B. Livingston wrote:

SILICON By Brian Livingston President Joe Biden recently signed a $52 billion subsidy program for the semiconductor industry, within an overall $280 b
[See the full post at: $52 billion for semiconductor giants — but will we get more chips?]

Thát is the so much the question, for years to come.

Mean while Intel reportedly nearing deal to build $5B+ chip plant in Italy

Intel Corp. and the Italian government are reportedly close to signing a deal that would see the chipmaker build a new multibillion-dollar chip plant in Italy.

The news was reported today by Reuters, which attributed the information to two sources familiar with the matter.

The deal is expected to be worth $5 billion initially. According to the sources, the Italian government is prepared to fund up to 40% of Intel’s investment in Italy. The total value of the project is expected to increase beyond the initial $5 billion price tag over time…

There are two manufacturing models in the semiconductor industry. One model, the Independent Device Manufacturer (IDM), results in semiconductor factories that produce chips exclusively for the factory owner. Intel designs the products and creates the manufacturing process to produce those designs. Because modern semiconductor plants cost 10’s of billions of dollars, you have to sell a lot of your own product to make a profit. Every square mm on the silicon wafer, except for test structures, contains product that Intel plans to sell.

The second model, for firms like TSMC, is called a foundry. The foundry creates the manufacturing process and publishes rules on how to use the process. Independent companies carry out the product design. The foundry makes money when you contract to use their services to build your design. The designers make money when you either buy the product from them or when you buy the product that incorporates them. There are other economies for the designer – you may not need as many chips from a manufacturing lot as are available from even a single run. The foundry will sell you “space” on the wafer that is shared with other designers whose product is being built using the same process. Result – lower cost chips at the expense of not being able to create proprietary manufacturing processes.

What Intel is now proposing is that they will ramp up the second business model, using other new factories or converted old ones, where they will provide foundry services. What’s not clear is whether Intel’s foundries will be able to supply products using the most advanced technology – one competitive with TSMC. It’s also not clear that Intel has the management and technical staff to run both business in parallel, and in competition with each other.

Further, just manufacturing the part in a semiconductor factory located in the USA does not solve the supply chain problem. After manufacturing you have test and assembly (packaging) almost all of which is done in Asia. It’s a specialized industry that requires its own integrated supply lines and capital investment. If you want to be independent, then you have to fund that industry.

Finally, you don’t get to build either the chip factory or the test/package factories without the manufacturing tools. These tools are so specialized that it makes no sense to try to build duplicate companies to manufacture them just so your supply lines are protected.

In the end, it’s a myth that any one country can sustain a fully independent semiconductor industry that produces competively priced products. The semiconductor industry is just too risky for most investers despite the prospect of enormous profits. Factory depreciation can be measured in dollars per second. Overcapacity in the industry, as in previous memory wars, can quickly lead to having to sell product at a loss – made worse if your labor costs are sustantially higher than your competitors. If you want a local industry badly enough you are going to have look for government investment. You are in a global competition for in-country production facilities.

So, yes let’s build more fabs in the USA, because it does reduce risk. But don’t expect those continuing new fabs to be the supplier of the most advanced technologies for the first 5-7 years or more. It’s a very hard learning curve.

Norm Goldsmith

Brian Livingston: “In calendar year 2021, the global auto industry was unable to build 7.7 million of the vehicles it had planned, approximately 10% to 20% of the usual production, due to a lack of essential semiconductors”

One thing that might not be that bad, considering that what this planet does not need is more internal combustion engines on and around it. Unless, for whatever extraordinary reason, all those unmade cars were going to have electric motors.

GoldenNorm: “Finally, you don’t get to build either the chip factory or the test/package factories without the manufacturing tools. These tools are so specialized that it makes no sense to try to build duplicate companies to manufacture them just so your supply lines are protected.”

Globalization, driven for the rush to move jobs to low-wage countries, where not just labor is cheaper, but also the costs of equipment, maintenance, facilities, etc. is in sync with the local  lower standards of living, has made bringing back crucial industries home really complicated. Only the bribes might be steep, but that’s just the cost of doing business.

But tools do not need to be made right away also “at home”, in time for the opening of the repatriated chip-making facilities, because they can (and imagine shall) be imported, along with spares, from wherever they were bough before.

Because getting all the things and services needed to make repatriated industries work has been, for some four decades by now, whether willfully or unwittingly, made into a tangle skein, a cat’s cradle, but, as Kurt Vonnegut well put it “with no cradle and no f….. cat.”

It’s only such a short time ago that some mr. donald.j.t. wanted to confiscate the “ASML euv-lithography-system technology” to be subjected to US federal law.
So it seems all been driven by a free world-ideology?
So history is written by…..
some insight in a view of the matter:

https://www.wired.co.uk/article/europe-asml-chip-shortage

.

Norman Goldsmith: ” Any nation that decides they need a domestically assured supply is going to have to heavily subsidize (hundreds of billions?) the folks with the knowledge to do that. ”

Yes! And not just to get electronic chips made domestically, cutting short the no longer secure and reliable supply lines to unreliable and maybe unsafe sources. As just one example, many countries, specially advanced ones, cannot clothe their own people, because they no longer have enough at home of what is needed to do it with, including enough of those with the required know how to make this work. Adding to that the costs of at the same time switching mostly to renewable power sources and adopting sustainable ways of living, changing how we are used to do things in so many ways, as a matter not of preference but of necessity … one thing seems sure to me:

The future is not going to be cheap, or convenient. For quite some time. At best.

Those who oppose the ideas of making those changes arguing, among other things, that it will be too expensive, are right, even if they are wrong.

I think that while still there is time, we better get used to the idea of paying and paying and paying, and also of working very hard for a future where we, but mostly those that come after us, can live in and live with, and even live better, to happen. So, with enough good luck and much hard work, things can get better, but I fear only after they get worse.

Color me pessimistically hopeful.

OscarCP wrote:

what this planet does not need is more internal combustion engines on and around it.

Who says the 7.7M cars were internal combustion and not EVs ?