Issue link: https://iconnect007.uberflip.com/i/1456062
16 SMT007 MAGAZINE I MARCH 2022 5 An Analysis of the North American Semiconductor and Advanced Packaging Ecosystem NORTH AMERICAN ADVANCED PACKAGING ASSESSMENT After more than two decades of outsourcing, North America now finds itself in a worrisome predicament: it can design the most cutting-edge electronics but cannot manufacture them. This trend spans across the entire electronics ecosystem, but it has been driven in recent years by the semiconductor industry's embrace of the "fabless" business model. A fabless company designs technologies for which it holds the intellectual property but outsources the manufacturing to third parties. For all the benefits of the fabless model, it places companies in the difficult, long-term position of being unable to physically produce semiconductor chips. As chip manufacturing has moved increasingly to third-party foundries offshore, so too have the supply chains that support and leverage silicon fabrication. Today, the North American share of advanced packaging of semiconductor chips constitutes just 3% of global production. Semiconductor Fabrication Chip plants run 24 hours a day, seven days a week. They do that for one reason: cost. Building an entry- level factory that produces 50,000 silicon wafers per month costs about $15 billion. Most of this is spent on specialized equipment, a market that exceeded $60 billion in sales in 2020. Three companies—Intel, Samsung and TSMC—account for most of this output. Their factories are more advanced and cost over $20 billion each. This year, TSMC is expected to spend as much as $28 billion on new plants and equipment. Even more daunting, these facilities can become obsolete in five years or less. Chipmakers must generate significant profit to reinvest in their facilities to stay current with ever advancing technology demands. Only the biggest companies can afford to build multiple plants, which is important for companies engaged in high- volume manufacturing. The more a company manufactures, the better they get at it. Yield—the percentage of chips that are accepted and not discarded—is the key measure, and anything less than 90% is considered a problem. But chipmakers can only exceed that level by learning expensive lessons over and over and building on that knowledge. These brutal economics mean very few companies can afford to keep up and/or break in. Overall, the level of recent or expected investment in U.S. semiconductor fabrication is strong although a significant percentage of that expected investment is premised on federal support. We strongly support the bipartisan effort to appropriate more than $50 billion for CHIPS for America Act. Failure to do so will signal a lack of U.S. commitment to U.S. semiconductor manufacturing and innovation.