![]() ![]() China is a leader in assembly, packaging, and testing, which is relatively less skill- and capital-intensive, and is investing aggressively to expand throughout the value chain.Īll countries are interdependent in this integrated global supply chain, relying on free trade to move materials, equipment, IP, and products around the world to the optimal location for performing each activity. East Asia is at the forefront in wafer fabrication, which requires massive capital investments supported by government incentives as well as access to robust infrastructure and a skilled workforce. (See the exhibit.) The US leads in the most R&D-intensive activities-electronic design automation (EDA), core intellectual property (IP), chip design, and advanced manufacturing equipment-owing to its world-class universities, vast pool of engineering talent, and market-driven innovation ecosystem. The need for deep technical know-how and scale has resulted in a highly specialized global supply chain, in which regions perform different roles according to their comparative advantages. ![]() No other industry has the same high level of investment in both R&D (22% of annual final semiconductor sales to electronic device makers) and capital expenditure (26%). Semiconductors are highly complex products to design and manufacture. Addressing these vulnerabilities requires a combination of carefully designed actions from policymakers, including targeted incentives to encourage domestic production in order to address strategic gaps. In the past few years, however, several new factors have emerged that could put the successful continuation of this global model at risk. The global structure of the semiconductor supply chain, developed over the past three decades, has enabled the industry to deliver continual leaps in cost savings and performance enhancements that ultimately made possible the explosion in information technology and digital services. Semiconductors are used to power a vast array of electronic devices-everything from smartphones and cloud servers to modern cars, industrial automation, and critical infrastructure and defense systems. ![]() ![]() The widespread shortage of semiconductors that began in late 2020 highlighted how indispensable these specialized components are in today’s economy. Technology, Media, and Telecommunications. ![]()
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