EMERGING RESILIENCE

IN THE SEMICONDUCTOR
SUPPLY CHAIN
MAY 2024

RAJ VARADARAJAN / IACOB KOCH-WESER / CHRIS RICHARD / JOSEPH FITZGERALD /

JASKARAN SINGH / MARY THORNTON / ROBERT CASANOVA / DAVID ISAACS
About Boston Consulting Group (BCG)
Boston Consulting Group (BCG) is a leading global management consulting firm, with
offices in over 50 countries. BCG partners with leaders in business and society to tackle
their most important challenges and capture their greatest opportunities. BCG was the
pioneer in business strategy when it was founded in 1963. Today, we help clients with total
transformation—inspiring complex change, enabling organizations to grow, building competitive
advantage, and driving bottom-line impact.

About the Semiconductor Industry Association (SIA)

The Semiconductor Industry Association (SIA) is the voice of the semiconductor industry in the
US, one of America’s top export industries and a key driver of America’s economic strength,
national security, and global competitiveness. The semiconductor industry directly employs
more than 300,000 workers in the United States, and US semiconductor company sales totaled
$264 billion in 2023. SIA represents 99 percent of the US semiconductor industry by revenue
and nearly two-thirds of non-US chip firms. Through this coalition, SIA seeks to strengthen
leadership of semiconductor manufacturing, design, and research by working with Congress,
the Administration, and key industry stakeholders around the world to encourage policies that
fuel innovation, propel business, and drive international competition.

About the Authors

Raj Varadarajan is a Senior Partner Emeritus of Boston Consulting Group. He has authored
several reports on the semiconductor industry at BCG and in collaboration with the SIA. You
may contact him as the corresponding author by email at Varadarajan.Raj@bcg-emeritus.com.

Iacob Koch-Weser is an Associate Director for Global Trade and Investment in the Boston office
of Boston Consulting Group. You may contact him by email at koch-weser.iacob@bcg.com.

Chris Richard is a Partner and Managing Director in the Denver office of Boston Consulting
Group and is a core member of its Technology, Media & Telecommunications practice.
You may contact him by email at richard.christopher@bcg.com.

Joseph Fitzgerald is a Partner and Managing Director in the San Francisco office of Boston
Consulting Group and is a core member of its Technology, Media & Telecommunications
practice. You may contact him by email at fitzgerald.joseph@bcg.com.

Jaskaran Singh is an Associate in the Dallas office of Boston Consulting Group. You may
contact him by email at singh.jaskaran@bcg.com.

Mary Thornton is the Vice President of Global Policy at the Semiconductor Industry Association.
You may contact her at mthornton@semiconductors.org.

Robert Casanova is the Director of Industry Statistics and Economic Policy at the
Semiconductor Industry Association. You may contact him at rcasanova@semiconductors.org.

David Isaacs is the Vice President of Government Affairs at the Semiconductor Industry
Association. You may contact him at disaacs@semiconductors.org.

Acknowledgments
This report would not have been possible without the contributions of our BCG Colleagues
Ramiro Palma, Thomas Lopez, Trey Sexton, Ceci Joy Perez, and Peilu Chen, and our SIA
colleagues Jennifer Meng and Alex Gordon.

2
Contents

4 Executive Summary

6 Introduction

The Expansion of
8
Government Incentives

Resilience in the
10
Semiconductor Supply Chain

22
Looking Ahead—the Pathway
to Greater Resilience

27 Future Needs of the Industry

28 Appendix

3
Executive Summary

T
here are strengths and vulnerabilities in The European Union (EU) unveiled the European
the global semiconductor supply chain. Chips Act, Mainland China initiated the third phase of
Our April 2021 report 1 illustrated that the its Integrated Circuit (IC) Industry Investment Fund,
globally integrated nature of the semiconductor and various other incentive programs emerged or
supply chain has realized $45 billion–$125 billion in expanded in Taiwan, South Korea, Japan, India, and
cost efficiencies each year, contributing to prices other countries. In parallel, companies have made
35%–65% lower than they would otherwise be with significant investments, in both established and new
fully localized supply chains, resulting in enhanced regions. We project around $2.3 trillion in private
adoption of downstream products and services. sector investment in wafer fabrication in 2024–2032,
But we also showed that the industry has become compared with $720 billion in the 10 years prior
vulnerable to geographic concentration—with at least to enactment of the CHIPS Act (2013–2022). The
50 points across the supply chain where one region US is projected to capture 28% of these capital
held over 65% of global market share. Disruptions, expenditures, as opposed to the pre-CHIPS Act pace
such as pandemics, natural disasters, materials of investment, in which the US would have captured
shortages, or conflicts, could substantially impact just 9% of global capital expenditures.
the global chip supply chain.
Wafer fabrication will become more resilient. By
Governments and companies are taking concerted 2032, we predict leading-edge wafer fabrication
action to increase resilience. The US CHIPS Act, capacity to diversify beyond Taiwan and South Korea
signed into law in August 2022, committed $39 to include the US, Europe, and Japan. We expect the
billion in grant incentives and a 25% investment tax US to increase its fab capacity by 203% between
credit (ITC) for semiconductor manufacturing. 2022 and 2032, the largest increase in the world. As
a result, the United States will reverse a decades-
long downward trajectory and raise its share of
global aggregate fab capacity from 10% today to
14% in 2032. In the absence of action, the US share
would have slipped further to 8% by 2032.

New markets and innovative technology can support

resilience in assembly, test, and packaging (ATP).
In ATP, Mainland China and Taiwan will continue to
hold the largest share of global capacity. But with
support from governments and foreign investors, we
expect countries in Southeast Asia, Latin America,
and Eastern Europe to expand ATP activity. The
US State Department is supporting these efforts
through International Technology Security and
Innovation (ITSI) funding under the CHIPS Act.
Emerging market governments are actively pursuing
their own strategies to attract ATP investment. In
parallel, the development of advanced packaging—
and associated innovations in chiplets—is also
driving leading players to build ATP capacity in the
United States and Europe, proximate to new wafer
fabrication capacity.

4
Other parts of the supply chain are also achieving Industrial policies have the potential to create
a better balance. In design, core IP, and additional bottlenecks that increase supply chain
Electronic Design Automation (EDA), companies risk. Certain segments of the semiconductor supply
are diversifying where they hire, locate, and chain are at risk if incentive programs and large-
train talent. In semiconductor manufacturing scale industrial policies lead to non-market-based
equipment (“tools”), current industry leaders are investment, which can result in overconcentration
establishing R&D and training centers in different or oversupply. Government incentives should focus
regions. Although materials production remains on enabling targeted, distributed, market-based
concentrated in East Asia, we expect it to follow investments.
future fab capacity to the United States and
Europe to realize cost and R&D benefits. Sustained support for resilience is needed. Over
the coming decade, the semiconductor supply
A strong global talent pipeline is as important chain will continue to face challenges, including
as ever. As semiconductor companies pursue industry cyclicality and the rapid evolution of
ambitious development plans in the context downstream demand (for example, in AI, EVs,
of a tight labor market, they rely on access industrial automation, and robotics). Supply-demand
to engineers and technicians to fill both high- imbalances in mature node capacity could become
and mid-skill positions. Improving workforce more evident. It will be critical for policymakers in
development across established and emerging the United States and elsewhere to “stay the course”
regions, while also advancing immigration by extending current support as well as considering
policies to foster global talent flows, will be vital additional measures to strengthen resilience.
to the semiconductor industry’s future resilience.

Scale and openness are critical for resilience.

To ensure new and diversified semiconductor
facilities can operate at optimal capacity
utilization rates to generate a positive return
on investment, it is vital for chip companies to
maintain continued access to global customers
and a global network of suppliers. Governments
are increasingly imposing constraints on where
chip companies can sell their products and
services, or where they can source inputs
and equipment. Fortunately, global trade in
semiconductors continues to grow at a rapid
pace, reflecting the global interconnectedness
of the industry. The United States and allied
governments need to maintain open trade
and cooperation by recognizing that extreme
industrial policies, such as full country-level “self-
sufficiency,” will undermine resilience, add cost,
and stifle innovation.

5
Introduction S
emiconductors power today’s economy,
from vehicles and mobile devices to
data centers, medical equipment, clean
technologies, and, of course, the upcoming
AI revolution. The invention of the integrated
circuit (IC) started the United States on a path
to early leadership in design and manufacturing.
Beginning in the 1980s, chip manufacturing
rapidly shifted from North America to Japan and
East Asia. While the United States remained
preeminent in equipment and chip design,
East Asian economies increased their share
of wafer fabrication capacity, highlighted by
the rise of South Korea in memory and Taiwan
in the pure-play foundry business for all other
semiconductors. This configuration enabled
rapid advances and specialization, but over
time, led to supply chain concentration. 2

In Strengthening the Global Semiconductor

Supply Chain in an Uncertain Era (April
2021), we analyzed the semiconductor supply
chain to understand its value for the global
economy, while also identifying points of
vulnerability. We recommended policies and
other actions to improve supply chain resilience
through greater geographic diversification.

Since then, the global

supply chain has evolved
rapidly, with major private
sector investments in
multiple geographies and
public sector policies
and support programs
directed at the industry.
The US CHIPS Act, signed into law in August
2022, committed $39 billion in grants and loans
for semiconductor manufacturing. Likewise,
the European Union unveiled the European
CHIPS Act, Mainland China initiated the third
vintage of its IC Industry Investment Fund, and
various other incentive programs emerged
across Asia and other regions. In parallel,
over 100 new semiconductor manufacturing
investments have been announced to
meet increased market demand, dispersed
worldwide across every major region.

6
In this report, we provide an updated view
on the impact of policies today on future
investment in the global semiconductor supply
chain and the implications for resilience. We
define resilience, broadly speaking, as improved
geographic diversification of the supply chain.
We begin by reviewing public and private
sector strategies across major geographies,
with additional detail provided in the Appendix.
We then assess the likely effects of these
trends over the coming decade, specifically
forecasting changes in distribution of wafer
fabrication and ATP capacity. We also consider
geographic diversification in other segments
of the supply chain,3 including design, core
IP, and EDA, equipment, and materials.

Our report then highlights the path toward

greater resilience, including sustaining
government support, guarding against supply-
demand imbalances, integrating new countries,
maintaining vibrant global trade, and fostering
global talent. As geopolitical frictions persist, it
is important to maintain a global supply chain
and support a more diverse global production
footprint. Accordingly, we close our report by
highlighting future needs of the industry.

7
The Expansion of
Government Incentives

S
emiconductor companies weigh many
factors when making investment decisions,
including overall business conditions,
supplier networks, site availability, infrastructure,
and workforce—but a significant overarching
factor is government policy. Well-crafted and
durable incentive programs, along with an
enabling regulatory environment and effective
talent development initiatives, also signal a
government’s commitment to the industry’s
long-term success. For individual companies,
effective policies can improve the cost and
efficiency of constructing and operating a facility.

Since our report in April 2021, governments

around the world have made substantial
efforts to increase their support for the
semiconductor industry (see Exhibit 1; for
more information on incentive programs
in each key region, see the Appendix).

The United States passed the CHIPS Act to

incentivize growth of the semiconductor ecosystem
through both direct grants and a 25% ITC for
semiconductor manufacturing, and several states
have enacted incentive programs to supplement
the federal efforts. $11 billion of the $52 billion
appropriated in the CHIPS Act is to be used to
develop US leadership in semiconductor R&D,
emphasizing the importance of an all-encompassing
industrial policy to success. In the EU and Japan,
governments have appropriated large grant funds
to be allocated on a national and project-specific
basis, coupled with tax incentives. The South
Korean and Taiwanese governments are offering
comparatively larger tax incentive programs and
R&D support—for example, in the Taiwan Chip
Innovation Program and South Korea’s K-CHIPS
Act. These direct incentives are complemented
by indirect tools to attract investment, such as
infrastructure support, low-cost access to land,
and streamlining government approvals.

8
 Mainland China’s large and wide-ranging support
for the semiconductor industry also will impact
the global supply chain in the coming years.
A large portion of Mainland China’s support
has come in the form of equity infusions and
the operation of funds that mix government
and private capital. Other factors, such as
overseas talent acquisition, the formulation
of domestic standards, state ownership,
and the preference given to domestically
produced chips, further act to support
Mainland China’s semiconductor industry.

EXHIBIT 1

Government incentives by major region (left to right by size of GDP)

US Mainland China EU Japan South Korea Taiwan

Target Achieve resiliency Reach 70% Gain 20% global Earn $112B Secure foothold Breakthrough
Guidance

in semiconductor self-sufficiency share by 2030 sales by 2030 in Logic, bolster 1 nm by 2030

supply chain by 2025 fab leadership

Guiding CHIPS and National IC Digital Compass Strategy for K-Belt Angstrom
policy Science Act, Outline, 14th 2030 Semis and the Semiconductor Semiconductor
100-Day Supply Five Year Plan Digital Industry Strategy Initiative,
Chain Review Moonshot program

Key $39B $142B $47B $17.5B $55B $16B

Measures

Incentive in grants1 in equity funds in grants in grants in tax incentives in tax incentives 4
amounts

Key 25% investment Big Fund I, II, III Grants and National fiscal Tax incentives Financial subsidies
Initiatives tax credit and local funds loans under EU funding under K-Chips Act under the Chip
Grants under State-owned Chips Act Leading-Edge Private-public Innovation Program
the CHIPS Act enterprise leaders Tax credits Semiconductor education Industry-
Technology programs academia co-op,
State-level National State aid Center tax credits
support science fund allowances2

New fab
Impact

& ATP
investments 26 ~305 8 4 3 7
since 20203

1. $39B for manufacturing; $13.2B for R&D and workforce development

2. Important Projects of Common European Interest (IPCEI)
3. Comprises fab and ATP projects that have been announced, started, or completed since 2020
4. 25% tax credit pledging to give back $2.25B per annum over 7 years.
5. May undercount the total number of sites in China.
Source: Gartner; SIA; Press releases; Company disclosures; Government websites; BCG analysis

9
Resilience in the
Semiconductor Supply Chain

T
he global semiconductor supply chain is diversification, mainly in two areas to start with: (i)
highly specialized (see Exhibit 2). Different wafer fabrication, particularly in advanced logic and
regions have strengths in different areas. (ii) ATP, with a diversification of activities outside
For example, US-headquartered companies lead Mainland China and Taiwan to include substantial
in design, core IP, and EDA; the United States, EU, gains for new markets. It is unlikely that ATP will
and Japan jointly lead in equipment; companies locate in the United States, due to cost pressures,
headquartered in Mainland China, Japan, the exception being certain advanced packaging
Taiwan, and South Korea lead in materials; South facilities near new fab sites. To a lesser extent, we
Korea- and Taiwan-headquartered companies also expect greater diversification in design, as
lead the world in advanced node fabrication market leaders source talent globally, and materials,
(sub-10 nanometer chips); and ATP footprint is as vendors follow new fab capacity to different
concentrated in Mainland China and Taiwan. regions (see Exhibit 3). In equipment as well as EDA
and core IP, meaningful diversification will prove
Specialization by region has been enabled by the challenging given the high degree of specialization
globally integrated nature of the supply chain, and vendor concentration today, as well as the
which has allowed each specialized company to lesser necessity of co-locating with fab sites.
access the global market. But it has also created
vulnerabilities in terms of geographic concentration. Below we discuss these trends in depth
Looking ahead, we expect significant geographic for each segment of the supply chain.

EXHIBIT 2

Semiconductor industry value-added by activity and region, 2022 (%)

EDA & 68% 25% 3%3%
Precompetitive Research Core IP 3%

Logic 30% 65% 9% 4% 3% 11% 5% 4%

EDA Design

Core IP • Logic DAO 17% 41% 17% 18% 4% 5% 9% 6%

• DAO
• Memory Memory 9% 25% 7% 60% 4% 3%

Mfg
Equipment Manufacturing
equipment 47% 18% 26% 3% 3%2%

Materials • Wafer 12%

fabrication Materials 9% 6% 12% 18% 28% 18% 10%
• A ssembly, 5%
test and
Wafer
packaging
fabrication 10% 8% 17% 17% 18% 24% 7%

19%

ATP 6% 3% 3% 6% 9% 28% 30% 20%

Overall value chain 100% 38% 11% 12% 12% 11% 11% 5%

USA EU Japan South Taiwan Mainland RoW

Korea China

Notes on regional breakdown: EDA, design, manufacturing equipment, and raw materials based on company revenues and company
headquarters location. Wafer fabrication and Assembly & testing based on installed capacity and geographic location of the facilities.
1. Includes Israel, Singapore, and the rest of the world
Source: IPnest; Wolfe Research; Gartner; SEMI; BCG analysis

10
 EXHIBIT 3

Diversification by Supply Chain Segment

Method Distribution, 2022 Geo diversification
4%
• Barriers to entry due to high R&D spend
HQ
1 Design1 51% 10% 9% 13% 8%6% • Diversification of where companies hire, locate,
revenue
and train talent for R&D and engineering

3%
• Use of AI in design process for efficiency
EDA & HQ
2 68% 25% • Growing domain-specific architecture
core IP revenue
3% • Focus on power, performance, and area

3%
• Barriers to entry due to specialization and R&D intensity
Equipment HQ
3 47% 18% 26% • Moderate diversification of geographic footprint of
& tools revenue
R&D and training centers by current market leaders
3%

• Increased co-location near new fabs

HQ
4 Materials 9% 6% 12% 18% 28% 18% 10%
• Continual vulnerabilities in specific materials
revenue
categories and related critical minerals

• Government incentive programs to attract fab investment

Wafer Site
5 10% 8% 17% 17% 18% 24% 7% • Substantial CapEx across destination regions by
Fabrication capacity
major companies, with the bulk in advanced logic

3%
• Policy support for conventional packaging in new markets
Site in Southeast Asia, Latin America, and Europe
6 ATP 6% 9% 28% 30% 20%
capacity
• Disruptive impact of chiplets in advanced packaging
3%

US Japan Taiwan EU
Unchanged Moderate Substantial
Korea Mainland China Others
1. Represents both fabless and IDM design
Source: SEMI; Yole Group; BCG Analysis

Asia:
Investments continue at pace across the region.
Wafer Fabrication Local companies in Taiwan have announced plans to
stand up seven new fabs on the island itself. TSMC
is also partnering with Sony, DENSO, and Toyota
We begin with wafer fabrication, which exerts a to boost manufacturing capabilities in Kumamoto,
“pull” effect on investment in other segments of Japan, and Japanese officials are helping domestic
the supply chain. Given the capital requirements startup Rapidus set up production lines for cutting-
and substantial lead time to bring projects online edge 2 nanometer chips at a new site in Hokkaido.
(upwards of five years in some cases), wafer South Korea has announced a plan to invest $471
fabrication is where government and industry billion through 2047 to build 16 new fabs in a mega
efforts have focused substantially to date. chip cluster in Gyeonggi Province, involving Samsung,
SK Hynix, and other chip companies.4 In Mainland
We project around $2.3 trillion in private sector China, domestic Chinese companies are making new
investment in wafer fabrication in 2024–2032, investments in fabs in Shenzhen, Tianjin, and Shanghai.
compared with $720 billion in the 10 years
prior to enactment of the CHIPS Act (2013– United States:
2022). The over 100 major semiconductor Between 2020 and year-end 2023, 80 new
manufacturing ecosystem projects that have semiconductor manufacturing projects were announced
been announced since our prior report are spread across the United States alone, projected to create
out—both around the globe and to new locations 50,000 direct new jobs.5 A portion of these investments
within each major region (see Exhibit 4). is going to areas with a mature semiconductor
footprint, such as Texas, Arizona, New York, and
California. But there have also been substantial
investments in Greenfields and capacity expansions
in newer regions, such as New Albany, Ohio.

11
Europe:
There has been substantial investment in new
capacity in Europe, with seven major wafer
fab investments announced since 2020. The
lion’s share of this capacity is being built in
eastern Germany, including Intel’s investment in
Magdeburg and TSMC’s joint investment with
leading European semiconductor manufacturers
to construct a new facility in Dresden. Still, the
momentum is not limited to Germany; in the
south of France, GlobalFoundries has partnered
Between 2020 and year-end
with STMicroelectronics to build a $3.1 billion 2023, 80 new semiconductor
fab in Crolles, and Poland is poised to host
a new Intel advanced packaging facility. manufacturing projects
In consequence, we expect significant were announced across
investment to flow between regions
between now and 2032 (see Exhibit 5). the United States alone

EXHIBIT 4

Major new fab and ATP investments announced across the world since 2020

ASIA USA EUROPE

SK Hynix Fab Sony Fab 5

(Yongin, KR) (Isahaya, JP)
SK Hynix M15X Fab Polar Semi Fab
TSMC, Sony Fab (Bloomington, MN) SK Hynix ATP Global Foundries Fab Intel ATP Factory
(Cheogju, KR)
(Kumamoto, JP) (W Lafayette, IN) (Dresden, DE) (Wroclaw, PL)
Samsung P3 Fab Micron Fab
(Pyeongtaek, KR) Renesas Kofu Nhanced
(Boise, Idaho) Intel Fab ST Microelectronics
Factory Microchip Fab Semiconductors ATP
SMIC Fab (Gresham, OR) (Magdeburg, DE) SiC Factory
(Kai City, JP) (Odon, IN)
(Tianjin, CN) Texas (Catania, IT)
Kioxia, Western Analog Devices Fab Instruments Fab Intel Fab Wolfspeed Fab
SMIC Fab (Lehi, UT)
Digital Fab (Beaverton, OR) (New Albany, OH) (Saarland, DE)
(Shanghai, CN)
(Yokkaichi, JP)
Micron ATP Factory Bosch Fab Microchip Fab Micron Fab
(Xi’an, CN) (Roseville, CA) (CO Springs, CO) (Clay, NY)
Hua Hong Semiconductor Fab Global
Western
(Wuxi, CN) Foundries Fab
Digital Fab
ST Microelectronics, Sanan Fab (Fremont, CA) (Malta, NY)
(Chongqing, CN)
SMIC Fab PSMC P5 Fab
(Shenzhen, CN) (Maoli, TW)
China Resources Nanya Fab 4
Microelectronics Fab Wolfspeed Fab
(New Taipei, TW)
(Shenzhen, CN) (Silver City, NC)
TSMC Fab
(Kaohsiung, TW) Pallidus Fab
ISMC Fab (Rock Hill, SC)
UMC Fab12 P6 Intel
(Karnataka, IN)
(Kaohsiung, TW) Fab 52 Fab 62
Infineon SiC (Chandler, AZ)
Win Semi Fab EMP Shield Fab
Power Fab
(Kaohsiung, TW) (Burlington, KS)
(Kulim, MY)
TSMC Fab21 X-Fab Global Wafer Fab
ASE ATP TSMC Fab14
(Phoenix, AZ) (Lubbock, TX) (Sherman, TX)
Plants 4 and 5 Amkor ATP Factory (Tainan, TW)
(Penang, MY) (Bac Ninh, VN) Amkor Integra Texas Instruments ST TSMC, Infineon,
Intel ATP Factory ATP Factory Technologies Fabs SM1, SM2, SM3, SM4 Microelectronics, Bosch, NXP Fab
Silicon Box ATP
(Penang, MY) (Peoria, AZ) Fab (Wichita, KS) (Sherman, TX) Global Foundries (Dresden, DE)
(SG)
Intel Fab Fab (Crolles, FR)
Micron ATP Factory UMC Fab12i P3 Samsung Fab / ATP Texas Instruments Fab
(Gujarat, IN) (SG) (Rio Rancho, NM) (Taylor, TX) InfineonSmart
(Richardson, TX)
Aledia Fab Power Fab
NXP Fab (Champagnier, FR) (Dresden, DE)
(Austin, TX)

Planned Started Completed Investment size ($) $2B

Note: Includes investments over $100M from 2020 onwards in Fabs and ATP facilities.
Source: Gartner; SIA; press releases; company disclosures; BCG analysis

12
 EXHIBIT 5

Future flows of CapEx6 from company HQ region to destination region, 2024-2032F

31% 28% 13% 10% 7% 7% 3%
$716B $646B $300B $222B $156B $154B $72B

11%
30% $2.3T
Total CapEx
66% 64%
Company HQ region

42%
HQ region
US
98% 37% 100% 98%
Europe

6% Japan

Korea
46% 28%
Taiwan
32% 25% China 2

6% Others1

Taiwan USA Korea Japan Mainland Europe Others1

China
Destination region

1. Others includes Israel, Malaysia, Singapore, India and the rest of the world
2. Mainland China
Source: SEMI; BCG Analysis

Advanced logic currently comprises processes The investment pattern for advanced logic has
newer than 10 nanometers. We expect the become more distributed around the globe, with
definition of “leading-edge” capacity to comprise Taiwanese and South Korean companies investing
processes newer than 3 nanometers by 2030.7 significantly more in the United States, Europe,
Advanced logic will attract a larger share of and Japan. Advanced logic7 capacity will see a
investment, driven by data centers, networking shift—from almost 100% distributed between South
equipment, PCs, smartphones, smart “edge” Korea and Taiwan in 2022 to more than 40%
devices with machine learning and artificial being outside these regions by 2032. In 2022,
intelligence (ML/AI) capabilities, and automotive the United States did not produce any advanced
advanced driver-assistance systems (ADASs), logic chips. By 2032, the United States will
among other applications. 8 Indeed, nearly 70% produce nearly 30% of all logic chips at processes
of CapEx will go toward chips manufactured on newer than 10 nanometers. In addition, when the
sub-10 nanometer technologies, because they projected fabs come online, Europe and Japan will
are substantially more expensive to produce. host a meaningful ~12% of chips newer than 10
This trend implies tradeoffs. Investing heavily in nanometers as well (see Exhibit 6).
the leading edge can allow a region to compete
at the forefront of innovation but will not be fully
reflected in terms of wafer starts per month;
investing in legacy processes, on the other
hand, allows a region to realize more near-term
value for money and employment, at the risk of
creating excess capacity for segments where
demand may be fixed or waning.

13
 EXHIBIT 6

Global wafer fabrication capacity9 by technology category by region, 2022 (top) and 2032 Forecast (bottom) (%)
2022 3% 7% 52% 20% 18%
DRAM
2032F 9% 4% 57% 17% 13%

2022 3% 30% 30% 4% 26% 7%

NAND
2032F 32% 42% 3% 17% 5%
2%
Logic: 2022 0% 31% 69%
<10 nm 2032F 28% 6% 5% 9% 47% 3%
2%
Logic: 2022 28% 13% 4% 40% 6% 8%
10–22 nm
2032F 20% 14% 6% 6% 29% 19% 6%

Logic: 2022 8% 4% 10% 5% 30% 33% 9%

28 nm+ 2032F 10% 3% 10% 5% 25% 37% 9%

2022 14% 17% 25% 7% 5% 25% 9%

DAO 1
2032F 18% 19% 21% 5% 4% 27% 7%

2022 10% 8% 17% 17% 18% 24% 7%

Total
2032F 14% 8% 15% 19% 17% 21% 5%

US China1,3 Taiwan Korea Japan Europe Other2

1. Discretes, analog, and optoelectronics & sensors; 2. Others includes Malaysia, Singapore, India, and the rest of the world; 3. Mainland China
Note 1: Looked at fabs with over 5K+ wspm and 8+ inch wafer size; excluded R&D fabs.
Note 2: May not total 100% due to rounding.
Source: Department of Commerce; SEMI; BCG Analysis

For logic processes in the range of 10 to 22 would have seen its share decline to 8% of global
nanometers, Japan will develop a meaningful 5% capacity by 2032. This corresponds to our projection
presence from a standing start, and Mainland that the US will capture 28% of global capital
China will triple its share from 6% to 19%. Logic expenditures, as opposed to the pre-CHIPS Act pace
at or older than 28 nanometers is poised to remain of investment, in which the US would have captured
well distributed—with multiple regions in the game just 9% of global capital expenditures.
and most regions experiencing small share moves.
Mainland China shows the biggest share gain, going Moreover, we expect each major region to grow its
from 33% share in 2022 to 37% in 2032. capacity by over 80% over the next decade.

In other process technologies, dynamic random-

access memory (DRAM) will remain highly
concentrated in South Korea, but with the United
The United States, at 203%,
States increasing its share threefold from 3% to 9%. will grow capacity at a faster
Geographic concentration will increase in NAND
memory—with South Korea moving from 30% to rate than other regions
42% share, and Japan and South Korea combined
accounting for ~75% of capacity by 2032. Finally,
discrete, analog, and optoelectronics chips (DAO) The United States, at 203%, will grow capacity at a
will stay well distributed, with all major regions faster rate than other regions and much faster than
participating at 5% share or greater. in the preceding decade (see Exhibit 8). In terms
of thousands of wafer starts per month (300 mm
The net result of these specific, strategic, and equivalents), this represents an increase from 1,121
targeted moves by companies is to improve resilience kwspm (thousands of wafer starts per month) in 2022
of the industry on a more “average” global capacity to 3,393 kwspm (203% increase) in 2032.
share by region (see Exhibit 7). The United States is
set to increase its share of global capacity from 10%
to 14%. Without the CHIPS Act, the United States

14
 EXHIBIT 7

Global 200mm+ commercial semiconductor fab capacity share by region, 1990-2032F

100 2% 3% 4%
7% 8% 7% 8% 7% 6% 6% 5% Others1
15% 7%
17% 22% 11% 12% 18%
24% 24% 22% 21% Mainland China
80
12% 21%
22% 24%
13% 19% Taiwan
18% 18% 17% 17%
60 19% 14%
44% 16% 15% 18% S. Korea
18% 19% 19%
40 21% 17% 18%
24% 18%
15% Japan
25% 18% 15% 15%
17% 15%
20 17%
37%
13% 11% 8% 8%
Europe
7% 8%
27% 8%
19% 14% 13% 13% 12% 10% 11% 13% 14% US
0

1990 1995 2000 2005 2010 2015 2020 2022 2025F 2030F 2032F

1. Others includes Malaysia, Singapore, India, and the rest of the world
Note 1: Rounding errors. All values shown in 300 mm (12”) equivalents; excludes capacity below 5K wspm or produced on wafer sizes less than 8”
Note 2: May not total 100% due to rounding.
Source: SEMI; BCG analysis

EXHIBIT 8

Semiconductor capacity increase by region, 2022-2032F

(% change in wspm capacity)

365%

203%
World Avg

124% 129%
86% 90% 97% 86% 22–32 (108%)
63% 67% 72% 62%
12–22 (81%)
36%
11%

USA Europe Japan Korea Taiwan Mainland China Others

2012–22 % change 2022–32F % change

Source: SEMI; BCG analysis

15
 Design, Core IP, and EDA

Design, core IP, and EDA are R&D-intensive,

non-manufacturing segments of the supply
chain. Across all design activities (fabless and
IDM), US-headquartered companies hold 51%
of the design market. The United States is also
home to the leading players in EDA software, and
the UK and US are home to the leaders in IP.

Nonetheless, in these talent-driven parts of

the supply chain, companies are diversifying
where they hire, locate, and train talent for R&D
and engineering. According to a 2023 survey
undertaken by the US Department of Commerce
Bureau of Industry and Security (BIS), surveyed
companies cited Europe, Mainland China, and
India as the leading non-US locations for their
design activity.10 A November 2022 BCG-SIA
report on semiconductor design also found
that design activities are distributed around the
globe. Mainland China and India are the locations
with the most semiconductor design engineers
outside the United States (see Exhibit 9).11

EXHIBIT 9

Left: Design facilities, by location (% of facilities of design companies by location);

Right: Design engineers by location (% of design engineers by location)

Design activity by location1 Design engineers by location2

% of facilities in each location % of engineers in each location

4% 4% 4%

23% 7% 12% 6% 21% 27% 6% 19% 28% 5% 32%

2%

US Japan Taiwan South Korea Europe India Mainland China All Others

Note 1: left chart based on Bureau of Industry and Security (BIS) survey (December 2023) of companies involved
in semiconductor design (fabless and IDM)
Note 2: right chart based on BCG-SIA analysis of LinkedIn profiles of engineers associated with semiconductor
design (fabless only); excludes engineers associated with manufacturing R&D; previously referenced in
BCG-SIA Design report (“The Growing Challenge of Semiconductor Design Leadership,” November 2022)
Source: Commerce-BIS; LinkedIn; BCG analysis

16
There are now over In design, there is a growing need for specialty
chips, such as AI accelerators, to accommodate
3,000 fabless design the proliferation of new devices and associated
functions.12 Meeting this demand opens the door
companies in Mainland to new vendors in different regions, including new
markets—India, for example, is home to an estimated
China, with double-digit 20% of all design engineers.13

annual revenue growth Mainland China’s state support for design and EDA
activities could also reshape industry segments
and challenge US design and EDA leadership.
The National IC Funds I and II allocated funding
worth billions of US dollars toward fabless design
companies, and National IC Fund III is poised to
do the same. There are now over 3,000 fabless
design companies in Mainland China, with double-
digit annual revenue growth.14 Mainland China’s
indigenous chip designs have focused on consumer
electronics, industrial control systems, and intelligent
device chips, but are less competitive in advanced
CPUs, GPUs, and FPGAs and corresponding high-
end servers and computer power management.15
Nonetheless, Mainland China’s fabless design
segment is likely to consolidate and achieve advances
in the coming decade. Various manufacturers in
Mainland China are starting to establish fabless
design units capable of designing their own chips—
for example, Xiaomi, a leading mobile device, home
device, and EV producer.16 Moreover, National IC Fund
allocations have focused in particular on GPU and
FPGA, and support some of Mainland China’s major
national semiconductor projects.17 US leadership in
EDA should not be taken for granted. Between 2018
and 2023, Empyrean Technology, Mainland China’s
leading entrant in EDA software, realized a sixfold
increase in revenues. (Empyrean predominately sells
into the Mainland China market, but could soon grow
its international sales.18)

Equipment & Tools

The $110 billion semiconductor equipment market

spans more than 50 types of specialized equipment,
but concentration is significant in some areas. Three
segments—lithography, deposition, and materials
removal & cleaning—comprise 70% of the market,
each dominated by a handful of key vendors.
One European company makes up 87% of the
lithography market. In deposition as well as materials
removal and cleaning, three companies—two based
in the United States and one based in Japan—
comprise 70%–80% of the market (see Exhibit 10).

17
 EXHIBIT 10

Semiconductor manufacturing equipment vendors, by HQ region revenue

Global geographical distribution of
Market
semiconductor manufacturing equipment1 size ($B)
US EU CN 2 KR JP Others

Lithography 1% 89% 10% $17.5

Photoresist processing 3% 5% 92% $3.7

Ion implant & doping eqpt Top 3

Wafer fabrication process

83% 17% $2.5

Thermal processes 57% 4% 2% 1% 37% $2.9

Deposition 67% 11% 2% 5% 15% $22.8

Material removal & cleaning 56% 0% 5% 4% 35% 0% $30.5

Manufacturing automation 5% 11% 64% 21% $4.2

Process control 76% 7% 11% 6% $13.5

Other 1% 8% 5% 43% 42% $3.4

1–5% 6–10% 11–25% 26–50% 51–75% 75–100%

1. Geographies based on company HQ’s; distribution based on company revenues 2. Mainland China
Source: Gartner; BCG analysis

Although R&D intensity creates barriers to new

entrants, current market leaders are diversifying
the geographic footprint of their R&D and training Materials
centers, which will add to resilience. The top 15
equipment vendors have manufacturing facilities
in a total of 17 countries. These also include new
training centers to increase the pool of talent The $64 billion semiconductor materials market
outside their home regions. For example, ASML comprises chemicals and materials used in the front-
opened a training center in Taiwan for operating end ($40 billion) and back-end (ATP) ($24 billion)
EUV lithography equipment, in support of TSMC. of the supply chain. Silicon wafers and photoresist
LAM Research has opened a new R&D facility in comprise about half of the total market for front-end
South Korea for semiconductor equipment and materials ($19.5 billion), but other subcategories,
process technology to enable faster and closer such as gases, wet chemicals, CMP slurries, and
engagement with customers. KLA is building an sputtering targets, are also vital to various steps
R&D and manufacturing center in Wales in the UK. of the fabrication process. Similarly, substrates
and lead frames comprise about half of the back-
Moreover, Mainland China’s efforts to build end market ($12.8 billion); other key subcategories
capacity and ultimately achieve self-sufficiency in include bonding wire, encapsulation resins, ceramic
equipment are notable. Mainland China currently packages, and die attach materials.
accounts for 20% of global equipment spend and
18% of global equipment imports. Export controls Most leading materials companies are headquartered
by the United States, Japan, and the Netherlands in Japan, the United States, and the EU (see Exhibit
elevate the urgency to develop domestic 11). There are multiple segments of the front-end
alternatives. With state support, Chinese domestic and back-end materials market where Japan is
equipment companies have made progress; at least home to at least three of the leading vendors.
five Chinese producers are reportedly progressing Still, its global production footprint is expanding
to mass production in deposition; SMEE has to accommodate new fab capacity. In the United
created demonstration equipment in lithography; States, Hemlock Semiconductor, a manufacturer
and NAURA and AMEC have entered the etching of hyper-pure polysilicon, invested more than $370
market for larger nodes. million to expand its facilities in Michigan; Entegris,

18
a semiconductor materials manufacturer, is knowledge is widely dispersed, and which incur
undertaking a $600 million expansion of its center higher logistics costs, have a greater incentive
of excellence in Colorado Springs; Global Wafers to be co-located near fabs. Examples include
is building a new 300 mm silicon wafer plant in older generations of photoresist, purified straight
Texas to supply TSMC, Intel, Texas Instruments, chemicals such as hydrofluoric acid, and bulk gases
and Samsung; and Calumet is standing up a that make localized onsite production financially
60,000 square foot substrates facility in Michigan. attractive.
In South Korea, Dongwoo Fine Chem announced
a new photoresist line at its Iksan plant, in part Going forward, further efforts are needed to improve
to reduce reliance on imports from Japan. And resilience. A survey published in December 2023
in Taiwan, Entegris is building a $500 million wet by BIS found that industry respondents “expressed
chemicals and CMP slurries plant in Kaohsiung to significant concern about domestic sources of three
support today’s advanced logic nodes (newer than categories of materials: bare wafers, gases, and wet
10 nanometers).19 chemicals.” 20 The post-COVID chip shortage also
brought to the fore the sourcing challenges related
The trend of co-location near fab sites is not to package substrates, which connect chips to the
uniform across all materials segments. Producers circuit boards. 21 Additionally, certain raw materials,
of low-volume, high-value, technically advanced including gallium, rare earths, and many other critical
materials, such as extreme ultra-violet (EUV) minerals, are still largely sourced from single regions.
photoresist, weigh the risk of IP leakage and There are efforts to source some of these critical
the difficulty of ensuring efficient, high-quality materials by recycling from old devices, but the vast
production far from their main production bases. majority of mining and refining for these materials is
On the other hand, materials for which production done in Mainland China. 22

EXHIBIT 11

Market size and number of major vendors by semiconductor materials segment

$40B $24B

Front end Back end

Silicon Photoresist Photomasks Gases Wet CMP Sputtering Other Substrates Lead Bonding Encapsulat Ceramic Die attach Others
wafers chemicals slurries targets frames wire ion resins packages materials
& pads
$14B $9B

US 1 1 1 3 2 1 2 1

EU 1 1 3 1 2 1 1 1 1

JP 2 4 3 1 2 2 2 2 2 3 2 3 4

KR 1 1 1 1

TW 1 1 2 1

CN 1 1 1 2 1 1 2 1

Number of major vendors by HQ region

1. Mainland China
Source: SEMI; IHS; BCG analysis

19
 Assembly, Test, ATP capacity, with Malaysia capturing
and Packaging the greatest share within the region.
Other countries expected to grow ATP
capacity include Vietnam25, where Amkor
The $95 billion ATP market is currently is investing $1.6 billion in a 200,000
concentrated in Northeast Asia. South Korea sq. meter advanced packaging facility,
hosts significant back-end capacity proximate and Costa Rica with Intel’s facility. 26
to existing fabs. More importantly, Mainland We forecast significant ATP capacity
China and Taiwan together host nearly 60% of additions in these emerging markets, from
global ATP capacity (including both IDM ATP 20% of global capacity in 2022 to 27%
facilities and OSATs). Out of 36 ATP facilities in 2032, primarily driven by Southeast
announced since 2020, 25 are projected to Asia (see Exhibit 13).
be in Mainland China and Taiwan (see Exhibit
12). 23 Due to lower construction and skilled The United States accounts for only
labor costs, 24 this pattern is likely to persist a small share of global ATP capacity.
into the near future. Conventional packaging, which accounts
for $51 billion of the $95 billion ATP
However, over the longer term, with sustained market, is concentrated in developing
policy support and foreign investment, we countries, due to both the labor-intensive
expect a shift of ATP capacity toward other nature of the work and low margins. The
regions, including Latin America, Europe, United States can improve resilience
and less-established parts of Southeast foremost through expanding ATP capacity
Asia, thereby improving resilience. Southeast in nearby low-cost geographies as well as
Asia is already home to significant ATP achieving a more equally distributed ATP
activity, accounting for ~20% of total global facility footprint globally.

EXHIBIT 12

New ATP investments by region, 2020-2023

Mainland China and Taiwan

Foxconn
(Qingdao, CN)
Rochester Electronics GEM Services
(Newburyport, NY, US) (Hefei, CN)
Tongfu Microelectronics
SK Hynix Intel
(Nantong, CN)
(West Lafayette, (Worclaw, PL)
IN, US) Access Semiconductor
(Nantong, CN)
Tianshui Huatian Technology
(Kunshan, CN)
Amkor ASE Group Ardentec
(Peoria, AZ, US) (Nanjing, CN) (Hsinchu, TW)
Intel Tianshui Huatian Technology PTI
(Rio Rancho, NM, US) (Nanjing, CN) (Hsinchu, TW)

Samsung Tianshui Huatian Technology KYEC

Micron (Nanjing, CN) (Miaoli, TW)
(Taylor, TX, US) (Gujarat, IN)
ASE Group PTI
Intel
(Jingiang, CN) (Toufen, TW)
(Belen, CR) ASE Group
Amkor ASE KYEC TSMC
(Sao Paulo, BR)
(Bac Ninh, VN) (Penang, MY) (Suzhou, CN) (Miaoli, TW)
Intel Chip Advanced ASE Group TSMC
(Penang, MY) (Haining, CN) (Changhua, TW) (Chunan, TW)
Silicon Box SMIC/JCET ASE Group
(SG) (Jiangyin, CN) (Kaohsiung, TW)
Tongfu Microelectronics ASE Group ASE Group
(Xiamen, CN) (Kaohsiung, TW) (Kaohsiung, TW)
Shenzhen Able Electronics ASE Group
(Shenzhen, CN) (Kaohsiung, TW)

Mainland China Taiwan Rest of World

Facilities 14 11 13

Note: Includes both IDM internal ATP facilities and OSATs

Source: SEMI; BCG Analysis

20
 EXHIBIT 13

ATP capacity27 distribution by region

Rest of world ATP capacity,
2022–2032F global ATP capacity 2022–2032F (as % of total capacity)
4% 7% 27%
3% 3%
6% 3%
5%
9%
20% 9%
23%
27%
7%
5%
32% 1%
1%
30%
6% 1%

8%
2%
27% 2%
20% 1% <1%
2% 2%

2022 2032F 2022 2032F

US Japan Taiwan EU Malaysia Singapore Thailand

Korea Mainland China Others Philippines Mexico Vietnam Others1
1. Other countries include Indonesia, Canada, Brazil, Costa Rica, India, Israel, and Morocco
Note: Includes both OSAT and IDM facilities
Source: US Department of State; The White House; SEMI; IHS; BCG analysis

Nonetheless, in advanced packaging, which SIDEBAR: Chiplets

accounts for just under half of the ATP
market, technological breakthroughs could The term “advanced packaging” covers a wide range of
open the door for higher-cost regions such as materials and manufacturing technologies. While this
term is used to describe approximately 46% of the ATP
the United States to play an enhanced role in market, a small but growing subset of this market uses
ATP. A key innovation is the heterogeneous highly precise and automated manufacturing methods
integration of chiplets (see sidebar). to assemble products consisting of multiple active and
passive components, namely, chiplet products.
To strengthen the US semiconductor supply
chain, one of the goals of the US CHIPS Heterogeneous integration of chiplets is the process
of combining multiple chips and chiplets to match the
Act is to grow the US domestic advanced
functionality of a single monolithic system-on-chip (SoC).
packaging ecosystem. The first commercial Engineers can design components and adjust features on
results of this policy are emerging: Amkor a case-by-case basis and source specific functionality
announced it would stand up a $2 billion from different suppliers. Although there may be tradeoffs
facility in Peoria, Arizona, to package chips in cost and complexity, possible benefits can include lower
produced there by TSMC for Apple, and Intel cost relative to a similarly capable monolithic chip, smaller
form factors, greater design flexibility, and improved
will invest $3.5 billion in advanced packaging yields. By working with multiple vendors, companies can
at its Rio Rancho, New Mexico, facility. SK potentially reduce system costs and time to market.
Hynix plans to invest roughly $4 billion to
build an advanced packaging facility in Demand for chiplets technology is growing due to
Indiana. Furthermore, Samsung is planning to applications in computing and AI, but there are currently
only a limited number of companies with the capability to
construct an advanced packaging facility as assemble these packages. IDMs are beginning to adopt
part of a larger semiconductor ecosystem in this technology to package newer nodes in-house, blurring
Texas. Advanced packaging R&D could also the lines between fabrication and ATP.
be enhanced by $3 billion from the CHIPS
Act under the National Advanced Packaging However, there are tradeoffs to investing in chiplet
technology. Acquiring the assembly technology requires
Manufacturing Program (NAPMP). higher upfront capital costs. Companies need to invest in
EDA and simulation software to design and test the validity
of their designs. Moreover, designing interconnected
chiplets raises the design and testing complexity of
semiconductor devices. Additionally, chiplets require more
complex power management and thermal management
solutions to handle heat.

21
Looking Ahead—the Pathway
to Greater Resilience

Sustained Support for Investment in Resiliency One area of potential

Building on the recent success of incentive
programs, policymakers can continue to
concern is in logic at or
demonstrate a steadfast commitment to supply older than 28 nanometers.
chain resilience. In the United States, the
government can accelerate implementation of The trajectory of current
existing CHIPS Act programs. It can also consider
the need for future tax incentives; for example, fab construction puts this
if the current ITC were to be made permanent
and broadened to cover semiconductor design, it capacity substantially in
would make future incentives more predictable,
thus helping companies make better investment
excess of future demand
decisions. In other regions, governments can
likewise take actions to extend and enhance
incentive programs.

Equally important, companies and governments

can adopt a long-term, strategic view of resilience.
The semiconductor industry is prone to cyclicality.
While cycles occur in the context of steadily
growing demand, reduced asset utilization can
hurt the economics of capital-intensive wafer
fabrication units, which quickly manifest in
reduced profitability. When a cyclical downturn
occurs, industry analysts with a shorter-term
equity valuation focus may raise questions on how
much “excess” there is in the market, and whether
incentives have driven industry to build this excess. Supply-Demand Imbalances
Complex product flows and unclear demand
signals can make it hard to estimate “real excess” Against the backdrop of improving resilience—driven
and the timing of recovery. by over $2 trillion in wafer fab investments we expect
over the coming decade—pockets of the supply
It will be critical in those times to “stay the course.” chain exhibit a risk of supply-demand imbalances.
In a world that is becoming as heavily reliant on
chips as on energy, the impact of a potential “black One area of potential concern is in logic at or older
swan” event—such as another global pandemic— than 28 nanometers. The trajectory of current fab
would be considerably worse than the near-term construction puts this capacity substantially in
externalities of “excess.” Confident leadership excess of future demand, with the majority of the
and communication, by both companies and capacity in large fabs in Mainland China. Absent
governments, will be critical. some change in trajectory, the highly utilization-
driven fab economics could lead to substantial
pressures to reduce wafer prices, which may cause
fabless companies to rethink process technology
selection decisions.

22
New Regions in the Supply Chain CHIPS Act, to expand and diversify downstream
capacity in the Indo-Pacific and Western
As investments in fab capacity gather Hemisphere. A core objective is to promote “the
momentum around the world, vulnerabilities in expansion of the international assembly, testing,
the form of inadequate capacity for “back-end” and packaging capacity needed to diversify the
manufacturing—particularly in ATP—are becoming global semiconductor supply chain.” 29 The US
more apparent. government has announced ITSI partnerships with
Panama, Costa Rica, Vietnam, Indonesia, and the
The entrance of new markets into the Philippines and launched semiconductor ecosystem
semiconductor ecosystem presents an assessments for each country.30 In September 2023,
opportunity to address these vulnerabilities in the $2 million of ITSI funding was allocated toward
medium to long term. Southeast Asia, in particular, supporting a semiconductor workforce development
can play an enhanced role. For decades, Malaysia initiative in Vietnam.31 Arizona State University’s Ira
has attracted extensive investment in ATP A. Fulton Schools of Engineering is cooperating
activities, giving rise to a thriving ecosystem. with the US Department of State to support these
Now Vietnam, a relative newcomer, is also efforts. 32
attracting investments from Intel, Amkor, and
other companies from around the world, and In addition, the US government is pursuing
is projected to increase its share of global ATP semiconductor cooperation with India, including
capacity from less than 1% to 9% of global ATP through the bilateral Initiative for Critical and
capacity by 2032. At a time when companies Emerging Technology (iCET) established by
face challenges securing talent, Southeast Asia is President Biden and Prime Minister Modi in 2022,33,
poised to raise the number of working-age people and via a 2023 US-India Semiconductor Supply
with postsecondary schooling to 65 million in Chain and Innovation Partnership Memorandum of
2030, compared with 37 million in 2015. 28 Understanding. 34

Southeast Asia is poised Talent and Immigration

to raise the number of Semiconductor development and production rely
on access to a workforce with diverse skill sets.
working-age people with As the industry’s innovation cycles and R&D
investments accelerate, they will need to ensure
postsecondary schooling to they are taking steps to develop a pipeline of
engineers and operators with the specialized
65 million in 2030, compared skills and training to operate new semiconductor
facilities. A July 2023 study by SIA, in partnership
with 37 million in 2015 with Oxford Economics, found that the United
States faces a significant shortage of technicians,
Whether new markets will realize their full computer scientists, and engineers, with a
potential to attract investment will depend on projected shortfall of 67,000 of these workers
numerous factors, such as access to a skilled, in the semiconductor industry by 2030 and a
cost-competitive workforce; availability of reliable gap of 1.4 million such workers throughout the
power and water utilities; an enabling regulatory broader US economy.35 Competition for high-
environment with limited market barriers; security skilled talent is fierce, with newly minted engineers
and rule of law; and competitive incentives often preferring to join software companies or
schemes. Government policy also plays a role, startups over roles in the semiconductor industry.
particularly as companies place more emphasis
than ever on environmental sustainability,
transparency, and social responsibility in their
global operations.

The US government is also stepping up its

efforts to enable new regions to create a more
diverse ecosystem in other segments of the
semiconductor supply chain. The US State
Department is responsible for implementing the
$500 million ITSI Fund, established under the

23
 Talent shortages are also appearing outside the graduates in India and Southeast Asia’s workforce
upper echelons of the workforce, in vocations to nearly double between 2015 and 2030, to 206
spanning construction workers, technicians, million.39 A micro-study by the Australian Strategic
electricians, master welders, and pipefitters. Policy Institute on the trajectories of some 500
Without these workers, semiconductor leading semiconductor research scholars further
manufacturing capacity cannot be adequately illustrated this point.40 Many of these scholars
built and operated. Many older workers are received STEM undergraduate degrees in Asia,
retiring; for example, in the welding trade, where earned their postgraduate degrees in the United
375,000 professionals were needed to fill job States and the EU, and then opted to pursue
openings in the United States in 2023, the their careers in the United States and the EU
average age of an employee is 55, compared with (see Exhibit 14). Such globally mobile career
the average age of 42 across all employees.36 paths are vital to the industry’s success today.

Education is a core solution to this challenge. For the United States, the opportunity lies in
SIA member companies are working with states improving its aggregate foreign talent retention.
and other partners on expanding certification SIA has found that at US colleges and universities,
boot camps, apprenticeships, and other over 50% of master’s engineering graduates and
training programs at community and technical over 60% of PhD engineering graduates are foreign
colleges located near new and expanding citizens. Among foreign students who graduate from
semiconductor fabs as an effective means to a US institution, approximately 80% of master’s
help close the workforce gap for technicians.37 and 25% of PhD STEM graduates do not remain
For example, in the United States, New Mexico in the United States after graduating, either by
has agreed to grant Intel up to $5 million to choice or because of US immigration policy.41
train hundreds of new hires to support the
multi-billion-dollar expansion of its Rio Rancho Germany is a leading example of how to encourage
plant tied to chiplet manufacturing.38 both high-skill and mid-skill migration. In July
2023, the German government passed the
Welcoming foreign talent is also key to bridge Skilled Immigration Act, which eases the process
the gap between talent shortages and surpluses to receive a visa for individuals who earn over
across regions. A 2022 study by the United €39,600 and for those looking for work through
Nations Development Program, for example, an “Opportunity Card.” Additionally, Germany has
forecasted the number of postsecondary removed caps on visas for high-skilled workers.

EXHIBIT 14

High-skilled workers migrate between geographies during their careers

Top authors of advanced IC papers 1 2
2 3 Trend
Location at different career stages

100% USA +15%pt -5%pt • Top destinations for postgraduate studies

10%
20% • Large net inflow of STEM talent from
25%
14% Europe +6%pt -2%pt rest of world
2%
5% 18%
2% 20%
3% Japan +1%pt --
4%
25% 3% 2%
4% • Impressive retention across all stages
S. Korea -1%pt --
2% 16%
• Struggle to attract foreign talent
13% 12%
7%
7% Taiwan -- --

30% 29%
28%
Mainland -13%pt +4%pt
China • Top talent trains abroad
Undergraduate Postgraduate Employee • …and stays abroad, aside from some returners
India -6%pt --

1 2 3

US JP TW KR EU IN CN 1 Others

Note: N=459 1. Mainland China

Source: Australian Strategic Policy Institute (ASPI); Expert interviews; ProtectAZWorkers; BCG analysis

24
Open Trade and Cooperation US share of global exports has decreased,
Mainland China’s share continues to increase
The global semiconductor supply chain faces (see Exhibit 15). Mainland China still runs a
a world of heightened tension and complexity. large trade deficit in semiconductors, but
Military conflicts can disrupt pockets of the relative to its total trade, the deficit has declined
supply chain and lead to shortages (for example, across most semiconductor products.42
the disruption to neon gas supplies used in
semiconductor manufacturing lasers following Ongoing geopolitical tensions between the
Russia’s invasion of Ukraine). Non-military United States and Mainland China drive
disputes can also impact global production chains; significant uncertainty for companies engaging in
in 2019, for instance, a disagreement between the global semiconductor ecosystem. The world’s
Japan and South Korea led Japan to impose leading semiconductor companies—in wafer
export controls on South Korea for materials fabrication, design, materials, and equipment—
critical to semiconductor production, such as still generate a significant share of their revenues
hydrogen fluoride, fluorinated polyamide, and in Mainland China. A March 2020 BCG report
photoresist. Floods, fires, and other climate- entitled “How Restricting Trade with Mainland
related disasters, as well as more frequent China Could End US Semiconductor Leadership”
pandemics, also pose “black swan” risks. found that a full technology decoupling
from Mainland China would lead to the US
Global trade in semiconductor-related products semiconductor industry losing its current sales
and services remains substantial. Global trade and innovation leadership position and 15,000 to
in semiconductor chips, in real dollars, grew 40,000 highly skilled direct jobs in the industry.
by 43% between 2017 and 2022. While the

EXHIBIT 15

Global growth in semiconductor product exports by region, 2017-2022

Semiconductor export growth1,2 Bubble Size

+/- ppt share of global exports, 2017-2022
$50B, 2022 exports

4
Mainland
China

2
Hong
Kong Taiwan

0 ASEAN
Japan
US EU

-2

Korea

-4
0 2 4 6 8 10 12 14
Export growth, CAGR 2017-2022

1. HS codes 854110, 854121, 854129, 854130, and 8542, excludes semiconductor equipment
2. Real 2017 USD.
Source: S&P Global Trade Atlas, UN Comtrade; BCG analysis

25
Global trade in
semiconductor chips, in
real dollars, grew by 43%
between 2017 and 2022.

Mainland China is working to ensure its

domestic companies have ready access to
foreign markets to sell their semiconductor
products. Mainland China has bilateral
investment agreements with over 100 countries,
including many across Europe and Asia .43
Mainland China by year-end 2021 had active
free trade agreements with 26 countries and
territories and was actively negotiating another
eight agreements. Mainland China is part of the
Regional Comprehensive Economic Partnership
(RCEP) that entered into force in 2022, which
convenes 15 countries across Association
of Southeast Asian Nations (ASEAN), South
Korea, Australia, New Zealand, and Japan—
economies that represent around 30% of
global GDP.44 RCEP is widely viewed as an
alternative to the Trans-Pacific Partnership
(TPP), a US-led agreement that was the
cornerstone of the US strategic pivot to Asia
in the early to mid-2010s, but that the United
States withdrew from in 2017.

The US government has been less active in

furthering its trade agenda. It has no active Free
Trade Agreement (FTA) negotiations, its recent
achievements being the 2018 US-Mexico-Canada
Agreement (USMCA)—a renegotiation of the 1994
North American Free Trade Agreement (NAFTA)—
and a digital trade agreement with Japan
concluded in 2020. The Indo-Pacific Economic
Framework, a US-led economic arrangement
with 13 countries in Asia, is not a conventional,
comprehensive FTA with chapters on tariffs, non-
tariff barriers, investment, IP, and other provisions
of greatest concern to companies.45

26
Future Needs of
the Industry

S
emiconductors will play a critical For the semiconductor industry to thrive,
role in the global economy in the key future needs include the following:
decade to come, from everyday
products to the cutting edge in defense Fostering talent at all levels, from cutting-
and AI. Few industries have a supply chain edge research to technicians on the
and ecosystem as complex and globally factory floor and welders on construction
intertwined. And yet, a number of factors— sites, through effective partnering with
from geopolitical tensions and a more educational institutions, workforce training,
complex regulatory environment to labor and industry-tailored migration policies
shortages and rising costs—have underscored
Providing sustained policy support
the need for supply chain diversification
to address remaining supply chain
and investments to improve resiliency.
vulnerabilities, anticipate the expiration
Governments, likewise, have recognized of current incentive programs, and “stay
the strategic importance of semiconductors the course” through business cycles
and seek to reduce strategic dependencies
Helping new markets develop the right
by attracting and incentivizing new
conditions to attract semiconductor
domestic or “near-shored” investments
investment, including targeted and
to achieve resilience. But resilience is not
sustained use of incentives, workforce
synonymous with self-sufficiency, and, as
training, infrastructure buildout, and
we laid out in our April 2021 report, the
improvements in the regulatory environment
costs of self-sufficiency are staggering.
Maintaining open trade and diversifying
end markets by enacting trade measures
that are well-defined, consistently applied,
and aligned across likeminded partners,
and negotiating effective trade agreements
in the face of geopolitical uncertainty

27
Appendix

Description of Government Initiatives • New York’s Green CHIPS project includes a state
ITC of up to 5% of qualified investments, an R&D
United States credit of up to 8% of expenditures, and a jobs tax
credit of up to 7.5% of gross wages per new job.50
The United States leads the world in chip design
and is home to leading global chipmakers, but all • Arizona allocated a $100 million investment
advanced logic chip fabrication (<10 nanometers) to spur greater growth in semiconductor
is located in Asia, and 97% of ATP is performed industry, managed by the Arizona Commerce
outside the United States.46 US policymakers and Authority to further enhance infrastructure
corporate leaders both inside and outside the and workforce and research capabilities.51
semiconductor industry recognize the urgency and
opportunity to strengthen resilience in the United • The Texas CHIPS Act, approved in June 2023,
States and global semiconductor supply chains creates a $698 million fund to issue grants
and reduce certain strategic dependencies. to private companies with an established
presence within the state to encourage
Enacted in August 2022, the CHIPS Act economic development related to semiconductor
appropriated over $52 billion in funding to support manufacturing and design. The Act also
the semiconductor industry, including $39 billion appropriated more than $660 million for the
in grants for manufacturing (with $2 billion set creation of advanced R&D centers at universities.52
aside for technology nodes at least as old as 28
nanometers and $3.5 billion set aside for the • The Oregon CHIPS Fund, approved in April 2023
creation of a “secure enclave” Defense Department with initial funding of $190 million, awards grants
program) and $11 billion in funding for R&D and and makes loans to businesses applying for federal
workforce development. The bill also appropriated semiconductor financial assistance for developing
$500 million to the ITSI Fund, which is aimed at manufacturing facilities, conducting R&D, and
improving resilience in the assembly, packaging, partnering with institutions of higher education.53
and testing stage of the supply chain, among other
• California has several programs targeting the
focus areas.47 The enactment of the law, including a
semiconductor industry through tax incentives
25% semiconductor manufacturing ITC, has sent a
and credits to promote both semiconductor
strong signal to the market, spurring private sector
manufacturing and R&D. For example, its California
investments in the United States. Since 2020, when
Competes Tax Credit provides over $180 million
the CHIPS Act was first passed, the United States
in credits annually, and its R&D credit can be
has attracted over $350 billion in private investment
applied on up to 39% of qualified expenses.54
for semiconductor manufacturing, materials,
and equipment,48 and companies are already Mainland China
leveraging the 25% ITC for chip manufacturing.
The Chinese government is adopting a whole-of-
US states are also implementing policies nation approach to promote its semiconductor
to attract semiconductor investments. industry, as reflected in its five-year and other
Examples include the following: long-term planning documents. Mainland China
has engaged in a decade-long effort55 to subsidize,
• Colorado created a $75 million CHIPS
including through equity infusions and domestic
Refundable Tax Credit program and the CHIPS
manufacturing capacity for logic chips at or older
Zone program, which gives semiconductor
than 28 nanometers, which are used in a variety of
companies access to five tax credits that can
end-use markets including aerospace & defense,
be earned by investing in equipment, staff,
automotive, industrial applications, and medical
and R&D. The state also provides support
devices. The Chinese government has documented
for workforce development plans through the
its ambitions for Mainland China to become a global
$85 million Opportunity Now Grant Program,
leader in the semiconductor industry. The 2014
and it established an express-lane for air
Guidelines for the Development and Promotion of
permitting of semiconductor projects .49

28
 the Integrated Circuit Industry (IC Guidelines) set backed financing in support of fabrication and design
the goal of mass producing chips at or newer than activities. Phase II (2019) raised an additional $32
16/14 nanometers by 2020, and by 2030, ensuring billion, with a greater focus on supporting older
that “the main linkages in the semiconductor node fabrication projects57 and design activities,
supply chain reach the internationally advanced and increasingly also to equipment and materials
level, and a group of enterprises enter the global investments. Phase III (as of 2023) aims to raise a
top ranks.” A year later, in 2015, Mainland China record $40 billion, with manufacturing equipment
published the Made in China 2025 Plan, which sets a likely priority in support of Mainland China’s self-
aspirational goals for Mainland China to achieve sufficiency goals. Beyond the National IC Fund at
70% self-sufficiency in semiconductors by 2025. the central level, at least 15 provincial and municipal
funds have been created since 2015, raising some
Central to Mainland China’s semiconductor $50 billion in capital. In addition, local governments
industrial policy is the National Integrated Circuits typically provide land, utilities, and other inputs at
Industry Development Investment Fund, hereafter below cost for semiconductor manufacturing sites.
referred to as the National IC Fund,56 established Other Chinese government incentives tailored to
in 2014. Mainland China has administered two support its domestic semiconductor sector include
phases of the National IC Fund and is in the grants, reduced utility rates, favorable loans,
process of beginning Phase III (see Exhibit 16). significant tax breaks, and free or discounted land.58
Phase I (2014) raised over $20 billion in state-

EXHIBIT 16

Mainland China National IC Fund Phases with capitalization and capital allocation

Phase I (2014–2019, $20B) Phase II (2019 ongoing, $32B) Phase III

16%
Capital investment

15%

5% 36%
11%
10% 55%
7%
11% 5%
7%
22%

Estimated to
China Mobile Ministry of Finance Other Shanghai Guosheng Group raise >$40B
E–Town Capital China National Tobacco China Development Bank
Greater support
2% expected for
7%
equipment
3% 10%
10%
Allocation

10%

20%

73% 75%

*as of
March 2022

IC design Fabrication ATP Equipment & materials Application

Source: Bruegel; Citic Securities ; BCG Analysis

29
As a result of this government support, a
2020 study by BCG and SIA found that, all
else equal, the cost of building and operating
a fab in Mainland China is 37% lower
than doing so in the United States.59

Mainland China leads the world in ATP capacity

and wafer fabrication for logic chips at or older
than 28 nanometers. In the past five years alone,
Chinese companies have invested $63 billion in 73
fabs, primarily in fabs for chips over 28 nanometers,
supported by significant subsidies from the
Chinese government.60 It is also rumored to be
making strides in newer advanced logic nodes.61

Mainland China is also a leading producer of

minerals and other industrial raw materials
used for chip manufacturing. It is making
moderate progress in design, core IP and EDA,
and equipment for advanced node chips, but
is challenged by export controls on advanced
lithography equipment recently imposed by the
United States, Japan, and the Netherlands. The EU’s efforts are yielding results. For example,
Intel plans to expand the scope of its Magdeburg
Europe Fab from $17 billion to $33 billion, supported by
a $10.9 billion subsidy package from Germany
The European Union is a global leader in advanced that may includes state aid and caps on energy
equipment manufacturing, led by ASML, a producer costs.64 Infineon announced a $5 billion investment
of advanced EUV lithography equipment. However, in Dresden, and TSMC, Bosch, Infineon, and NXP
Europe’s share of global fabrication capacity sits have established the European Semiconductor
below 10%. The European Commission in 2021 Manufacturing Company (ESMC) GmbH joint venture
unveiled the Digital Compass 2030, with a stated in Dresden under the European CHIPS Act.65 France
goal to increase this share to 20% by 2030.62 also announced plans to disburse $3.1 billion in
state aid to support STMicroelectronics’ and Global
The EU’s strategy63 for semiconductors, under
Foundries’ $7.5 billion investment in Crolles.66
the umbrella of its Digital Compass strategy,
comprises three pillars. First, the Chips for Europe The EU has an active trade policy agenda,
Initiative targets design capabilities, production with 47 active preferential agreements
innovation (for example, 3D heterogeneous system with 79 trading partners. It also has nine
integration back-end processes), and talent. The agreements either under negotiation or in
second “Security of Supply” pillar focuses on the process of being ratified, including with
filling a proven funding gap to develop a “first of a India, South Korea, Indonesia, and Mexico.
kind” that fabricates nodes below 2 nanometer or
substrate material production (for example, SiC, Taiwan, South Korea, and Japan
GaN). Lastly, a monitor and crisis reporting pillar
creates a legal basis for “common purchasing” Taiwan and South Korea hold strong positions in
and “priority orders” among EU member states. semiconductor manufacturing and continue to
elevate support for their respective industries.
The EU Chips Act, enacted in September 2023, Taiwan boasts a thriving semiconductor ecosystem,
seeks to mobilize $47 billion in public and private underpinned by heavy investment in R&D and
funds via three funding mechanisms: Invest EU, TSMC’s state-of-the-art foundry business.
the European Investment Bank Group, and the Taiwan has captured over 70% of advanced
European Innovation Council. However, EU Member node (<10 nanometers) chip manufacturing as the
State governments will disburse subsidy packages go-to foundry partner for fabless companies.67
under EU state aid rules, which so far has resulted South Korea invested early in the development
in the majority of funding concentrated in wealthier of its semiconductor industry and supported
member states such as Germany and France. the growth of Samsung and SK Hynix into
Notably, the EU Chips Act allows member states to global semiconductor leaders; together, they
disburse larger amounts to underdeveloped regions, majority share in the global NAND flash memory
making these attractive locations for investment. and DRAM chips markets, respectively.68

30
Taiwan has directed its efforts toward innovation of a $180 million site for equipment repair, R&D,
and talent. Taiwan’s most recent round of and training related to EUV lithography.74
investment, known as the “Taiwan Chip-based
Industrial Innovation Program Industrial Innovation Amassing 50% global market share at its height in
Program,” came into force in November 2023, the 1980s, Japan now only represents 9% of the
allocating $9.2 billion in funding for 2024 to global semiconductor sales. Japanese companies lag
2033. Its tax incentives include a tax rebate behind leading-edge logic manufacturing companies
of up to 25% for R&D activities in logic chips by a decade, manufacturing chips only as advanced
and a 5% tax credit on equipment used in as 40 nanometers.75 The government now aims to
advanced manufacturing processes. The address this gap by making a technological leap
Act has the following four main pillars: into advanced logic manufacturing in the next
five years. Japan’s Strategy for Semiconductors
1. Integrating generative AI and semiconductor
1
and the Digital Industry announced in 2021 aims
technologies to drive innovation to increase sales of semiconductors from $38
across all sectors of the economy billion in 2020 to $112 billion by 2030. To drive
implementation of this goal, the government
2. Attracting global R&D professionals
2 introduced both the 5G Promotion Act76 and the
and developing domestic talent Act on the New Energy and Industrial Technology
Development Organization in 2022 to develop
3. Accelerating the integration of new innovations
3 fabs for high-speed processing semiconductors.
into all segments of the semiconductor
In November 2021, the Japanese government
supply chain, prioritizing <1 nanometer node
allocated $4.1 billion for domestic investments in
silicon-based chip manufacturing, non-
leading-edge chip manufacturing capacity and
silicon-based chip manufacturing, 3D chip
in November 2023 announced an additional $13
stacking, and heterogeneous integration
billion funding allocation to attract investment.
4. Attracting IC startups to land in Taiwan by
4 Japan has also taken significant steps to support fab
providing tools, IP, masks, and tape-out
construction. At least $3.5 billion of the $8.6 billion
services, as well as funding and partnership
in costs to build TSMC’s joint venture with Sony,
opportunities with local industry leaders69
DENSO, and Toyota in Kumamoto are being covered
In 2021, the Ministry of Education also enacted by the government, the first project to receive a grant
the Training Act to address the need for talent from a $4 billion public fund administered by Japan’s
in emerging high-tech industries, including Ministry of Economy, Trade and Industry to strengthen
semiconductors.70 Among other things, the Japan’s semiconductor industry.77 The government
Act relaxed some educational regulations to also agreed to provide up to a $620 million subsidy for
foster industry-academia collaboration, and Kioxia and Western Digital’s joint venture to construct
since then, the public and private sector have Yokkaichi Fab 7, and a $1.3 billion subsidy for Micron
joined forces to establish six semiconductor to expand capacity at its plant in Hiroshima.78
research institutes across the island.
Moreover, Japan is supporting leading-edge chip
South Korea in 2021 unveiled the K-Belt innovation through Rapidus, a consortium backed
Semiconductor Strategy, aimed at attracting by Japanese companies, IBM, and European
up to $450 billion of investment, strengthening nanoelectronics research hub Interuniversity
manufacturing capabilities, and expanding Microelectronics Centre (IMEC), aimed at producing
in the logic sector. South Korea’s incentive 2-nanometer chips. The Japanese government in
programs focus on tax incentives, expected April 2023 granted Rapidus $1.94 billion to support
to yield $55 billion–$65 billion in relief for R&D activities and $530 million in startup aid.79
companies. The tax credit relief ranges by size
On trade policy, Japan has 18 active economic
of enterprise and supply chain activity, offering
partnership agreements—including with Mainland
up to 50% tax credit for R&D and 25% for
China, the European Union covering its 27
manufacturing activities, and an additional
Member States, and the 10 members of ASEAN—
10% deduction for investments in 2023.71 72
which provide its semiconductor companies
These programs are spurring new investment with preferential access to those markets.
commitments. For example, in 2022, SK
Hynix announced plans to build M15X Fab in
Cheongju, encouraged by the K-CHIPS Act
tax credit.73 In 2022, equipment maker ASML
also selected South Korea as the new location

31
New markets
A number of new markets across Asia and
the Western Hemisphere see an opportunity
to attract semiconductor industry investment
and have announced, or plan to announce,
national semiconductor strategies and
incentives programs in a bid to play a
larger role in the global supply chain.

In Southeast Asia, governments have

taken a variety of actions to boost
incentives, including the following:

• Vietnam. In October 2023, the country set a

goal of training 50,000 engineers by 2030 to
support the semiconductor industry and plans
to issue a national semiconductor strategy
in early 2024. In Vietnam, Samsung invested
$850 million in a Flip-chip Ball Grid Array
(FCBGA) production facility and Amkor stood
up a $1.6 billion advanced packaging facility.

• Philippines. The government is actively In the Western Hemisphere, Costa Rica enacted
enhancing workforce readiness and offering Law 10234 in February 2023, which offers
incentives through the CREATE Act for high- incentives to attract foreign investment in ATP
impact projects with a minimum investment and other semiconductor manufacturing services.
of PhP50 billion or significant job generation. Costa Rica has an existing semiconductor industry
In addition to supporting the United States in footprint largely due to the presence of Intel,
ATP, there’s a focus on moving up the supply which has operated in the country for decades
chain, including in design, to stay globally and recently announced plans to spend $1.2
competitive, with SEIPI proposing a Science billion to upgrade its existing ATP facility. 83
and Technology Center for this purpose. 80
In December 2021, India launched its “Semicon India
• Indonesia. The nation has designated the Programme,” which includes $10 billion in funding
semiconductor sector as a priority industry for fiscal incentives, 84 and financial incentives
eligible for tax incentives. Furthermore, the and design infrastructure to domestic companies,
country provides additional benefits, including startups, and Micro, Small, and Medium Enterprises
tax exemptions and flexible licensing, within its (MSMEs) focused on design. To date, India’s
19 Special Economic Zones and offers tailored efforts have had mixed success. A joint venture
investment facilities, including rent-free leases, between Foxconn and India’s Vedanta to build a
in a newly developed integrated industrial park. 81 semiconductor fab, for example, did not succeed,
due to complications with administrative approvals
• Malaysia. Its New Industrial Master Plan (NIMP) and other factors. 85 Micron, however, is proceeding
2030 aims to enhance the manufacturing with a $825 million investment in a new chip
sector’s value added by diversifying exported assembly and test facility in Gujarat, with substantial
products, focusing on encouraging front- support from the central and state governments. 86
end activities such as semiconductor
equipment manufacturing, wafer fabrication, The US ITSI Fund is focused on helping
and integrated circuit design. Notably, major new markets assess their semiconductor
investments from Intel ($7 billion) and Texas ecosystems and target their efforts at
Instruments ($3.1 billion) reflect the country’s attracting investment in areas that play to their
attractiveness for complex manufacturing, strengths and underlying competitiveness.
with Intel’s expansion including its first
overseas 3D chip packaging facility. 82

32
Methodology
Fab Capacity Assembly, Test, and Packaging

The fab capacity forecast was done by The ATP forecast relies on expectations of
forecasting future CapEx by region and process future plants based on announced investments
type and allocating it to different regions based to add to capacity. Following this, we adjust
on investment patterns we observed with for the attractiveness of certain regions based
future fab announcements (comprising over on key cost factors (labor, construction, etc.)
100 individual fabs between 2024 and 2032). and nearshoring (some regions will be more
This accounts for how CapEx is distributed attractive to locate ATP facilities near due to
from HQ region (the source of the investment) increasing fab capacity in those regions).
to destination region (where the investment is
directed toward). This new capacity was added
onto the existing base of capacity and thus we
created a forecast for fab capacity through 2032.

The definitions of advanced, mature, and legacy

logic were collated from the Department of
Commerce and previous SIA-BCG reports.
In our forecast, we divide logic into (1) <10
nanometers, (2) >/=10 nanometers and <28
nanometers and (3) >/=28 nanometers.

In our September 2020 report, we presented

a sediment chart of wafer fabrication capacity
by region, dating to 1990. We defined capacity
as (1) wafer size at or above 8 inches; (2)
50%+ probability; (3) facilities with 5000 or
more wafer starts per month. Based on this
methodology, certain capacity was excluded; in
particular, capacity below 8 inches, which was
prevalent in some regions in the 1990s, was
excluded. We recognize that this significantly
influenced the percentage share of capacity
distribution by region for that historical
period, as depicted in the sediment chart.

However, to maintain a consistent methodology,

and given that the above parameters
represent nearly all capacity installed
today and for the foreseeable future, this
report adheres to the same methodology
used in the September 2020 report.

33
1. SIA-BCG, “Strengthening the Global Semiconductor Supply Chain in an Uncertain Era,” April 2021.

2. For further reading, see Daniel Nenni and Paul McLellan, Fabless: The Transformation of the
Semiconductor Industry (SemiWiki, 2016) and Larry Diamond et al, (eds). Silicon Triangle: The United
States, Taiwan, China, and Global Semiconductor Security (Palo Alto: Stanford Hoover Institution, 2023).

3. For the purposes of this paper, we have expanded the definition of “supply chain” to include areas,
such as EDA and design, that are not typically considered part of the physical product supply chain.

4. The Korea Times, “Korea unveils plan to build $471 bil. mega chip cluster in Gyeonggi Province,”
15 January 2024. https://www.koreatimes.co.kr/www/tech/2024/02/129_366948.html.

5. SIA, “The CHIPS Act Has Already Sparked $450 Billion in Private Investments for U.S. Semiconductor
Production,” 14 December 2022.

6. The forecast is based on historical patterns of CapEx and capacity as well as CapEx already committed
for the 2024–2032 period from company headquarter regions to fab site destination regions, by process
technology. Additional adjustments were made based on investments recently announced, through
March 15, 2024, but not yet captured in CapEx data; primarily accounting for South Korea’s mega-cluster
planned in Gyeonggi Province ($471 billion in CapEx through 2047).

7. The technological capability to produce logic chips newer than 3 nanometers may already exist
prior to 2030.

8. BCG, “Establishing Leadership in Advanced Logic Technology,” November 2021.

9. While other approaches are possible, the historical analysis in this document focuses on “modern”
capacity where the wafer diameter is greater than or equal to 8 inches. Capacity in this range represents
80%–90% of all capacity in operation today, is >80% of all capacity added between 1990 and 2020,
is more cost-competitive than <8” capacity, and is used to make a wider variety of products than <8”
capacity. Alternative analyses, which, for example, include wafer capacity at and below 6”, lead to
substantially equivalent historical trends, though the year-by-year percentages necessarily differ.

10. U.S. Department of Commerce, “Assessment of the Status of the Microelectronics Industrial Base in the
United States,” https://www.bis.doc.gov/index.php/documents/technology-evaluation/3402-section-
9904-report-final-20231221/file.

11. SIA-BCG, “The Growing Challenge of Semiconductor Design Leadership,” November 2022.

12. Global Market Insights, “Application Specific Integrated Circuit Market to surpass $28 Bn by 2032,
Says Global Market Insights inc.,” 8 August 2023.

13. Electronics Clap, “India Home to 20% of World’s Chip Design Engineers, Emerges as a Leader
with Strong Presence of Major Semiconductor Companies,” 2 January 2023.

14. SIA-BCG, “The Growing Challenge of Semiconductor Design Leadership,” November 2022.

15. SIA, “Taking Stock of China’s Semiconductor Industry,” 13 July 2021.

16. TechNode, “Xiaomi’s Self-developed Chip Set to Power Its Smartphones and Cars,” 1 September 2023.

17. Approximately 20 different design companies are listed as recipients of National IC Fund
Phase II funding.

18. Empyrean Technology Co., Ltd. Income statement (SZSE:301269), via CapitalIQ.

19. Supply Chain Dive, “Entegris breaks ground on $600M Colorado facility,” 5 July 2023; Freese and
Nichols, “Tech Boom Part Two: Wafer Plant Progresses in Sherman,” 2 August 2023; Governor Gretchen
Whitmer, “Gov. Whitmer Announces Approval for Economic Development Projects Creating or Retaining
Nearly 400 Jobs Across the State,” 24 October 2023; Korea IT News, “Sumitomo of Japan to Produce
ArFi Photoresist in Korea… ‘Factory Operation in 2024,’” 2 September 2021; Entegris, “Entegris
Opens State-of-the-Art Manufacturing Facility in Kaohsiung, Taiwan,” 10 May 2023; HSC, “Hemlock
Semiconductor Breaks Ground on $375 Million Expansion Project in Saginaw County,” 21, October,
2022. For the purposes of this report, semiconductor grade polysilicon is categorized as a material input
into the process, although the process of manufacturing semiconductors “starts with silicon” and the
“semiconductor supply chain begins with polysilicon of ultra-high purity.” White House Supply Chain
Report, available at https://www.whitehouse.gov/wp-content/uploads/2021/06/100-day-supply-chain-
review-report.pdf.

34
20. The report further states: “Within gases, the survey found that helium, nitrogen, hydrogen chloride,
neon, nitrogen trifluoride, and hydrogen presented the most frequent acquisition concerns. Concerns
for wet chemicals were more dispersed. Survey respondents identified 78 unique chemicals of concern,
led by sulfuric acid and isopropyl alcohol.” U.S. Department of Commerce, “Commerce Assessment of
U.S. Microelectronics Industrial Base,” December 2023.

21. Wall Street Journal, “The Chip Shortage Has Made a Star of This Little-Known Component,”
4 September 2021.

22. US Geological Survey, 2023.

23. See detailed methodology in the Appendix.

24. Fanny Potkin and Yantoultra Ngui, “Exclusive: Chinese firms look to Malaysia for assembly of high-end
chips, sources say,” Reuters, December 18, 2023, https://www.reuters.com/technology/chinese-firms-
look-malaysia-assembly-high-end-chips-sources-say-2023-12-17/.

25. Intel’s IDM ATP facility in Vietnam is ~50,000 sq. meters of facility space (<1% of global ATP capacity)
but due to growing investment momentum and favorable cost factors, we project Vietnam to reach 9%
of world ATP capacity by 2032.

26. “Amkor Inaugurates Latest Factory in Vietnam,” Amkor, https://amkor.com/blog/amkor-inaugurates-

latest-factory-in-vietnam/; https://www.cinde.org/en/essential-news/intel-costa-rica-s-assembly-and-
testing-plant-begun-operations-and-already-made-its-first-export.

27. Facility capacity measured by footprint of the facilities (in square meters).

28. Wittgenstein Centre for Demography and Global Human Capital, (2018). Wittgenstein Centre Data
Explorer Version 2.0. Available at: http://www.wittgensteincentre.org/dataexplorer.

29. U.S. Department of State, “The U.S. Department of State International Technology Security and
Innovation Fund.”

30. U.S. Department of State, “New Partnership with the Philippines to Explore Semiconductor Supply
Chain Opportunities,” 16 November 2023; U.S. Department of State, “New Partnership with Indonesia
to Explore Semiconductor Supply Chain Opportunities,” 13 November 2023; U.S. Department of State,
“New Partnership with Vietnam to Explore Semiconductor Supply Chain Opportunities,” 11 September
2023; U.S. Department of State, “New Partnership with Panama to Explore Semiconductor Supply Chain
Opportunities,” 20 July 2023; U.S. Department of State, “New Partnership with Costa Rica to Explore
Semiconductor Supply Chain Opportunities,” 14 July 2023

31. White House, “Joint Leaders’ Statement: Elevating United States – Vietnam Relations to a
Comprehensive Strategic Partnership,” 11 September 2023.

32. U.S. Department of State: “Department of State and Arizona State University Announce New ITSI
Initiative,” February 20, 2024.

33. White House, “Fact Sheet: United States and India Elevate Strategic Partnership with the initiative on
Critical and Emerging Technology (iCET),” January 31, 2023.

34. U.S. Department of Commerce, “Secretary Raimondo Announces U.S.-India Semiconductor Supply
Chain and Innovation Partnership MOU in New Delhi,”
March 15, 2023.

35. SIA, “America Faces Significant Shortage of Tech Workers in Semiconductor Industry and Throughout
U.S. Economy,” 25 July 2023.

36. GVC-RPB, “Welder Shortage,” 9 May 2023.

37. SIA, “America Faces Significant Shortage of Tech Workers in Semiconductor Industry and Throughout
U.S. Economy,” 25 July 2023.

38. Alburquerque Journal, “Intel Corp. to Receive Up to $5M in Job Training Incentives from State as It
Plans to Expand Workforce,” 25 July 2023.

39. UNDP World Population Prospects 2022 Revision.

40. Australian Strategic Policy Institute Critical Technology Tracker, “How is United States performing in
Advanced integrated circuit design and fabrication, Talent tracker within Advanced integrated circuit
design and fabrication,” https://techtracker.aspi.org.au/tech/advanced-integrated-circuit-design-and-
fabrication/?c1=us.

35
41. SIA, “America Faces Significant Shortage of Tech Workers in Semiconductor Industry and Throughout U.S.
Economy,” 25 July 2023.

42. BCG analysis based on UN Comtrade data.

43. International Trade Administration, China – Country Commercial Guide, Trade Agreements,
https://www.trade.gov/country-commercial-guides/china-trade-agreements.

44. New Zealand Foreign Affairs & Trade, Regional Comprehensive Economic Partnership,
https://www.mfat.govt.nz/en/trade/free-trade-agreements/free-trade-agreements-in-force/regional-
comprehensive-economic-partnership-rcep/rcep-overview.

45. Congressional Research Service, “Indo-Pacific Economic Framework for Prosperity,” 16 June 2023,
https://crsreports.congress.gov/product/pdf/IF/IF12373/4.

46. President’s Council of Advisors on Science and Technology, “Report to the President: Revitalizing
the U.S. Semiconductor Ecosystem,” September 2022.

47. John D. Sargent Jr., Manpreet Singh, Karen M. Sutter, “Frequently Asked Questions: CHIPS Act of 2022
Provisions and Implementation,” Congressional Research Service, 25 April 2023.

48. SIA, “The CHIPS Act Has Already Sparked $350 Billion in Private Investments
for U.S. Semiconductor Production,” Semiconductor Industry Association, 14 December 2022.

49. Colorado Office of Economic Development & International Trade, (Links) 1) CHIPS Refundable Tax Credit
Program | Colorado Office of Economic Development and International Trade; 2) CHIPS Zones Program
| Colorado Office of Economic Development and International Trade; 3) Polis Administration Launches
Innovative Grant Program to Connect Colorado Workers with New Opportunities | Colorado Governor Jared
Polis.

50. Wolters Kluwer, “New York’s Green CHIPS Incentives for Semiconductor Manufacturing,”
1 November 2022; New York State, “Excelsior Jobs Program.”

51. Arizona Commerce Authority, “Governor Ducey Announces $100 Million to Enhance Arizona
Semiconductor System,” 4 November 2022.

52. Office of Governor Greg Abbott, “Texas CHIPS Act – House Bill 5174.”

53. Oregon Senate, “Senate Bill 4,”

https://olis.oregonlegislature.gov/liz/2023R1/Downloads/MeasureDocument/SB4.

54. California Governor’s Office of Business and Economic Development, (Link to both credits) 1)
Semiconductors & Microelectronics - California Governor’s Office of Business and Economic Development.

55. Refer to “We need to lend support to important high-tech projects, such as high-speed, wide-band
information networks, key integrated circuits and new-type carrier rockets in order to strengthen China’s
new and high-tech industries on an overall as well as individual basis” in “The Outline of the Tenth Five-Year
Plan for National Economic and Social Development (2001),” The National People’s Congress of the People’s
Republic of China, 3 March 2010.

56. Notice on Issuing Guidelines for the Development and Promotion of the Integrated Circuit Industry
(State Council, issued June 24, 2014).

57. The focus on more mature node fabrication is reflected in China’s production capacity build up primarily
in semiconductors at or older than 28 nm.

58. SIA, “Taking Stock of China’s Semiconductor Industry,” July 2021.

59. SIA & BCG, “Government Incentives and US Competitiveness in Semiconductor Manufacturing,”
September 2020.

60. Based on sum of CapEx for individual wafer fabrication sites.

61. CSIS, “Contextualizing the National Security Concerns over China’s Domestically Produced High-End Chip,”
26 September 2023. https://www.csis.org/analysis/contextualizing-national-security-concerns-over-
chinas-domestically-produced-high-end-chip.

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62. European Commission Digital Compass 2030.

63. European Commission – “European CHIPS Act – Questions and Answers,” 30 November 2023.

64. Intel, “Intel, German government agree on increased scope for wafer fabrication
site in Magdeburg,” 19 June 2023.

65. Infineon, “Infineon breaks ground for new plant in Dresden together with EU Commission President
Ursula von der Leyen, German Federal Chancellor Olaf Scholz, Saxony’s Prime Minister Michael
Kretschmer and Dresden’s Mayor Dirk Hilbert,” May 2, 2022, https://www.infineon.com/cms/en/about-
infineon/press/press-releases/2023/INFXX202305-098.html.

66. Dominique Vidalon and Sudip Kar-Gupta, “France to provide 2.9 billion euros in aid for new STMicro/
GlobalFoundries factory,” Reuters, 5 June 2023.

67. Richard Cronin, “Semiconductors and Taiwan’s “Silicon Shield” Stimson Center, 16 august 2022.

68. U.S. International Trade Administration.

69. Department Information Services, Executive Yuan, “Taiwan Chip-Based Industrial Innovation Program,”
13 November 2023.

70. Ministry of Education (TW), “The Private and Public Sectors Work Together to Fill Talent Gaps Six Major
Semiconductor Research Colleges,” 26 June 2023.

71. Korea Legislation Research Institute translation of “Act on Restriction on Special Cases
Concerning Taxation.”

72. Kim & Chang, “Enactment of the K-CHIPS Act - Government’s Support and Regulatory Policies
for the Semiconductor Industry,” 22 May 2023.

73. SK Hynix, “SK Hynix to Build M15X Fab in Ceongju,” 6 September 2022.

74. Nikkei Asia, “ASML Plans New Chip Equipment Hub in South Korea,” 16 November 2022.

75. Sujai Shivakumar, Charles Wessner, and Thomas Howell, “Japan Seeks to Revitalize Its Semiconductor
Industry,” August 2023, Center for Strategic and International Studies.

76. Act on Promotion of Developing/Supplying and Introducing Systems Making Use of Specified
Advanced Information Communication Technologies.

77. Nikkei Asia, “Japan to Subsidize TSMC”s Kumamoto Plant by Up to $3.5bn,” 17 June 2022.

78. Bloomberg, “In Boost for Chip Ambitions, Japan Inks $1.3 Billion in Subsidies for Micron Plant,”
2 October 2023.

79. CSIS, “Japan Seeks to Revitalize Its Semiconductor Industry,” 25 August 2023.

80. Government of Philippines, “PBBM: Govt Ready to Expand Semiconductor Industry,”

16 November 2023.

81. Ernst & Young, “When the Chips Are Down: ASEAN Could Be the Answer to the Semiconductor Crunch”;
OOSGA, “Investing in Indonesia – 2023: Industrial Incentives & Zones,” 31 October 2023; The Jakarta
Post, “Indonesia Behind, But Not Conceding, in Chip Industry Race,” 17 January 2024.

82. ASEAN Briefing, “Malaysia’s Semiconductor Sector Beckons Foreign Investors,” 16 January 2024.

83. Invest in Costa Rica, “New Law Will Strengthen Territorial Competitiveness for Attracting Investment
Outside the Greater Metropolitan Area,” 4 May 2022; Reuters, “Intel to Invest $1.2 Bln in Costa Rica
over Next Two Years,” 30 August 2023.

84. Subject to an INR 150 million ceiling per application. Dezan Shira & Associates, “What Is the Semicon
India Program and How Does It Work?” 21 February 2022.

85. Bureaucratic delays in the approval process reportedly led prospective partner STMicroelectronics
to pull out of the deal early, leaving the Foxconn-Vedanta JV to struggle to find a partner with the know-
how to build a fab. Munsif Vengattil, Aditya Kalra, and Jane Lee, “Modi’s chip making plan flounders
as firms struggle to find tech partners,” Reuters, 1 June 2023.

86. Reuters, “Micron Confirms up to $825 Million Investment in India Chip Facility,” 22 June 2023.

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