relevant courses and careers. We are in the process of launching three regional pilot programs that will enable us to develop the SEMI Works business model that we’ll use to scale the program and ensure the initiative is robust and sustainable. At SEMICON West the Global Advocacy team convened regional stakeholders involved in these pilots to share information on opportunities and challenges and to discuss various implementation strategies.At SEMICON West we also facilitated meetings with U.S. government representatives aimed at improving cybersecurity in manufacturing and developing a commercial security model that will strengthen security throughout the supply chain in areas vital to industry growth such as traceability.After nearly 50 years, SEMI still excels in enabling the industry collaborations key to growth and innovation. Collaboration is also a driving force within SEMI Global Industry Advocacy as we continue to work with SEMI members, our various boards and governments around the world to advance the interests of the semiconductor industry.Mike Russo is vice president of Global Industry Advocacy at SEMI.

There is a glimmer of light at the end of the tunnel. But most electronic industry time series will likely struggle at least though autumn.

The typical winter “seasonal slowdown” is now behind us. What can we expect as the year progresses? 

Forecast SummariesCharts 1 and 2 are the recent world growth forecasts for this year and next for GDP (World Bank), Electronic Equipment and Printed Wiring Boards (Custer Consulting Group), Semiconductors (SIA/WSTSI and new Semiconductor Capital Equipment (SEMI). The semiconductor-related sectors are clearly outgrowing the rest of the supply chain. These forecasts require regular review considering the current global political uncertainty and potential industry output and trade disruptions.Updates to these forecasts are regularly available.Taiwan Wafer Fab SalesComposite sales of 14 Taiwan-listed wafer fabs including TSMC and UMC dipped sharply in June. This sales composite has been historically a useful leading indicator for global semiconductor shipments (Chart 3). If wafer fab sales remain weak, they may signal an imminent chip slowdown. These data are updated monthly.Wafer Fab, Semiconductor and SEMI Capital Equipment Business CyclesChart 4 compares the 3/12 growth of global semiconductor and semiconductor capital equipment to Taiwan-listed wafer fabs. Watch this information over the next few months to see if the wafer fab dip is temporary or leads semiconductor and SEMI equipment down to slower growth. Walt Custer of Custer Consulting Group is an analyst focused on the global electronics [email protected]