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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowSemiconductors function as the brains of almost every modern technology we use. They play an indispensable role for our national security, and competitiveness and can be found in everything from cars and phones to the electric grid and rocket ships. For the past generation, the U.S. has held the global leadership role in the technology; however, the U.S. share of global semiconductor manufacturing slipped from 37% in 1990 to about 12% in 2020. At the same time, the cost of operating a fabrication plant, or “fab,” is estimated to be 30-50% higher in the U.S. than competing countries, while a substantial chunk of production is subsidized by foreign governments. China has assumed an outsized role in that competition.
Congress responded to the loss of competitiveness and threat to national security with the CHIPS and Science Act of 2022, signed into law by President Joe Biden on Aug. 9, 2022. CHIPS directs about $280 billion in funding to spur domestic R&D and manufacturing of semiconductors in the U.S. Federal support includes $39 billion in subsidies for manufacturing fabs, a 25% investment tax credit and about $13 billion for semiconductor research and workforce development. CHIPS aims to boost research in AI, quantum computing and hypersonics.
Silicon Valley symbolizes our understanding of the locus of the semiconductor industry in the U.S., but the reality is that the industry has been diversifying eastward for some time. In 2020, Taiwan-based TSMC announced plans to build what is now expected to be a $40 billion fab in Arizona. In 2021, Samsung announced plans to build a $17 billion fab in Texas. In 2022, Intel announced a fab investment of $100 billion in neighboring Ohio. Indiana grabbed a share of the spotlight in 2022 when SkyWater announced plans to build a $1.8 billion fab in West Lafayette. (Full disclosure: The author provides counsel to SkyWater.)
The opportunity for Indiana to capitalize on its central location, manufacturing history and academic partnerships is strong. Indiana fingerprints can be found throughout the blueprints for CHIPS. In 2020 and 2021, respectively, Indiana Sen. Todd Young co-introduced the Endless Frontier Act and U.S. Innovation and Competition Act, precursor legislation that ultimately culminated in CHIPS passage. Gov. Eric Holcomb was among a group of governors actively advocating for CHIPS. Former Purdue University board chair and Undersecretary of State Keith Krach spearheaded efforts between the executive and legislative branches to create a strategy to develop a semiconductor ecosystem in the U.S. grounded in a trusted supply chain. (Full disclosure: The author worked with Undersecretary Krach at the Department of State.)
Purdue plays a significant role in innovation and workforce development and is regarded among a small number of elite universities for the semiconductor industry. Last year under then-president Mitch Daniels, Purdue launched the nation’s first semiconductor degrees program. This year at the G7 Summit in Japan, under the leadership of President Mung Chiang, Purdue entered an international agreement with Micron, Tokyo Electron and other educational institutions to create a network for workforce advancement and R&D in semiconductors. Fast Company designated Purdue as No. 16 on its list of the “World’s 50 Most Innovative Companies of 2023” for its role in semiconductors.
Purdue is well positioned to serve as a center of gravity for a resurgent semiconductor ecosystem in the U.S. The federal government has signaled that at least two chipmaking ecosystems will be incentivized under CHIPS. One such cluster is expected to be located near Arizona or Texas based on company investment plans already announced. A second cluster reasonably could be expected to be in the Midwest. Given the projected investment in fabs in the region, along with the presence of Purdue, Indiana could play a key role in a Midwestern cluster.
The result could be tens of billions of dollars in new capital investment and thousands of new high-paying jobs in Indiana. Just as significant, Indiana’s future would be directly linked to innovation, technology and manufacturing for the next generation.•
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Stephen Akard is a partner in the Bose McKinney & Evans Site Selection and Economic Incentives Group. His practice includes special emphasis on economic development contract language and compliance.Opinions expressed are those of the author.
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