Industry executives and experts share their predictions for 2023. Read them in this 15th annual VMblog.com series exclusive.
2023 Will Be the Year of the Semiconductor
By John Durcan, Senior Technologist for the Emerging
Business & Technology Division of IDA Ireland
As
integrated circuits continue to transform most of society, the United States
and Europe have recently taken bold steps to supercharge their domestic
semiconductor industries as an antidote to supply chain vicissitudes. The
importance of this transformation can't be understated given how crucial it is
to ensure a reliable supply of chips for key industries from vehicles to
consumer electronics. In automobiles alone, the global market for
semiconductors is expected to reach $73.3
billion (US) by
2028, with a CAGR of 11.5%.
However, the major
factor that will make 2023 the year of the semiconductor is the CHIPS
and Science Act
signed by President Biden in August 2022 and the European Chips Act passed by
the European Commission in February 2022. The American program appropriates
$52.7 billion for semiconductor incentives, establishes a 25% tax credit for
investments in domestic manufacturing and authorizes $170 billion for R&D
programs. Meanwhile, the €43 billion European effort includes provisions like €15
billion in public and private investment on top of €30 billion of public
funding as well as focus on key areas such as research, manufacturing and
partnerships to help encourage growth.
We will be rolling our
sleeves up in 2023
USA
Scaling
up the resource-intensive semiconductor industry with its multi-billion-dollar
fabs has reached the now-or-never stage because it takes years to roll out such
investments; current-day planning might not be realized until some years in the
future. With so many key industries in the United States and Europe depending
on a supply of chips, revamping the supply chain by creating and enlarging
sources closer to home not only cuts shipping costs but removes the supply
chain uncertainty that is so economically dangerous.
Semiconductors
are clearly becoming top of mind, with companies not only able to tap into
these new government funding sources but a revved-up chip industry encourages
overall forward momentum. Consider the 5nm fab being
built by Taiwanese giant TSMC near Phoenix, which is where Apple intends to
source its future chips. In fact, TSMC recently announced it will construct a
second fab
nearby.
Europe
Major
overseas investments are also being announced by leading domestic companies. Intel will spend as much as €80 billion in
the EU over the next decade along the entire semiconductor value chain - from
research and development to manufacturing to state-of-the art packaging
technologies. For example, the company is expanding its manufacturing facilities
in Leixlip, Ireland, for new process technologies and enlarged foundry
services, bringing its total investment there to more than €30 billion.
While
the United States is among the larger producers of semiconductors, European
nations rank relatively low today given the size of their economies so tracking
activities there to revitalize this critical industry provides a useful
snapshot of what the world market might look like over time. The EU has
targeted an increase in its share of the global semiconductor industry from 9%
now up to 30% by 2030. The following ambitious goals will
likely reshape the region's future.
1. European Collaboration
Given
the magnitude of desired growth, certain factors are most important to enable
this European industry expansion. Collaboration
and inclusion should be elements in fostering growth, with partnerships
between government, research organizations and industry as well as between EU
and American companies and programs. For example, Intel's massive European
investments have identified Germany, France and Poland in addition to Ireland
for new facilities. Another key area for collaboration is between small and
medium-sized enterprises - which comprise the vast
majority
of EU businesses - and larger manufacturing companies, strongly benefitting
everyone.
2. Talent
Finding
talent and skills development
are essential to create the workforce needed to run the facilities and fabs of
tomorrow. Europe already has a diverse, largely well-educated work force but
additional effort must be made to create new STEM graduates and retrain other
professionals for hiring into the growing industry there. For example, Ireland
has a wealth of tech courses and retraining programs aimed at producing the
kind of employees required for the jobs in electronics that are flourishing in
the nation. The prevalence of tech talent in Ireland led Qualcom to enlarge its
operation there via a €78 million R&D center for ASIC research that is bringing on
board hundreds of microelectronics engineers.
Central to Ireland's drive is a focus on bringing together strong
R&D talent from all over the globe gathered in academic research centres
including IPIC Centre for photonics and
the Tyndall
Institute.
3. The Environment
Prioritizing
sustainability is an
important element in building up Europe's semiconductor industry. The region's
green transition and net-zero carbon emissions goal mandate attention to
optimizing production lines, lowering energy usage and perhaps using
renewables. Europe must rebuild its chip industry but not do so at the cost of
the climate.
4. Innovation
Ultimately, it's the capabilities of the
new electronic technologies coming out of the labs that will help both
Europe and America transform their semiconductor industries. New-generation
technologies utilize AI, pervasive computing and cloud-to-edge infrastructure,
with the computer chip at the core of this transformation. For example, a key
technique going forward involves layering processes onto a chip - such as a
layer of intelligence - so the devices have greater functionality. Successfully
managing this evolution gives the nations that invest in these technologies a huge
advantage within the world economy. It's been estimated that the overall
European economy would experience between €77 billion and €85 billion in
additional GDP over the next decade through chip investment alone.
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ABOUT THE AUTHOR
John Durcan is
senior technologist for the Emerging Business & Technology Division of IDA
Ireland.