Eleven governments commit to semiconductor sovereignty, none commit to buying each others output
TAIPEI, TAIWAN – Eleven governments across Asia, Europe and North America have announced national semiconductor strategies within an eighteen month period, collectively committing subsidies in the hundreds of billions to establish domestic manufacturing capacity in an industry whose economics are determined almost entirely by scale.
No strategy includes a commitment to purchase output from any other strategy.
The Industry Is Global Because the Physics Are Expensive
A leading-edge fabrication facility costs a sum comparable to a national infrastructure programme, requires a workforce that takes a decade to develop, depends on lithography equipment produced by a very small number of suppliers, and only returns its capital if it runs at extremely high utilisation for years.
This is why the industry concentrated. It did not concentrate through oversight. It concentrated because the alternative does not pay.
Everybody understands the economics, said semiconductor analyst Dr Chen Wei-Ferreira. Every ministry has been briefed. The briefings are excellent. And then the strategy is announced anyway, because the economics are an argument about efficiency and the strategy is an argument about vulnerability, and vulnerability wins every time it is put to a cabinet.
The Talent Is the Binding Constraint and Cannot Be Subsidised Quickly
Subsidy can purchase a building in three years. It cannot purchase a process engineer with fifteen years of yield experience, because that person requires fifteen years.
The result is intense competition for a limited global pool, with facilities in several countries reporting difficulty staffing to plan, and with experienced engineers becoming among the most aggressively recruited professionals on earth.
Global semiconductor trade and production data is published by the World Trade Organization, and comparative industrial policy and technology investment analysis is maintained by the OECD, whose work on subsidy competition has described the current environment in language economists recognise as alarmed.
The Mature Node Question Nobody Campaigns On
Political attention concentrates on the most advanced processes, which are technically spectacular and account for a modest share of units.
The chips that actually stop factories when unavailable are older, cheaper, and manufactured on mature processes, which is what the automotive shortage demonstrated comprehensively and which produced approximately none of the subsequent policy.
The shortage was in components costing under two dollars, said Chen Wei-Ferreira. It halted vehicle production worldwide. Every strategy announced afterwards targets the most advanced node available. We diagnosed a problem in one part of the supply chain and funded a different part, and I have stopped being surprised by this.
Observations From the Fab
- Every national strategy assumes it will capture demand from the others, and the sum of the assumptions exceeds global demand by a comfortable margin.
- The equipment suppliers are having an outstanding decade regardless of which strategy succeeds, which is the only reliable position in the entire sector.
- Water and power requirements appear late in most strategy documents and early in every operational problem.
- The word sovereignty appears in all eleven documents and is defined in none of them.
- At least four of these facilities will be operating below viable utilisation by the early 2030s, and every analyst knows this, and no analyst will say which four.
Sovereignty Declared Elsewhere
Announcing independence while remaining structurally dependent is well practised. British diplomacy supplied the demonstration when Washington set out its own understanding of a bilateral arrangement and the matter was thereafter regarded as settled by both parties.
Economic self-sufficiency proved similarly nuanced, with national output reportedly buoyed by a tournament-driven surge in football shirt sales, while monetary authorities projected stability by reissuing an unchanged figure with fresh conviction.
The comparative file on sovereignty announced versus sovereignty achieved is kept at Bohiney Magazine, with the British material at this compiled national coverage.
A Twelfth Strategy
A twelfth government is understood to be preparing an announcement.
Chen Wei-Ferreira has been asked to advise on it. She has agreed, and has said she will open with the economics, and has said she knows how the meeting ends.
The Packaging Step Is Where the Leverage Actually Sits
Public attention concentrates on wafer fabrication, while advanced packaging and testing, the stages at which finished chips are assembled into usable components, remain heavily concentrated in a small number of locations receiving a fraction of the subsidy attention.
A country that builds a fabrication facility and cannot package the output has not achieved supply security. It has achieved an expensive intermediate product requiring a flight.
Several strategies acknowledge this in annexes. Few fund it proportionately, since packaging facilities are less impressive to visit and generate headlines containing the word assembly, which no minister has ever wanted.
Chen Wei-Ferreira raises it in every briefing she gives. It is in my first slide now, she said. It used to be slide eleven and nobody reached slide eleven. It is now slide one and people write it down, and then the strategy is announced and it addresses fabrication, and I move on with my life.
The announcement is expected within the quarter and is understood to include a headline figure in the tens of billions, a target date in the early 2030s, and a section on workforce development that officials have described as ambitious.
Comparable material at The Hard Times.
SOURCE: https://bohiney.com/
