Hoover Institution (Stanford, CA) — As dollars from the CHIPS and Science Act flow to strengthen the US semiconductor industry, senior leaders from the US government, industry, academia, and international partners met at the Hoover Institution to discuss current challenges and the field’s next steps at a forum hosted by the Stanford Emerging Technology Review on May 22.

The Stanford Emerging Technology Review—a university-wide partnership between Stanford University’s Hoover Institution and School of Engineering—convenes Stanford scientists and engineers with Hoover fellows to explore policy challenges posed by ten emerging technological areas. 

Almost two years after the passage of the CHIPS and Science Act, foundry construction, research programs, and other related efforts to strengthen domestic semiconductor manufacturing and technology are underway. But for all the fanfare around the CHIPS and Science Act awards, are they set to put US industry on a sustainable economic path? How do they contribute to making the United States more resilient to global crises like the COVID-19 pandemic? What impacts are US semiconductor policies having on the nation’s diplomatic efforts to build secure supply chains with international partners? These were the key questions explored.

Domestic discussions centered around the implementation of the CHIPS and Science Act at the Department of Commerce. US government representatives described the strategy for CHIPS Act awards—highlighting their thesis that combining public and private capital together will result in a more effective return for the taxpayer when compared with public funding alone.

Participants questioned whether the large federal subsidies and credits (amounting to $39 billion) for existing semiconductor firms would do nothing more than create jobs and factories that were dependent on continued government subsidies—particularly given the disproportionately high costs of operating fabrication facilities, or fabs, in the United States compared with other countries.

Several participants highlighted challenges in growing the US semiconductor talent base, including the need to reform immigration policies to bring high-skill foreign talent into the United States; the high costs of small-scale hardware innovation and university research; the lack of certain demand for new engineers among high-paying employers; and the need to foster science, technology, engineering, and math (STEM) education much earlier than in the university level.

With respect to the CHIPS Act’s research funding, several participants highlighted the disconnects between manufacturing and innovation funding, questioning the strategy of doling out smaller grants without specific emphasis on scaling innovations. Participants highlighted the lack of awards with high growth potential as well as the negative incentives for large companies, which are the primary beneficiaries of CHIPS Act funding, to support the scaling of new companies that might compete with them later.

To all these challenges, participants presented a range of actionable recommendations that could be taken back to Washington, including a more focused look at reducing regulatory burden and therefore the operating costs of new semiconductor fabs; an employee- and student-centric approach to growing the talent base; and placing greater emphasis on scaling American innovation in the semiconductor sector.

International discussions focused on America’s diplomatic efforts to reduce barriers to foreign collaboration and create resilient global supply chains. US government representatives described several of the existing development and multilateral coordination efforts currently underway, including the International Technology Security and Innovation Fund, which was  focused on the assembly, testing, and packaging components of the semiconductor supply chain.

Participants highlighted a lack of clarity toward overall US economic policy objectives as well as the obvious disconnect between protectionist domestic policies and attempts by the US government to foster international collaboration. Participants struggled to develop a cohesive narrative for how the United States is balancing promotion of global free trade with the current emphasis on export controls and domestic subsidies in Washington.

Diplomats from Asia and Europe present at the meeting indicated a polite tolerance for the major direct subsidies contained in the US CHIPS and Science Act, as many of their home nations already engage in subsidies to spur semiconductor development. Other participants warned of the shortsightedness of commercial subsidies and the pitfalls associated with an international subsidies race. 

Here too, participants presented a range of potential paths forward, including expanding international participation within the National Semiconductor Technology Center research efforts; increasing the number of “commerce to commerce” exchanges between national development authorities; increasing dialogue between the development and security functions within the US government; and consolidating multilateral technology dialogues between US partners under a smaller number of forums.

For more information on the Stanford Emerging Technology Review and to read its inaugural report, click here

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