How Investments in Manufacturing will Benefit the Semiconductor Ecosystem

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2022 has seen a steady stream of large – scale investments from some of the world’s largest chip manufacturers. At a time where the chip shortage finally seems to ease up, these investments will greatly benefit the global semiconductor value chain, helping to further alleviate the shortage, generate new jobs, create increased demand for fab equipment, and drive innovations in chip design.

Let’s look at some recent investments:

  • Intel announced in March that Germany would be the site for a huge new chipmaking complex, giving the first details of a $ 88 billion investment drive across Europe. Intel is spreading its investment in Europe around half a dozen countries, including boosting its existing factory in Ireland, setting up a design and research facility in France, and a packaging and assembly site in Italy.
  • Earlier this year, President Biden announced Intel’s plans to invest $ 100 billion in US manufacturing as part of its State of the Union Address. The investment is a 500% increase from Intel’s original $ 20 billion plan to develop new semiconductor production facilities in Columbus, Ohio.
  • Taiwan Semiconductor Manufacturing Company (TSMC), which supplies silicon for Apple, Qualcomm, and other tech giants, announced last January that it plans to spend as much as $ 44 billion to increase its manufacturing capacity in 2022. This is the most TSMC has ever earmarked , and it represents a 47% jump from 2021, when the company spent a then record of $ 30 billion.
  • In November 2021, Samsung revealed its plans to spend $ 17 billion to build a semiconductor factory in Texas as part of a three-year strategy to increase its manufacturing capacity and alleviate the global chip shortage. This is the largest investment Samsung has ever made in the US

These investments, totaling a staggering $ 249 billion, will bring to the entire semiconductor ecosystem some much needed help.

Ending shortages

While it may take 2–3 years to bring more semiconductor capacity into the ecosystem, this is good news for sectors such as automotive, smartphone, and consumer tech. These industries felt the strain of reduced chip availability more than others, and many businesses had to delay product launches that resulted in billions in revenue loss.

As new capacity comes online, these sectors will not only have increased access to the standardized chips they need, but also new chips that can enable new features and functionalities. In fact, TSMC’s CFO Wendell Huang stated that “Out of the $ 40 billion to $ 44 billion CapEx for 2022, between 70 percent and 80 percent of the capital budget will be allocated for advanced process technologies, including 2 – nanometer, 3 – nanometer, 5 –Nanometer and 7 – nanometer. ”

More Equipment, Jobs, and Supply Choices

These recent investments should also drive up the demand for semiconductor manufacturing equipment and the skilled labor required to run the equipment. Back when Intel first announced it would invest $ 20 billion in its Ohio manufacturing site, for example, it was reported that this would create up to 10,000 jobs across eight state – of – the – art factories.

Likewise in Europe, planned factories in Magdeburg, Germany would create 7,000 construction jobs, 3,000 permanent jobs at the fabs, and tens of thousands of additional jobs across suppliers and partners.

With more capacity available from multiple suppliers, semiconductor customers will have more options to buy from. Having multiple suppliers typically helps drive competitiveness, lowers supply chain risks, and provides more flexibility for companies to recover if one supplier experiences unexpected issues.

Start Planning Now

Companies around the globe should start planning today because as these fabs come online in the next 2–3 years, more capacity will become available. Securing this capacity early and working this into future plans and forecasts will be crucial for manufacturers and OEMs to avoid a repeat of the past couple years.

The semiconductor industry, on the other end, should start looking at ways they can ensure skilled labor is available when these fabs are up and running. Many industries are already experiencing labor shortages and semiconductor manufacturing requires very specialized and skilled labor. There are many steps companies can take to increase the availability of skilled labor – from training, STEM programs, recruitment, and more – but these steps need to be taken sooner rather than later.

Overall, these recent investments are great news for the entire semiconductor ecosystem, and it will be exciting to see how this helps the chip shortage and enables OEMs to generate more revenue as capacity starts coming online in a few years.

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