In February 2021, The White House issued an Executive Order on securing America’s supply chains, calling for “an immediate 100-day review across federal agencies to address vulnerabilities in the supply chains of four key products…semiconductor manufacturing and advanced packaging; large capacity batteries, like those for electric vehicles; critical minerals and materials; and pharmaceuticals and advanced pharmaceutical ingredients (APIs).”

The final review was delivered in June of 2021. The Department of Commerce (DoC) took the lead in authoring the section on semiconductor manufacturing. The final report is an exhaustive 250-page document, of which 60 pages are dedicated to a semiconductor and advanced packaging supply chain risk assessment, along with sections on opportunities and challenges ahead, concluding with recommendations.

Building Resilient Supply Chains, Revitalizing American Manufacturing and Fostering Broad-based Growth

This report was released amidst a backdrop of bottlenecks in the supply chain brought on by the Covid-19 pandemic – which has only worsened since July – causing the Biden administration to prioritize supply chain resiliency and the government-wide 100-day review and final report.

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What has also crystallized for the administration since July of 2021 is the challenge represented by China’s formal bid for global dominance of the semiconductor supply chain, “including preferential terms over the next ten years – including tax, tariff, financing, and IP protection – for firms willing to establish capabilities, including production facilities, in China.”

Entitled “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-based Growth,” the content of the report is in direct response to the specific requests articulated in the Executive Order “to consider in their assessment of supply chain vulnerabilities…a variety of risks to supply chains and industrial bases. For example, these reviews must identify critical goods and materials within supply chains… as well as a variety of vulnerabilities created by the failure to develop domestic capabilities.”

“Agencies and Departments are also directed to identify locations of key manufacturing and production assets, the availability of substitutes or alternative sources for critical goods, the state of workforce skills and identified gaps for all sectors, and the role of transportation systems in supporting supply chains and industrial bases.”

Results from the Report: A CEO Summit and CHIPS Act Congressional Funding

In April, the White House hosted the CEO Summit on Semiconductor and Supply Chain Resilience. According to the New York Times, “Participants in the meeting…included executives from AT&T, Ford Motor, General Motors, Google, Intel, Samsung, and Taiwan Semiconductor Manufacturing Company. The meeting was closed to the news media, aside from a brief portion when Mr. Biden gave remarks.”

A significant legislative outcome has also resulted from the 100-day review and report. In June, overshadowed by the ongoing $2T infrastructure bill debate ( which has been raging since March), the Senate managed to approve in a bipartisan fashion the US Innovation and Competition Act, or USICA, which would provide $52 billion, as recommended by the 100-day review report, to “advance long-term U.S. leadership and resilience by fully funding the Creating Helpful Incentives for Production of Semiconductors (CHIPS) for America provisions in the Fiscal Year (FY) 2021 National Defense Authorization Act (NDAA).”

The FY 2021 NDAA authorized programs to:

(1) Incentivize manufacturing through federal financial assistance to construct, expand, or modernize semiconductor-related facilities to support semiconductor fabrication, assembly, test, packaging, and advanced packaging; and

(2) Advance R&D technology prototyping via a new National Semiconductor Technology Center (NSTC).”

Building Resilient Supply Chains and Semiconductor Manufacturing: The Road Ahead

Your company or organization should be up to date on the type of initiatives funded by the CHIPS Act (by way of the Fiscal Year 2021 National Defense Authorization Act).

The initiatives are all housed at the Department of Commerce, except for the Multilateral Semiconductors Security Fund (which will be led by the State Department) and The DoD DARPA Electronics Resurgence Initiative program.

Following are recommendations made by the 100-day review and final report:

Production Incentives: Incentives that ensure “U.S. leadership in leading-edge chip production, secure mature node supply chains for critical industries, and ensure the safety and security of products produced domestically and by allies and partners.”

Manufacturing: Federal incentives to build or expand semiconductor facilities are necessary to counter the significant subsidies provided by foreign allies and competitors. The NDAA authorized the Department of Commerce to award financial assistance to private entities or public-private consortia to finance, construct, expand, or modernize facilities to support semiconductor fabrication, assembly, test, packaging, and advanced packaging.

These incentives should support production across multiple nodes. Investment should support the production of leading-edge logic production necessary to maintain competitiveness in the semiconductor industry, along with the production of mature node logic chips and analog and discrete chips essential to critical industries and defense needs, and production of memory chips, which require support in the face of increased Chinese investment in the memory industry.

Research and Development: Congress should also fund essential investments in R&D. As authorized by the NDAA, these funds could support a National Semiconductor Technology Center (NTSC), to advance the next phase of innovation, advanced packaging and integration, research into new materials, architectures, processes, devices, and applications, and most importantly, bridges the gap between R&D and commercialization.

The funds could support a Department of Commerce National Institute of Standards and Technology (NIST) in establishing innovative programs to foster the development of Advanced Packaging and Test capabilities onshore. Appropriations also support new or expanded R&D programs at the DoD. For example, DoD funds can be used to continue or expand R&D in DARPA’s Electronics Resurgence Initiative, including for laboratory to fabrication programs. These efforts should be closely aligned with the NSTC R&D programs and priorities.

Multilateral Fund: The NDAA authorized a Multilateral Semiconductors Security Fund which should support the development and adoption of secure semiconductors and secure semiconductors supply chains. This should include joint R&D programs with allies. The Fund, operated by the Department of State, would support diplomatic efforts with foreign partners to align policies on export controls, foreign direct investment screening, supply chain security, intellectual property protection, and transparency requirements on subsidies.

For more on the EO on which the report is based, see Executive Order on America’s Supply Chains | The White House and the FACT SHEET: Securing America’s Critical Supply Chains | The White House

For more on the CEO Summit, see White House CEO Summit on Semiconductor and Supply Chain Resilience | The White House

For more on China’s strategic framework and implementation measures for competitive advantage in the semiconductor industry, see China’s Formal Bid for Global Dominance of the Semiconductor Supply Chain

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