The Resiliency of U.S. Semiconductor Supply Chain

In February 2021, President Biden signed Executive Order (EO) 14017, “America’s Supply Chains,” directing seven executive agencies to evaluate the resilience and security of the nation’s critical supply chains. As a result, the U.S. Department of Energy (DOE), through the national laboratories, conducted evaluations of the supply chains that encompass the Energy Sector Industrial Base, with particular focus on technologies required to decarbonize the U.S. by 2050.

This is a synopsis of the Deep Dive Report on the U.S. Semiconductor Supply Chain, one of 11 sectors that was evaluated, released by the DOE, in February of 2022.

Introduction

To combat the climate crisis and avoid the most severe impacts of climate change, the U.S. is committed to achieving a 50 to 52 percent reduction in economy-wide net greenhouse gas pollution by 2030, creating a carbon pollution-free power sector by 2035, and achieving net zero emissions economy-wide by no later than 2050. 

The U.S. Energy Sector Industrial Base will require radical transformations to decarbonize by 2050, and the growth, energy efficiency, and security of the semiconductor supply chain are key components of this transformation. 

Semiconductors are a keystone technology in the energy sector as they are essential for the operation of nearly every electric vehicle, recharging station, and wind turbine as well as the entire electrical grid which are critical to decarbonization.  

Semiconductors are also critical to the American economy, contributing over $246.4 billion to the gross domestic product (GDP) of the United States in 2020. With an export value of $49 billion, they were the fourth-largest U.S. export in 2020 behind aircraft, refined oil, and crude oil. 

The report focuses on both conventional and wide bandgap (WBG) power electronics (PE) semiconductors as they are both critical to achieving net-zero carbon emission. 

The Technology 

For this report, “semiconductor” will focus on semiconductors used in applications that are important for the decarbonization of the energy sector, except those in photovoltaics.

These include:

• WBG semiconductors (e.g., SiC and gallium nitride (GaN)) that control, convert, and condition power flow for electric vehicles (EVs), electrified industrial technologies (such as industrial heat pumps), and other renewable energy applications such as wind and solar generators.
• Conventional semiconductors (e.g., silicon-based) that control data flow for energy efficiency and renewable energy applications, including EVs, integrated wireless sensor systems for energy-efficient manufacturing, energy efficiency in buildings, and other renewable energy technologies.

The primary driving force behind the difference in applications is the semiconductors’ operating range. both semiconductors perform well between 600 and 900 V, but SiC devices also operate at much higher voltages. One of the areas of current application overlap between GaN and SiC is in the EV sector. 

Semiconductor Supply Chain Mapping

The market and supply chain for semiconductors is global and extremely complex. The designing, fabricating, and packaging of a semiconductor product takes up to 100 days, including 12 days of transit, and can cross international borders 70 times.

Most supply chains can be characterized by five main segments: raw materials, processed materials, subcomponents, product, and end-of-life recycling/reuse. The complexity of semiconductors, however, require several additional supply chain segments: design, semiconductor manufacturing equipment (SME), and assembly, testing, and packaging (ATP), including advanced packaging and research and development (R&D) as shown in Figure 9. 

U.S. Semiconductor Supply Chain Key Vulnerabilities 

• Decarbonization efforts will increase the demand for renewable energy and its supporting infrastructure, including both conventional semiconductor and WBG power electronic supply chains. The current lack of domestic manufacturing capacity and access to raw materials will be exacerbated. Current projected global silicon production cannot keep pace with this growth, and it is likely that other supply chains will be stretched as well. The EV sector could be especially impacted due to the rising semiconductor use in vehicles as well as the necessary charging infrastructure. 

• The global energy use of products featuring semiconductors has doubled every three years since 2010. This exponential growth in energy use is projected to accelerate even more due to increased electrification from decarbonization, and the exponential growth in energy-intensive computer applications.

• With the explosion in use of semiconductor technologies in all sectors, especially the energy sector, the performance and efficiency of semiconductors have a direct effect on the performance and efficiency of technologies in those other sectors. 
• Artificial intelligence algorithms are doubling their power every two months, and semiconductor energy use just for Bitcoin mining uses more electricity than some European countries, with a 1-year doubling time. 

• In 1995, 26% of global semiconductor manufacturing capacity was located in the United States, this has decreased to 10% by 2020 (European Semiconductor Industry Association. Developing technologies to address the needs of the energy sectors is especially critical. The United States already has significant strength in the SiC power electronics market and has a foothold in the HV market. However, this technology and supporting technologies require additional development to improve quality and costs. Without investment now, this advantage could easily move offshore. 

• New devices are nearly impossible to introduce directly into multi-billion dollar fab facilities. Tools based on the ultra-precise control techniques used to make such energy-efficient devices could instead be introduced through toolmakers.

• The United States must also improve its capabilities in advanced packaging. This technology is rapidly increasing in importance for performance and efficiency reasons and will only accelerate in importance with increased electrification. Advanced packaging is a growing, innovative area that depends heavily on design capabilities where the United States excels, but the U.S. industry needs to build the manufacturing facilities here or it will risk being left behind in this critical field. 

• Manufacture of semiconductors has a significant water demand and a high carbon footprint from substantial energy demands as well as the use of fluorinated compounds. So, it is critical to address the potential environmental impacts of increased manufacturing. 

• Securing a resilient supply chain is underpinned by having a robust, well-trained workforce. This demand spans the trades to advanced degrees and will need to be met by both U.S. citizens and foreign workers. Ensuring that training programs, immigration policies, and all the supporting infrastructure work together to address this need, while also ensuring strong labor standards and competitive wages, is critical. 

Conclusions 

The United States has a leading position in the semiconductor industry, but this position has been eroding, especially with respect to domestic manufacturing and advanced packaging. 

While technologies are available to help reduce carbon emissions, they currently rely on raw materials sold in opaque and volatile global markets that are often located in geopolitically sensitive areas. 

Furthermore, midstream stages of supply chains, such as material processing and component manufacturing, are concentrated in foreign countries with complicated geopolitical relationships with the United States.

For the United States to maintain and expand its leadership in the semiconductor industry it has to meet the skyrocketing growth in the demand for conventional and wide bandgap power electronics by increasing manufacturing and use of both types of semiconductors while ensuring development of new energy-efficient semiconductors with low environmental impacts.

To achieve these goals, the U.S. needs to develop a skilled domestic workforce for both conventional semiconductors and WBG power electronics.