Chips are the backbone of our digital economy. We must rebuild the American chip industry or suffer the consequences

Some of the most astounding tech-enabled advances of the next decade, from cutting-edge medical research to urban traffic control and factory floor optimization, will be enabled by a device often smaller than a thumbnail: the memory chip.

While vast amounts of data are created, stored and processed every moment — by some estimates, 2.5 quintillion bytes daily — the insights in that code are unlocked by the memory chips that hold it and transfer it. “Memory will propel the next 10 years into the most transformative years in human history,” said Sanjay Mehrotra, president and CEO of Micron Technology.

A kind of semiconductor, memory chips are integrated circuits made of millions of capacitors and transistors that can store data. They are the backbone of the broader digital economy — enabling everything from safer transportation to greater broadband access and a more efficient energy grid — and they play an active part in almost every aspect of our daily life. Consider automobiles, for example, “Not long ago, automobiles contained very little memory to process data,” Mehrotra said. “Today, automobiles process huge quantities of fast-moving data in support of advanced safety features.” Electric vehicles, in essence, can be likened to data centers on wheels.

The quantity of data has broader implications

The 21st century runs on chips, but right now they can't be supported. A global shortage of semiconductors, which crimped the production of everything from pickup trucks to PlayStations, has industry experts and policymakers looking for a new strategy to avoid debilitating bottlenecks in the future supply chain of microprocessors.

Semiconductors are in short supply because of several colliding factors, including spikes in demand for consumer electronic products and concurrent slowdowns in chip production caused by the pandemic. In 1990, the U.S. produced 37% of the world’s semiconductors. Today, it produces 12%. Meanwhile, 75% of the world’s chip manufacturing is concentrated in East Asia. Micron is the only memory manufacturer remaining in the Western Hemisphere, and it makes 2% of the global memory chips in the U.S.

The increasing performance demands caused by technological leaps in artificial intelligence, 5G, the industrial Internet of Things, edge computing, autonomous cars and high-performance data centers have increased demand for chips. Every major industrial company is trying to figure out how it can manage the amount of data it generates to make its business stronger. Chips are an essential part of that.

Meanwhile, foreign countries see the strategic importance of semiconductors and use government incentives to advance manufacturing while the United States government has watched it happen while sitting on the sidelines.

Take China, which is projected to have the world’s largest share of chip production by 2030 due to an estimated $100 billion in government subsidies. How much has the United States invested in essential strategic manufacturing operations like semiconductors? Zero. And, without government incentives, U.S. domestic chip production will continue to collapse.

After years of inaction, U.S. elected leaders have taken note, and are working to implement change. The House and Senate are working on legislation designed to increase global competitiveness, including the Facilitating American-Built Semiconductors Act, which aims to provide firms a 25% tax credit toward the construction, expansion or modernization of semiconductor fabrication plants and processing equipment in the U.S.

In January 2021, Congress passed the Chips for America Act. This bipartisan legislation authorized a series of programs to promote the research, development and fabrication of semiconductors within the United States. Together, the Fabs and Chip Acts are meant to renew American competitiveness in chip manufacturing, processing, packaging and design.

Large-scale investments like those the semiconductor industry are poised to make, coupled with targeted government incentives, can meaningfully benefit the U.S. economy in both the short and long term by boosting domestic manufacturing, enhancing supply chain resiliency and increasing national security. “Government support of these capital-intensive, long-term investments serve as a multiplier for advanced manufacturing across the industry, positioning the U.S. as a central figure in the fourth Industrial Revolution,” Mehrotra said. An investment in semiconductors is an investment in the foundational technology that will support innovation across sectors and industries in the United States.

Already there are hopeful signs. A billion-dollar chip factory just opened in upstate New York, and in October 2020, the Department of Defense awarded more than $197 million to help the American microelectronics companies create state-of-the-art design and manufacturing facilities. Advanced computer chips not only drive economic and scientific advancement but military capabilities. Through the Rapid Assured Microelectronics Prototypes plans, the DoD hopes to create a reliable and resilient domestic source of chips for its artificial intelligence, 5G communications, quantum computing and autonomous vehicle needs. “The microelectronics industry is at the root of our nation’s economic strength, national security and technological standing,” said Michael Kratsios, former acting undersecretary of Defense for Research and Engineering.

Ultimately, the result of the silicon resurgence — in processing power and speed as well as energy efficiency — will be to help build bold new business models, many of which we have yet to dream up. But, with the right investments in our chip-driven future, these dreams can turn into an exciting new reality and protect the future of America.