Can We Reimagine The Future Of The Semiconductor Industry?
CEO of PragmatIC Semiconductor, Scott White is an experienced serial entrepreneur leading his sixth technology venture at PragmatIC.
Faced with a global chip shortage and growing geopolitical concerns over international supply chains, the United States and European Union have both proposed legislation to boost homegrown semiconductor industries.
The European Chips Act is a multibillion-euro initiative to strengthen the European semiconductor ecosystem, while the CHIPS for America Act includes a generous $52 billion package to aid the research, development and fabrication of semiconductors in the States. Both pieces of legislation have come at a crucial time for chip manufacturers, as industries ranging from automobiles to healthcare and consumer electronics have been forced to reduce or even pause production due to the unavailability of devices. Integrated circuit (IC) lead times were 25.8 weeks in February, the longest ever in five years, and some of the world’s biggest wafer suppliers claim to have sold out production capacity till 2026.
And it’s not just the powerful microprocessors in today’s laptops and smartphones that have become impossible to find — the lack of $1 display drivers used in everything from digital thermometers to cars has led to widespread shortages in consumer products across the globe. Earlier this year, American automotive company Ford announced it would ship its SUVs without chips controlling non-safety features, nine months after news agencies revealed that over 60,000 cars were piled up in factories due to a shortage of ICs.
With so much at stake, we need to consider novel approaches that can transform how we think of the semiconductor industry. Instead of massive silicon fabrication plants that need billions to fund and use huge amounts of water and energy, it is now financially viable to create smaller, more cost-effective fabs that can be set up in every state or county. These fabs can take advantage of innovative materials and streamlined manufacturing processes to sidestep the supply chain issues plaguing the industry.
In February 2022, I had the opportunity to meet U.S. Senator Mark Warner and discuss semiconductor manufacturing and the CHIPS Act. He was quick to see the potential in localized chip manufacturing in towns and counties across the country, laying the groundwork for the growth of ancillary industries and creating thousands of jobs in the process.
Such modular fabs can disrupt traditional manufacturing processes and shorten supply chains to deliver made-to-order ICs in a matter of weeks, enabling agile hardware design in electronics that has previously been impossible to implement. Traditionally, the evolution from design to manufacturing could take anywhere from several months to a couple of years. New innovations have shown that this can now be done in less than two weeks. Localized chip manufacturing can also be more financially viable due to the huge savings in capital expenses, transportation, land and energy.
A successful parallel can be drawn to the small modular reactors (SMR) being built by Rolls Royce to deliver at scale the next generation of low-carbon nuclear power. A single SMR power station can power nearly 1 million homes and is about the size of two football pitches. And because the station is built by interconnecting modules that can be transported on regular-sized trucks, they are vastly more affordable than traditional nuclear reactors.
A major reason to encourage local chip manufacturing is the huge potential for upskilling and job creation. Along with directly requiring skilled jobs in a particular sector, core manufacturing industries encourage the growth of ancillary industries and centers of innovations centered on specific industries. To understand the potential for economic growth, one needs to look no further than the English Midlands and the economic growth spurred by Britain’s automotive industry or the quiet but enviable success of Germany’s Mittelstand. In the U.S., recent analysis shows that jobs in semiconductor industry have a 6.7x multiplier on overall job creation.
Besides, global connectivity and lightning-fast internet have made it possible for companies to bring skilled jobs to remote hinterlands that never had such opportunities before. A shining example in this regard is Indian technology company Zoho. In 2011, the company set up a new division in a remote village in south India and trained and hired local youth who would otherwise have been forced to leave for bigger cities to find well-paying jobs. In just over a decade, the six-person division grew to over 500 employees and helped to improve the socio-economic conditions of the local community.
What does this mean for the United Kingdom, with its proud history of innovation in the semiconductor sector? Today the country has the technology, skill set and resources to be pioneers in semiconductor innovation, particularly in technologies that complement or leap-frog silicon, such as compound semiconductors and flexible electronics. And although the UK Innovation Strategy envisions a key role for British semiconductor companies, particularly those based in established clusters such as Bristol, Wales and Cambridge, it simply does not go far enough in scope and ambition.
Given the right support and encouragement, the UK could very well become a semiconductor manufacturing powerhouse once again, with the chip sector generating thousands of jobs as it did in Silicon Glen, which employed close to 50,000 people in its heyday in the 1980s. But we will need to act quickly, or we risk losing initial ground and the exciting opportunity to reinvent the UK’s once-thriving semiconductor industry.
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