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Thank you for the opportunity to comment on "Risks in the Semiconductor Manufacturing and Advanced Packaging Supply Chain." CSI appreciates the need identified by the Biden administration to secure resilient, diverse, and secure supply chains that support the
As many services have become digitized, CSI members have come to depend on semiconductors as an essential tool to enable the digital delivery of services. The COVID pandemic has accelerated the shift of services online, as the need to maintain social distance and physical lockdowns has led to a sharp spike in demand for online commerce, financial services, digital communications - including the transfer of critical public health and scientific research -- and streaming media and entertainment./1
Beyond the service sectors themselves, digitally delivered services have also steadily grown to become an invaluable component in
II. Manufacturing and Other Capabilities Necessary to Produce Semiconductors,
In addition to ensuring a robust supply chain of the goods and materials supporting semiconductor manufacturing, the
Such investment should be prioritized at the leading edge of semiconductor technology, while also recognizing the importance of building resiliency of supply of less sophisticated forms of chip architectures. For example, while some semiconductor technologies have migrated to 300mm (12") wafers to support higher end processing performance, there are a variety of power management integrated circuits ("PMICs") and other semiconductors that are still manufactured using 200mm (8") nodes. These older fabs support a variety of mixed signal chipsets still in use today, yet there has been no investment in domestic tooling or manufacturing capacity for these nodes in many years.
III. The availability of the key skill sets and personnel necessary to sustain a competitive
It is critical for the
(iv) Risks or Contingencies that may Disrupt the Semiconductor Supply Chain (Including Defense, Intelligence, Cyber, Homeland Security, Health, Climate, Environmental, Natural, Market, Economic, Geopolitical, Human-Rights or Forced Labor Risks):
a. Risks Posed by Reliance on Digital Products that May be Vulnerable to Failures or Exploitation;
b. Risks Resulting from Lack of or Failure to Develop Domestic Manufacturing Capabilities, Including Emerging Capabilities;
(v) The resilience and capacity of the semiconductor supply chain to support national and economic security and emergency preparedness, including: a. Manufacturing or other needed capacities (including ability to modernize to meet future needs); b. gaps in manufacturing capabilities, including nonexistent, threatened, or single-point-of-failure capabilities, or single or dual suppliers; c. location of key manufacturing and production assets, and risks posed by these assets' physical location; d. exclusive or dominant supply of critical or essential goods and materials by or through nations that are, or may become, unfriendly or unstable; e. availability of substitutes or alternative sources for critical or essential goods and materials; f. need for research and development capacity to sustain leadership in the development of goods and materials critical or essential to semiconductor manufacturing; g. current domestic education and manufacturing workforce skills and any identified gaps, opportunities and potential best practices; i. risks posed by climate change to the availability, production, or transportation of goods and materials critical to semiconductor manufacturing; and h. role of transportation systems in supporting the semiconductor supply chain and risks associated with these transportation systems.
In addition to the supply chain issues discussed above (i.e., general issues with
First, there is an expectation that fabrication capacity won't be able to keep up with customer demand in the near term. Overall semiconductor capacity is projected to increase at a 6% compound annual growth rate ("CAGR") over the next five years. However, demand for semiconductors is expected to rise at double-digit CAGR during that same period./3
This demand is expected to be principally driven by new and emerging technologies, including 5G, cloud platforms, automotive and various consumer electronics categories. Additionally, there is not currently a balanced investment by industry between 8" wafer capacity and 12" wafer capacity. Presently, it is expected that there will be an 8% growth in the foundry capacity for producing 12" wafers over the next five years./4
However, it is expected that there will be little to no capacity build out for 8" wafers over that same period. These 8" wafers are necessary to produce certain critical components of integrated devices, including power management integrated circuits and metal-oxide-semiconductor field-effect transistors.
Second, the current semiconductor capacity is dependent on a few countries - notably,
* Wafers for logic chips (e.g., central processing units ("CPUs"), graphics processing units ("GPUs"), etc.) are primarily manufactured in
* Wafers for dynamic random-access memory ("DRAM") are primarily manufactured in
The manufacture of 8" wafers is more fragmented, generally due to the presence of smaller scale suppliers in various geographic locations. The largest manufacturing capacity for these chips resides in
Third, printed circuit boards ("PCB") - another critical component (besides silicon) to the production of semiconductors - also have geo diversification challenges. Currently, 80% of the worldwide capacity of PCBs resides in
Overall, given the challenges noted above, there is a significant need for the Government to develop policies and incentive programs to increase domestic capacity and to develop technologies needed to secure U.S. market position in this sector. Relatedly, there is also a need for Government investment in research and development - particularly relating to manufacturing - including by appropriating monies to be available under the Creating Helpful Incentives To Produce Semiconductors ("CHIPS") for America Act.
(vi) Potential impact of the failure to sustain or develop elements of the semiconductor supply chain in
The potential impact to downstream capabilities if there is a failure to sustain or develop elements of the semiconductor supply chain cannot be overstated. Among other things, critical domestic industries and capabilities are highly dependent on the production of semiconductors, including food production and agriculture, energy and utilities, information communications technology, aerospace, artificial intelligence, infrastructure, medical, transportation, and national security and elections, among others. Given the current concentration of suppliers in a limited number of countries,
(vii) Policy recommendations or suggested executive, legislative, regulatory changes, or actions to ensure a resilient supply chain for semiconductors (e.g., reshoring, nearshoring, or developing domestic suppliers, cooperation with allies to identify or develop alternative supply chains, building redundancy into supply chains, ways to address risks due to vulnerabilities in digital products or climate change).
To ensure a resilient supply chain of trusted and assured semiconductors, Sections 9902 and 9903 of the William M (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 ("FY21 NDAA") should be funded. Sections 9902 and 9903 are based on the CHIPS for America Act and would establish funds within the
Additionally, the administration should ensure there is adequate funding available to support
The government should refrain from any interventions in the market to direct scarce supplies of chips to particular industries. Such actions could cause unintended distortions that would harm services or other industries, with negative economic consequences.
Finally, tax incentive programs and credits should be considered to attract
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Thank you again for the opportunity to comment.
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3/ Source: IC Insight, "Global Wafer Capacity 2021-2025."
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The notice can be viewed at: https://www.regulations.gov/document/BIS-2021-0011-0001
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