Page:Ensuring Long-Term U.S. Leadership in Semiconductors.djvu/15

Ensuring Long-Term U.S. Leadership in Semiconductors semiconductor-related national-security challenges. To maintain its advantage, the U.S. military needs access to leading-edge semiconductors that not all potential adversaries have. U.S. government purchasers of semiconductors, including the U.S. military, also need to be able to mitigate risks to their supply chains, with regard both to integrity and availability; moreover, mobile computing, automated vehicles, and the Internet of Things increasingly place similar demands on commercially used semiconductors, as a much broader civilian cybersecurity imperative.

A strong U.S .-based industry can mitigate some of these security concerns but is not a panacea for them. Risks to the integrity of the semiconductor supply chain, while lower when critical items are designed and produced domestically or on the territories of U.S. allies, cannot be assured through domestic manufacturing and design alone and therefore ultimately need to be mitigated through other means (such as integrity standards and testing and greater system resilience), regardless of where production is located. Moreover, if the United States attempted to ensure security by simply restricting the set of producers that was allowed to sell semiconductors to U.S. firms, it would slow innovation by fragmenting markets and reducing competition. The U.S. government and U.S. consumers would be increasingly unable to procure the cutting-edge chips on which the U.S. economy and national security depend.

Box 1. The State of U.S. Industry U.S. -headquartered firms have the largest share of the global semiconductor market, as measured by revenue, but the semiconductor industry has steadily been globalizing over the last 40 years. For approximately the past two decades, U.S. -headquartered firms have accounted for half of global semiconductor sales. Other leading firms are based in South Korea, Japan, Taiwan and Europe. No Chinese-headquartered company is in the top twenty. How U.S. -based companies do business, however, has been changing. U.S .-headquartered semiconductor companies have increasingly moved fabrication facilities abroad or focused on design while contracting out fabrication (the so-called fabless business model). The share of worldwide fabrication capacity located in the United States fell to about 13 percent in 2015, compared to 30 percent in 1990 and 42 percent in 1980, though nearly half of planned global additions are U.S. - company-owned. 1 During the last four decades, the memory business has also largely shifted from the United States to Asia, with notable exceptions for cutting-edge technologies. U.S. companies still earn the largest share of revenues in a host of critical areas. The United States has a majority of the global market for integrated circuits design and fabrication, which makes up over 80 percent of the global semiconductor market. 2 Within integrated circuits, the United States leads in logic and analog. 3 In particular, the United States has the clear lead in sales of high-end 1 See: fas.org/sgp/crs/misc/R44544.pdf. 2 Integrated circuits (ICs) are semiconductor devices (chips) composed of multiple electronic circuits. They are used for most electronic applications in which semiconductors are needed. They include memory, logic, and analog chips. The processor chip in a computer, for example, is an IC. 3 Logic chips are central processing units (CPUs)―sometimes called microprocessors―that control and carry out computation; analog chips convert continuous signals such as sound or video that are found in the real world into 5