Billions of government dollars show that electronic components are now recognised worldwide as an essential resource
The post-pandemic shortages of components showed everyone something that we, and our customers, have known for years: that a reliable supply of electronic components is essential to the economies of all developed countries. The shortages left key manufacturing industries, such as the automotive and aerospace sectors, unable to manufacture.
Politicians have realised that components are an essential strategic resource by investing billions to develop the component industry in their own countries. Exactly a year ago, on 9 Aug 2022, the CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act was passed, which authorises the spending of $280 billion to strengthen the domestic semiconductor industry by facilitating new manufacturing plant construction, bolstering research and development, and enhancing workforce skills. The act includes $39 billion in subsidies for chip manufacturing on US soil along with 25% investment tax credits for costs of manufacturing equipment. The US is the major force in chip design, but is weak in manufacture, importing 90% of its components.
The EU’s response is much smaller, the European Chips Act aims to invest € 43 billion to increase the EU’s share of worldwide chip manufacturing to 20% from the current level of less than 10%. Getting this through the EU’s law-making process is of course taking time. Following provisional agreement on the Chips Act proposal on 18 April 2023, the European Parliament and Council have now formally adopted the Chips Act. The final step will be signature and publication in the EU Official Journal, which is expected to take place in September 2023.
The UK is trying to keep up, without spending anywhere near as much money. The government launched the National Semiconductor Strategy on 19 May 2023 which pledges to spend up to £1 billion over the next 10 years. It will “improve access to infrastructure, power more research and development and facilitate greater international cooperation” and claims this will “secure the UK’s position as a global science and technology superpower”. Given that the amount is small compared to the EU’s effort, and tiny compared to the US’s commitment, that seems rather optimistic.
And where does this leave us and our customers? It’s all a reminder that the rate of change in the electronic component industry will always be increasing, and therefore the rate of obsolescence will also continue to increase. We expect to be solving component supply problems for our clients for many years to come.