Money pouring into the semiconductor industry is set to supercharge the sector—and reshape its landscape in the process.
Governments have stepped up efforts to bolster their domestic productions of the chips that power everything from cars to electronics to artificial intelligence, and companies worldwide are competing to be part of the frenzy. Global semiconductor revenue is expected to top $1 trillion by the end of the decade, according to forecasts by the chip-industry consulting firm International Business Strategies.
Stronger domestic production could diversify the highly specialized semiconductor supply chain, which in certain regions has strengths in some areas of the process and weaknesses in others. U.S. companies are leaders in many areas of chip design, for example, while those in Taiwan, South Korea and mainland China dominate the later production and assembly stages.
That specialization makes the supply chain vulnerable to disruption from natural disasters, war, a pandemic or a trade fight. National security is also a driving force behind building domestic supply chains; reliance on China for chips, parts and materials is a concern among U.S. lawmakers.
To combat this, funds are now flowing from the U.S. government to chip makers as part of the $53 billion Chips Act. But other countries in the chip race have their own aid packages.
Last month alone, South Korea unveiled a $19 billion support package for its chip industry and China raised about $48 billion in its third and largest-yet installment of a national semiconductor fund. Japan and the European Union have put forth billions in government support.
Intel, Taiwan Semiconductor Manufacturing, Samsung Electronics and Micron Technology have all been awarded Chips Act funding. No company’s fortunes, however, have soared in the midst of the chip frenzy quite like Nvidia’s. The AI chip designer reported record revenue and profit last quarter, and its market cap is nearing $3 trillion.
As funding is distributed and spent, the chip industry could look quite a bit different in the coming years. The U.S. is expected to increase its share of global chip-production capacity to 14% in 2032 from 10% in 2022, according to a Boston Consulting Group study commissioned by the Semiconductor Industry Association. The U.S. share in 2032 would be 8% without the Chips Act, the study found.
South Korea will also see a modest gain in capacity share in the next decade, while Japan, Taiwan and mainland China will see their shares slide, according to the study.
The battle over chip production isn’t purely a zero-sum game. Japan, Taiwan, South Korea, mainland China and the U.S. will each increase their production capacity by at least 80% over the next decade, according to the BCG and SIA report.
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