As Tech Layoffs Continue, Chip Foundry Plans Become Vital

Intel, Micron, TSMC, and other global semiconductor players have multi-billion dollar plans to build out chip manufacturing in North America and Europe to diversify the supply chain and avoid the massive backlogs experienced during the COVID-19 pandemic. Those companies helped lobby for (and quickly tapped into) the Biden Administration’s $208 billion 2022 Chips and Science Act. A global chip shortage helped illustrate the need for supply chain relief and moved lawmakers to action.

Now, the chip industry is saddled with a supply glut as consumer spending recoils after a two-year tech shopping spree spurred by the pandemic’s remote work and school needs. The market has since corrected course, and tech cuts have sliced thousands from the workforce and more cost-saving initiatives are on the table in the coming months.

While it may seem like a conspicuous time to continue herculean efforts to resuscitate the western world’s chip manufacturing capabilities, some analysts say the industry needs to forge ahead despite a gloomy economic backdrop.

According to a 2021 report by the Semiconductor Industry Association, the US chip market share has declined from about 37% to 12%, with Asia now producing the lion’s share of chips used in everything from cars and refrigerators to smart phones and personal computers. That deep imbalance has created a fragile semiconductor supply chain. The pandemic’s chip shortage saw delays for deliveries of cars, computers, appliances -- just about every device with a semiconductor brain.

Related:South Korea Passes Its ‘Chips Act’ Amid US-China Friction

Creating a Stable Supply Chain Will Take Years

Steve Leibson, author and analyst with Tirias Research, says while the situation is complex, Intel and others are right to quickly stage a semiconductor manufacturing comeback -- even if those new fabrication operations (fabs), will take years to produce enough product to shore up supplies. “All these new fabs that are being planned will not do anything to alleviate shortages in the short term,” Leibson says. One reason is that the focus of US and European’s fab ambitions is on advanced semiconductors -- not the less advanced chips that caused shortages in appliances and automobiles...

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