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The CHIPS Act alone won’t secure US semiconductor supply chains

Associated Press
President Biden attends an event to support legislation that would encourage domestic manufacturing and strengthen supply chains for computer chips, at the White House campus on March 9, 2022. A bill to boost semiconductor production in the United States will subsidize computer chip manufacturers through grants and tax breaks when they build or expand chip plants.

The implementation of the CHIPS Act shows promise for revitalizing the U.S. semiconductor manufacturing industry via investments in research and development, workforce development and incentives programs. Indeed, the CHIPS Act is projected to increase U.S. domestic microelectronics manufacturing capacity by more than 1 million wafers per month.

But executing on these ambitions could take some time: to staff federal program offices, to solicit proposals from industry and academia, to mature a sufficient workforce and to construct new fabrication facilities.

In this interim period, the U.S. will remain dependent on foreign suppliers. Further, the expansion of domestic manufacturing capacity may never eliminate the inclusion of foreign suppliers in semiconductor supply chains. The complex and globalized nature of these supply chains suggests it could be impossible to substitute all foreign nodes with domestic suppliers.

Additionally, U.S. reliance on obsolete components that require production lines no longer commercially viable, particularly by legacy weapons platforms sustained by the U.S. Department of Defense, could remain a challenge.

As a result, strengthening domestic production may not resolve semiconductor supply chain risks. This strategy may reduce U.S. vulnerability to future geopolitical risks emanating from the rise of Chinese manufacturing capabilities and China-Taiwan tensions, but globalized supply chains could leave many supply chain risks unabated. The U.S. will likely continue to rely on foreign, often unauthorized distributors for obsolete parts and foreign suppliers that at times skirt intellectual property laws and miss manufacturing specifications.

The importation of counterfeit microelectronics is particularly concerning. A 2012 report by the U.S. Senate Armed Services Committee found nearly 1,800 occurrences of counterfeit microelectronics being incorporated into defense equipment, ranging from thermal weapons sights to military aircraft. Counterfeit microelectronics can contribute to a host of failures, including data corruption and system malfunction. While the Defense Department has implemented new capabilities and processes to mitigate this challenge, poor visibility into complex and multi-tiered supply chains continues to limit the identification and avoidance of problematic suppliers, while current techniques for identifying counterfeits do not work at scale nor directly at the point of need. (Suspect counterfeit microelectronics are typically shipped to a laboratory for detailed analysis.)

Information sharing, whether between government agencies or within public-private partnerships, is especially problematic.

The Biden administration is working to implement the CHIPS Act, with a corresponding focus on growing domestic semiconductor manufacturing capacity and advancing research and development efforts for next-generation semiconductor technologies. Indeed, the President’s Council of Advisors on Science and Technology proposed actions on advanced semiconductor manufacturing and a recently released draft national strategy for microelectronics research shares this emphasis.

While this focus may be appropriate for long-term supply chain resiliency, there is also a need for research goals that promote immediate supply chain risk management benefits. Without addressing near-term resilience concerns, the U.S. government, U.S. military and the general public remain vulnerable to semiconductor supply chain issues.

To work towards eliminating this liability, the U.S. government could consider funding research to develop new techniques, processes, tools and capabilities for collecting and analyzing supply chain data to identify systemic risks, sharing information among relevant stakeholders, identifying malicious microelectronics sufficiently early, and doing all of this at a scale aligned with the magnitude of semiconductor imports. These advancements could be directed towards both the private sector and federal government entities, like the Customs and Border Protection agents responsible for preventing the importation of counterfeits.

Advancing in this critical space may raise difficulties, particularly concerns around proprietary supply chain data and the need for close partnerships between the public and private sector. But investing in novel supply chain risk management tools, not just new fabs, could resolve many more semiconductor supply chain issues and make it possible to generate a truly secure, robust and resilient U.S. semiconductor ecosystem.

Jared Mondschein is a physical scientist at the nonprofit, nonpartisan RAND Corporation who researches semiconductor supply chain challenges.

Tags CHIPS Act supply chain issues

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