The House Intelligence Committee held a hearing last month to examine ways the U.S. can address its vulnerabilities in the security and supply of microelectronics. In her opening statement, Rep. Jackie Speier (D-CA), who chairs the panel’s Strategic Technologies and Advanced Research Subcommittee, observed that the country’s current options are shaped by the industry’s sophisticated, globalized supply chain and the predominance of commercial interests.
“We now face a world where a single chip can travel to more than 70 countries during the production process. Where once the U.S. government drove market innovation and production schedules, we now see private companies commanding nearly all the demand for chip production,” she said.
Two witnesses, Georgetown University analyst Will Hunt and Semiconductor Industry Association executive David Isaacs, stressed that leading foreign semiconductor companies are backed by their governments. To rebalance the U.S. position, they said the House should adopt a proposal the Senate passed in June to provide $52 billion for the manufacturing subsidy programs and R&D initiatives authorized in the CHIPS for America Act.
However, former Defense Department official Lisa Porter argued the sprawl of the microelectronics supply chain makes subsidies difficult to target and said the U.S. should prioritize other means of mitigating threats.
Porter advocates standards leadership and resilience
Porter was the first director of the Intelligence Advanced Research Projects Activity (IARPA) and served as deputy under secretary of defense for research and engineering under the Trump administration. During her time in the latter position, the Defense Department pivoted away from a “trusted foundries” approach for acquiring secure microelectronics toward a “zero-trust” philosophy adapted from the field of cybersecurity.
At the hearing, Porter testified the shift reflects a recognition that microelectronics security cannot be guaranteed, partially because breaches can occur within trusted suppliers and partially because the supply chains are so complex. She explained that chip production draws on a “vast network of thousands of suppliers performing specialized tasks at many different levels in the lifecycle, for example specialty gases and chemicals, silicon wafers, electronic design automation, software, lithography tools, packaging, and test.”
She further remarked, “There are those who would argue for the creation of trusted onshore foundries and for limiting all actors in the supply chain to those who can be trusted. Such a perspective is not only näive but also dangerous.”
Porter said the best way to reduce vulnerabilities is to build resilience against risks such as security breaches and supply disruptions. She also advocated for the U.S. to lead in setting technical standards for component security, arguing that it would also enhance the country’s influence over the industry, which she suggested is otherwise limited by its relatively small share of the global population.
Moreover, Porter credited the sprawl of the global market as a source of innovation and economic growth and counseled against attempts to isolate from it. Noting that the Defense Department and intelligence agencies have little sway over the industry, she remarked, “If they think they’re going to be able to do something special off to the side, all they’re going to do is isolate themselves from the state of the art that is going to be driven by the commercial sector.”
For similar reasons, she suggested that, although concentration of chip manufacturing in countries such as Taiwan and South Korea presents vulnerabilities, providing subsidies would risk creating supplies of economically unviable components. “Any subsidy targeting a specific part of such a complex value chain — or even worse, specific companies within the chain — will weaken the competitive forces of a free market that correct for poor performance and poor alignment with the market demand,” she said.
Porter said that export controls could likewise damage the U.S. position, arguing they would give rival nations an incentive to build up their own capabilities and would both limit U.S. companies’ access to global markets and shelter them from competitive pressure.
Addressing concerns about the erosion of the U.S. position in semiconductor manufacturing globally, she said, “The U.S. is currently a leader in several critical areas of the industry, to include the design of chips, electronic design automation software, RF chip design and manufacturing, and specialty tooling. Further, the Defense Advanced Research Projects Agency is still recognized as a global leader of cutting-edge innovation in this domain.”
Porter also argued that, despite strong cash flow, U.S. companies that might benefit from subsidies are not currently focusing investment in the kinds of domestic capabilities Congress is proposing to support.
CHIPS Act advocates seek level playing field for industry
Like Porter, the Semiconductor Industry Association’s David Isaacs said the U.S. retains a strong position in many areas of the industry, but he emphasized that U.S. companies are not competing on a level playing field. He remarked, “We lead in the core intellectual property. We lead in the manufacturing equipment. We lead in chip design. But we have fundamental vulnerabilities in manufacturing and materials and other parts of the supply chain, and part of that is due to the fact that our global competitors are heavily investing in this area. They are seeking to displace U.S. leadership, and they are providing massive subsidies, massive support to their industry. And as a result, over time, America used to account for 37% of shipped capacity in 1990 and now that’s down to 12%.”
Responding to Porter’s points, Isaacs said, “We are dependent on a complex global supply chain, and leveraging that supply chain has been an advantage for the United States. We’re not looking to be self-sufficient, but we need to fill in gaps and vulnerabilities that exist for the Intelligence Community and the economy as a whole.”
Accordingly, Isaacs strongly advocated for funding the CHIPS Act. Notwithstanding the healthy status of U.S. companies, he said the objective is to reduce the cost difference of providing capabilities in the U.S. versus in countries that already subsidize their industry.
“Maybe we don’t fully eliminate it, but we get close enough where … the big players — you know, Amazon, Apple — have an interest in having leading-edge capability diversified, and have their supply chain diversified with capabilities in the United States and elsewhere and not have everything concentrated in one locality,” he said.
Isaacs said the recent decision by leading Taiwanese chipmaker TSMC to build a fabrication facility in Arizona was spurred “in part” by the prospect the CHIPS Act will be funded, and added that companies such as Intel and Samsung have also been encouraged to announce new U.S.-based projects.
Georgetown’s Will Hunt, who works in the university’s Center for Security and Emerging Technology, agreed CHIPS Act funding is important and suggested pursuing additional measures.
“The CHIPS for America Act provides some R&D funding to address near-term issues like advanced packaging, but longer-term investments in R&D are needed. For example, IARPA has been working on novel energy-efficient approaches to computing, which could greatly reduce the costs of encryption and other computing tasks. The United States should make further such investments across a portfolio of hardware paradigms,” he urged.
Need for workforce development draws consensus
All three witnesses agreed the U.S. needs to bolster its semiconductor workforce at all levels.
Hunt, who co-authored a report on the subject last year, noted that 40% of the domestic semiconductor workforce is foreign-born and that, despite the field’s growth, the number of U.S.-born graduate students in it has been stagnant for 30 years. He said the U.S. should admit more foreign workers with specialized skills to help satisfy the demand for talent that CHIPS Act funding could spur. In the longer term, he said the U.S. should build up domestic talent, such as through fellowships and ensuring university students have access to equipment used in industry.
Porter stressed that workforce shortfalls are a potential impediment to successfully expanding chip production in the U.S., saying, “Foundries have no value without a skilled workforce.”
However, she also argued that workforce development is an area where government action would be useful. “The U.S. should carefully consider incentives to attract the best and brightest from within its borders, as well as from around the globe to pursue careers in this industry. And it is important to note that this is not just about advanced engineering degrees; highly trained technicians are extremely important to the success of this industry,” she said.
Porter later added that she is concerned about rhetoric that is hostile to immigrants and urged that the U.S. should strive to remain welcoming. “I think we want to be the beacon for the best and brightest and encourage those people to stay here,” she remarked.