Northwest needs government incentives for semiconductor industry

  • Saturday, March 27, 2021 1:30am
  • Opinion

Surprisingly, there is something U.S. Presidents agree upon-America’s economic and national security hinge upon maintaining our technology edge in semiconductors.

Those tiny computer chips are the brains of modern electronics. They operate our laptops and smart phones and permeate every sector of our lives from farming and manufacturing to health care and public safety. They are embedded in our military’s most advanced equipment and give us a tactical edge.

Semiconductors are among our nation’s top five exports. The Semiconductor Industry Association reports in 2019, those exports totaled $46 billion and the industry employed nearly 185,000 people earning an average $166,400 a year, which is more than twice the average of U.S. manufacturing workers. In Portland and Vancouver, those companies employ more than 30,000 people.

However, our long-held dominance in semiconductors is challenged by foreign competitors whose governments heavily subsidize the industry. For example, China’s government is investing over $150 billion seeking to become the global semiconductor leader in research, design and production by 2030.

That has not gone unnoticed by our presidents.

For example, Donald Trump imposed trade restrictions and pushed bipartisan measures to reduce the industry’s taxes and authorized $25 billion increase research and development, which includes facilities construction. Joe Biden has identified semiconductors as ground zero in economic and strategic competition with China and is seeking a Western alliance to secure that industry.

The Congressional Research Service issued a detailed report last October that alarmingly shows our share of semiconductor manufacturing capacity, which was 37 percent in 1990, has dropped to 12 percent.

“Moreover, only six percent of the new global capacity will be located in the U.S. In contrast, it is projected that during the next decade, China will add 40 percent and become the largest semiconductor location in the world,” according to CRS.

The questions are what will it take to reverse the trend and what happens to the semiconductor fabricators or “fabs” in the Portland-Vancouver metropolitan area?

When considering investment locations, CRS found the U.S. ranks high in some factors, including protection of intellectual property, skilled talent and synergy with existing facilities and ecosystems. But the total costs in the U.S. are up to 50 percent higher than in China. Compared to Taiwan, South Korea and Singapore, we are nearly one-third higher.

Costs are a glaring issue for companies faced with spending billions to upgrade equipment every five years. They drive location decisions and southern cities such as Austin and Phoenix offer lucrative incentives and lower costs to companies and workers.

For example, the WaferTech plant constructed 25 years ago in Camas cost $1.2 billion. Washington’s Legislature provided incentives, such as sales tax exemptions for equipment. Even though there is room for additional capacity at the Camas site, the company’s parent, Taiwan Semiconductor Manufacturing Co., just announced a $12 billion “fab” complex in Phoenix.

The new plant will make TSMC’s most- sophisticated chip (5-nanometer).

Intel, the world’s largest semiconductor company, has four “fabs” in Hillsboro, OR, but invested in Arizona. Its $7 billion Fab 42 plant in Chandler started up last October with 3,000 new workers.

In both cases, government incentives were deciding factors.

Even though the bidding war for manufacturing facilities may be distasteful, it is not

going away. Hopefully, Washington and Oregon elected officials will not give up on Intel, Wafer Tech and other semiconductor companies. They are too important to write-off.

The silver-lining is global semiconductor manufacturing capacity is expected to increase by 50 percent in the next decade. There will be opportunities to bring new facilities to the Pacific Northwest. We just need to figure out how to do it.

Don C. Brunell is a business analyst, writer and columnist. He can be contacted at

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