Several Truths and One Semi-Truth About Semiconductors

The Importance of Semiconductor Production for U.S. Economy and Security:

Semiconductors are critical to modern economies and vital for U.S. national security. However, the current state of semiconductor production highlights significant challenges that need immediate attention. Here are some important facts about the semiconductor industry:

• 20 years ago, the U.S. produced nearly 40% of the world’s semiconductors. Today, that number has dropped to 13%.
• 75% of global semiconductor production capacity is now concentrated in four Asian countries: Taiwan, South Korea, China, and Japan.
• Demand for electronic devices and equipment has skyrocketed since COVID-19, outpacing current global semiconductor production capacity.
• Capital expenditures in semiconductor production have increased significantly, yet the U.S. only captures 14% of these investments, while Asia accounts for more than 80%.
• U.S. manufacturing is being disrupted by the lack of semiconductor availability, affecting multiple industries.

Semiconductor Shortages Aren’t Just a Supply Chain Issue

The one semi-truth about semiconductors that I have seen time and time again is that the semiconductor challenges are a result of supply chain issues. Well, this is true as production is a key process in many supply chains, but the real problem is a not a supply chain issue, it’s a production capacity issue. So, let’s not disguise our semiconductor challenges as being supply chain challenges, but more accurately establish that semiconductor production challenges are the cause of many of the supply chain challenges we are experiencing in business today. The solution to this problem is not in the supply chain, but in the U.S. government properly providing incentives for companies to invest in U.S. semiconductor production.

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