Amid fierce competition in the global semiconductor industry, the United States is reshaping its position in the global supply chain through a series of strategic initiatives. Recently, the United States government launched a plan to improve chip packaging capabilities in Latin America, a move that is not only an important adjustment to the global supply chain, but also part of United States' strategic layout in the global semiconductor industry. China Exportsemi Web will try to analyze the background, goals and challenges of this plan, and explore its far-reaching impact on the global semiconductor industry.
Background to the CHIPS and Science Act in United States
On August 9, 2022, United States President Joe Biden signed the CHIPS and Science Act, which plans to provide up to $52.7 billion in government subsidies for the United States semiconductor industry. The core purpose of the bill is to help United States regain its leadership in semiconductor manufacturing and strengthen supply chain security. However, while the United States will produce more semiconductor products by the end of the decade, most of them will need to be packaged in Asia outside the United States, making the entire supply chain more complex.
"Western Hemisphere Semiconductor Program (CHIPS ITSI)"
To further localize semiconductor manufacturing and packaging, United States Secretary of State Antony Blinken announced the launch of the Western Hemisphere Semiconductor Initiative (CHIPS ITSI) on July 17, 2024, which aims to enhance semiconductor assembly, test, and packaging (ATP) capabilities in key partner countries such as Mexico, Panama, and Costa Rica. The program will support public-private partnerships and adopt the recommendations of the Organisation for Economic Co-operation and Development (OECD) to develop the semiconductor ecosystem in these countries. The first projects will be carried out in Mexico, Panama and Costa Rica, and will be included in the rest of the Americas in the future.
Figure: United States semiconductor layout: Latin American chip packaging supply chain construction
Financial Support & Goals
Under the plan, the ITSI Fund will provide $500 million in funding over five years starting in fiscal year 2023, with $100 million per year allocated to "promote the development and adoption of secure and reliable telecommunications networks and ensure the security and diversification of semiconductor supply chains." This suggests that in addition to semiconductor ATP capabilities, the program will also involve the development of telecommunications networks. The ultimate goal is to bring new trusted ICT suppliers and semiconductor manufacturing capacity to the global market for direct benefits to the United States and its allies and partners.
Intel's layout in Costa Rica
Notably, Intel already has an assembly, test, and packaging facility in San Jose, Costa Rica. However, it is unclear whether the blue giant will benefit from the new plan. Intel's layout shows its strategic vision in the global semiconductor industry chain, and also provides an important starting point for United States to establish a chip packaging supply chain in Latin America.
Challenges and prospects
Despite the United States government's ambitious plans, achieving this goal will not be easy. First of all, semiconductor manufacturing and packaging is a highly complex process that requires a lot of technology, capital, and talent. According to the Wall Street Journal, semiconductor manufacturing involves hundreds of steps, each of which requires extreme precision and control. Second, United States countries may have shortcomings in infrastructure, education, and industrial base, which will pose challenges to the implementation of the plan. For example, Mexico, although it has some foundation in the field of automobile manufacturing, has relatively little experience in semiconductor manufacturing.
In addition, United States investment and cooperation in Latin America need to take into account the local political, economic, and social environment to ensure the sustainability of projects. According to the South China Morning Post, some experts have expressed doubts about the feasibility of this plan in United States, arguing that even in the United States, major front-end manufacturers funded by the CHIPS and Science Act are "struggling" with factory operations and construction due to a lack of skilled workers.
Conclusion
United States' plan to establish a chip packaging supply chain in Latin America is an important strategic move to reduce dependence on Asia and improve the competitiveness of the local semiconductor industry. Through the Western Hemisphere Semiconductor Initiative (CHIPS ITSI), the United States hopes to increase semiconductor assembly, testing and packaging capabilities in key partner countries such as Mexico, Panama and Costa Rica. However, the successful implementation of this plan requires overcoming many challenges, including technology transfer, infrastructure construction, and talent development. In the future, we look forward to seeing more results and breakthroughs as the plan progresses.
