Earlier this month, STMicroelectronics (ST) and GF (formerly Globalfoundries) signed a memorandum of understanding to jointly build and run a 300mm semiconductor fab in Crolles, France, alongside ST’s existing fabs. Crolles is just north of Grenoble. This new fab will focus on building FD-SOI (fully depleted silicon on insulator) chips, in addition to making other kinds of chips. FD-SOI is a more economical way to achieve some of the benefits of leading-edge semiconductor process technologies including higher speed and lower power consumption.
ST and GF expect that the new fab will start producing chips in 2024 and that the new fab will reach full production capacity, as many as 620,000 300mm wafers per year by 2026. ST was the first company to commercialize an FD-SOI process, which was later licensed to GF. In addition, the Grenoble area in southeastern France has been a center of FD-SOI development for more than two decades. Soitec in Bernin, which is literally just down the street from the Crolles fab complex, is a major supplier of FD-SOI wafers.
By coincidence, Soitec, GF, and ST, along with CEA (the French Alternative Energies and Atomic Energy Commission), announced a collaborative agreement earlier this year to jointly define the industry’s next generation roadmap for FD-SOI. In that announcement, CEA Chairman François Jacq said, “CEA has… a long history of deep R&D cooperation with… STMicroelectronics, Soitec and GlobalFoundries and has been very active in the initiatives led by the European Commission and Member States aiming to set up a complete ecosystem for FD-SOI going from material suppliers, design houses, EDA tools providers, fabless companies, and end users.” July’s ST/GF FD-SOI memorandum announcement also says, “ST and GF will receive significant financial support from the State of France for the new facility. This facility will strongly contribute to the objectives of the European Chips Act, including the goal of Europe reaching 20% of worldwide semiconductor production by 2030.”
Similarly, there’s a $52 billion, bipartisan bill to support the rebuilding of the US semiconductor industry called the US Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act. The US Senate version of the CHIPS Act is called the United States Innovation and Competition Act (USICA) of 2021. The Senate passed this bill on June 8, 2021. The US House passed its version, the America COMPETES Act, on February 4, 2022. The two versions of the bill now need to be reconciled, and that’s not happening, even though 275 House members and 69 Senators back the completion of this bill according to the Semiconductor Industry Association (SIA). President Joe Biden will undoubtedly sign this bill if it ever hits his desk.
Many question the need for this $52 billion influx of taxpayer’s money into the coffers of some very profitable semiconductor companies. Companies that stand to benefit from the CHIPS Act include American companies such as Intel and IBM and non-US companies that are or are considering building fabs in the US, including Taiwan’s TSMC and China’s GlobalWafers. All of these companies, and more, expect to build new manufacturing plants in the US if the CHIPS Act is passed.
In many ways, the situation parallels a similar situation the US found itself in more than 40 years ago. Back in 1980, the US semiconductor industry was in a funk while Japan’s semiconductor industry was becoming increasingly competitive. In only five years, Intel, the company that invented the commercial DRAM in 1970, would exit the DRAM market because it could not compete financially or from a quality perspective with Japanese DRAM makers. The entire industry was stuck above the 1-micron barrier. The IC revolution, which started in the US in 1959, was grinding to a halt.
To counter this stagnation, the US Department of Defense (DoD) initiated the Very High Speed Integrated Circuit (VHSIC) program to develop advanced silicon integrated circuits. The VHSIC program was just as controversial then as the CHIPS Act is today. People back then questioned why the US government should pump money into the US semiconductor industry instead of letting the free market’s invisible hand guide things.
From 1980 through 1990, DoD pumped $918 million into Honeywell, Hughes, IBM, Texas Instruments, TRW, and Westinghouse. Some of these companies were semiconductor providers and some were systems suppliers. For its nearly billion-dollar investment, the US got about 25 different demonstration chips and a revitalized domestic semiconductor industry. The 1-micron barrier was quickly smashed.
In September 1990, the VHSIC Program Office issued a report titled “Very High Speed Integrated Circuits – VHSIC – Final Program Report 1980- 1990” that said:
“An important indirect mode of technology transfer activity also took place. The very existence of the VHSIC program and the visible results of its contract efforts spurred other companies to initiate independent IC technology development programs with the intention of remaining current and competitive.”
In other words, the VHSIC program had very positive, unintended consequences for the broader semiconductor industry because even companies that did not participate in the program didn’t want to be left in the dust.
Perhaps more important, a critical new chip-design methodology called VHDL emerged. VHDL stands for the VHSIC Hardware Description Language. Without VHDL and a similar language called Verilog, created by a company named Gateway Design Automation, it would be impossible to design today’s large chips. VHDL and Verilog remain the mainstream languages for chip design today, more than four decades later. That’s quite an achievement by itself.
The VHSIC program and its relationship to the US semiconductor industry is not unique. The US government has helped the semiconductor and other high-technology industries in myriad ways over the decades. Here are a very few additional examples:
- US government labs poured funding into the development of faster and faster computers starting in the late 1940s, finally leading to the development of supercomputers in the 1960s. These supercomputer programs continue to this day.
- ICBM and aerospace/defense programs underwrote the development of the silicon transistors and more than a decade of transistor innovations
- NASA’s adoption of Fairchild Semiconductor’s earliest logic ICs for its Apollo Program computers spurred integrated circuit research and development
- MIL-STD-1750A formally defined the instruction set of a 16-bit processor for the US military, which spurred nearly a dozen companies to develop microprocessors to the 1750A standard at a time when 8-bit processors ruled
- The Internet would not exist without the funding provided by the DoD’s Advanced Research Projects Agency (ARPA) to create the ARPANET and its packet protocols, which sent its first message from computer to computer in 1969. ARPANET paved the way for the Internet.
Today, the idea that Adam Smith’s invisible hand is guiding the worldwide semiconductor industry is an absolute myth. Semiconductor company CEOs, like all heads of for-profit companies, must look for the best possible deals for their companies. These CEOs will build fabs. They must build them to remain competitive. The demand is there (there’s a chip shortage in case you haven’t heard). The technology is available. The know-how is on hand. CEOs are shopping for the best places to build those fabs. According to the SIA, the cost of building and operating fabs is 20-40% higher in the U.S. than abroad, due primarily to foreign government incentives. Semiconductor companies are global. Semiconductor CEOs can build their fabs anywhere.
Other countries are putting their very visible fingers on the scales. As mentioned above, Europe already has a Chips Act in place to help grow the semiconductor industry there. Pat Gelsinger, Intel’s CEO, recently explained during an interview with the Washington Post that China has put semiconductor corporate development in the top five goals of its five-year plans for the past two and a half decades, that Taiwan has had industrial policy in place to help their domestic semiconductor companies for many years, and that Korea and Japan have been subsidizing their semiconductor industry for decades. As a result, said Gelsinger, the US share of the semiconductor market has declined from 40 percent in 1990 to its present level: 12 percent. (According to the SIA, the US semiconductor market share in 1990 was 37 percent.) This is the global semiconductor playing field today. The US can’t play by its own rules and expect the outcome to be any different.
However, the US CHIPS Act is stuck in a political tug-of-war game between Senate minority leader Mitch McConnell and nearly everyone else in the US congress. Here’s what Leader McConnell tweeted on June 30:
“Let me be perfectly clear: there will be no bipartisan USICA as long as Democrats are pursuing a partisan reconciliation bill.”
It seems Leader McConnell doesn’t have a problem with the CHIPS Act. He was just holding it hostage because it’s part of the bigger reconciliation bill. The solution seems simple. Split off the CHIPS Act and pass it with bipartisan support. That appears to be exactly what’s about to happen. Let’s hope the US congress figures it out before their next recess.
For his part, Gelsinger has made it clear on multiple occasions that Intel will delay some of its planned construction of fabs in Ohio if the US CHIPS Act does not pass. That could be gamesmanship, or it could be a simple statement about the realities of cash flow for Intel. The company has put a massive worldwide building program into motion, and Gelsinger is obligated to get the most bang for his buck, wherever he can.
TIRIAS Research believes that the semiconductor industry is critical to the long-term competitiveness of the US, as well as its economic growth. Holding the CHIPS Act hostage is akin to holding the entire US economy hostage. It’s good to see the EU and well as US and European companies working together to make the EU more competitive. It’s time for the US Congress to step up and do the same for the US. Hopefully, we’ll see some action next week.