With CHIPS Down, SEMATECH Gets Second Look.

• Author: Steenburg, Robbie Van
• Position: Policy Points

* Congress is currently considering an investment of more than $50 billion in the semiconductor industry through the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act.

By the time this article is published, this investment might have already occurred as part of the larger United States Innovation and Competition Act. This proposed legislation includes an infusion of money into production capability--a new domain for U.S. industrial policy--in addition to traditional research funding.

Given the bill's scope and scale, it is important to examine what lessons can be learned from the last time the nation invested in semiconductors.

In 1987, the United States created SEMATECH, a name derived from "Semiconductor Manufacturing Technology." It was a public-private partnership that was designed to direct research on semiconductor manufacturing between major industry players.

Today's situation is reminiscent of the 1980s, when U.S.-based companies were losing ground to global competition due to major investments and subsides by the Japanese government. However, instead of facing competition from Japan, industry is now up against China.

Another difference is the scale of investment in the CHIPS Act. SEMATECH was funded by $500 million in matching funds from the Defense Advanced Research Projects Agency spread over five years. This represents just more than $1 billion in 2022 dollars or just 2 percent of the CHIPS investment. The proposed legislation also includes funding to establish a National Semiconductor Technology Center for research on semiconductor design and manufacturing.

SEMATECH was absorbed by SUNY Polytechnic in 2015 after years of decline, leaving behind a mixed legacy. While some observers give it little credit in the eventual overtaking of Japanese semiconductor manufacturing, a National Academy of Sciences report said, "SEMATECH was widely perceived by industry to have had a significant impact on U.S. semiconductor manufacturing performance in the 1990s."

SEMATECH met several of its early goals including reduction of the time for a generation of chip miniaturization from three years to two. The cost of miniaturization also dropped from 30 percent to 12.5 percent.

Standing up a new consortium could similarly improve the current performance of industry, but it will need to learn from past lessons to ensure that the government receives a robust return on investment.

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