US Investing $5bn in Semiconductor R&D Amid AI Chip Shortage

The US is to invest over US$5bn in semiconductor-related R&D, amid ongoing chip shortages prompted in part by the rapid adoption of generative AI

The United States is to invest over US$5bn in semiconductor-related research, development, and workforce needs with the aim of cutting down on the time and cost of commercialising new technologies, amid ongoing chip shortages prompted in part by the rapid adoption of generative AI (Gen AI). 

A rapid rise in demand in AI has led to a global shortage of chips - which are used to train the latest large language models.

With the vast majority of these chips manufactured in Asia – particularly in Taiwan – last year  Taiwan Semiconductor Manufacturing Company (TSMC) Chairman Mark Liu suggested that supply constraints on AI chips could take about 18 months to ease, due to limited capacity in advanced chip packaging services. The company - the world’s largest chipmaker - is the sole manufacturer for Nvidia's H100 and A100 GPUs, which power AI tools like ChatGPT.

Semiconductors were invented in America and serve as the backbone of the modern economy. But today, the United States produces less than 10% of global supply and none of the most advanced chips. Similarly, decades ago the US government invested nearly 2% of GDP in R&D, however in recent years the government investment ratio has fallen below 1%. 

Now, the Biden-Harris administration says it expects to invest billions in the National Semiconductor Technology Center (NSTC), now established as a public-private consortium, and other CHIPS Research and Development (R&D) priorities.

Supply shortages, AI and geopolitical tension: America’s falling share of the global semiconductor market

Despite US companies designing the world’s leading chips, since the 1990s America’s share of the global semiconductor market has fallen from 37% to around 12% in 2020. Following the global shortage of semiconductor chips, halted by restrictions during the coronavirus pandemic – together with continuing geopolitical tensions between China and Taiwan – a number of global companies have begun exploring manufacturing these chips in the US, taking advantage of funding from the US CHIPS Act to build new or expanded fabs across the country.

In 2022 Intel said it was planning to invest more than US$20bn in the construction of two new leading-edge chip factories in Ohio to boost production to meet the demand for advanced semiconductors. Intel says the ‘mega site’ in Licking County, just outside Columbus, can accommodate a total of eight chip factories as well as supporting operations and ecosystem partners.

TSMC meanwhile announced in 2020 its plans to build one or more chip plants in Arizona, while Idaho-based Micron Technology has a planned investment of US$150bn in the production of memory chips over the next 10 years.

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