The Semiconductor Industry’s Building Problem.

The tech sector never gets a break. Across countries and cultures, we have become so accustomed to its advance that we often fail to recognize the scale and speed at which we demand innovation. We rely on advanced technology so much that the list is probably shorter for what we don’t expect it to improve about our lives.?

It’s ironic, then, that a single component wields outsized influence over the extent and rate of innovation: semiconductor chips. These small but powerful pieces of hardware are produced in semiconductor fabrication plants (fabs) and can be found in nearly every piece of tech we use, from doorbells and baby monitors to credit cards and toasters—and their industrial applications are equally as broad. As the market grows, so too do its trials, foremost of which is building an industry from the ground up.?

This month’s issue of Bytes & Insights will explore how growth in the industry has created a unique set of challenges for manufacturers and their fab design and construction partners.?

So Demanding?

According to a report this month from the Semiconductor Industry Association (SIA), global semiconductor sales have exceeded half a trillion dollars in each of the last three years, with unit sales as high as 1.15 trillion. The increase in demand stems from a rise in tech users as well as a growing spectrum of chip-managed technologies. As more traditional tools and manual tasks become digitalized, we need semiconductors to keep these elements running effectively. Moreover, to compete in the market, manufacturers must continuously design semiconductors to be faster, smaller, and cheaper. Taken from a broader view, demand is not a single consideration—it is a three-pronged challenge that necessitates greater quantity, wider application, and faster innovation.?

Before the COVID-19 pandemic, global semiconductor production and supply lines were concentrated in East Asia. When pandemic-related delays led to production shortages in that region, the automotive industry was hit especially hard. Virtually every auto manufacturer was forced to cut production, which in turn affected many ancillary industries. That severe chip shortage has receded, but unless new fabs are built and more diverse supply chains established, such an event could become recurrent with each demand cycle.?

Under this threat, nations around the globe made boosting chip production a top priority. In August 2022, President Biden signed into law the Creating Helpful Incentives to Produce Semiconductors (CHIPS) & Science Act. The legislation provides $52 billion to bring semiconductor manufacturing and supply chains to the U.S. Yet in a nation with few fabs, manufacturers couldn’t simply switch on production lines: they had to quite literally build the industry first.?

Many have answered the call. According to the Semiconductor Industry Association’s (SIA) 2023 State of the Industry report , the U.S. Department of Commerce received more than 400 statements of interest by May 2023, and dozens of projects representing $200 billion in investments have been announced.?

Just as the U.S. government has prioritized domestic semiconductor manufacturing, so too has it engineered a major push to make the U.S. a global leader for the EV supply chain and solar energy. The Infrastructure Investment and Jobs Act (IIJA) in 2021 and Inflation Reduction Act (IRA) in 2022 serve in part as an expansion of the CHIPS Act to these industries. These wide-ranging pieces of legislation create dozens of federal programs and funding for projects in advanced/clean technology. According to recent research from the Center for American Progress , “$92.3 billion in investments in EV and battery manufacturing have been announced for projects that will create approximately 84,800 jobs.”?

“We will always look at the history of our industry in two eras now that the Inflation Reduction Act has passed,” remarks Scott Moskowitz , head of market strategy and public affairs for Qcells North America.?Following the passage of the IRA, Qcells announced a $2.5 billion investment in building a complete solar production and supply chain in the U.S., including an ingot, wafer, cell, and module manufacturing plant in Bartow County, GA, that the White House described as “the largest solar investment in U.S. history.”?

The combination of growing demand, incentivized opportunities, and a market willing to invest have placed an incredible charge on advanced tech manufacturers and their project partners. Producing the resources and labor to execute new construction while effectively leveraging subcontractor networks and trade partners to exponentially increase capacity will be a major challenge, but one that defines the industry’s future.?

Want to know how demand is affecting other segments of the Advanced Tech market? Check out our recent article on gray.com about the growth of the U.S. battery market.?

Site Makes Right?

The first challenge of building a semiconductor plant lies in locating a site with the civil infrastructure and community resources to meet the plant’s many needs:?

Power—An average fab uses enough electricity per year to power 50,000 homes, and electricity can account for as much as 30% of its operating costs. For communities with grids unable to fully support these needs, owners may want to explore the addition of on-site or rooftop solar panels.?

Water—Fabs require an equally astounding volume of water—roughly 4 million gallons each day. Much of this is spent on ultra-pure water systems that clean silicon wafers at the micron level. A municipality that cannot easily meet a fab’s water requirements is an obstacle not easily overcome.?

Wastewater treatment—Producing semiconductor chips involves hazardous waste that must be mitigated through wastewater treatment. Should local authorities be unable to process a fab’s daily wastewater, the manufacturer may secure additional incentives in exchange for upgrading or expanding these facilities.?

Skilled labor—Building a world-class fab will avail you nothing if you can’t staff it. Fabs must be located near a population center that offers a skilled talent pool and the educational resources to prepare the next generation of labor.?

Transportation infrastructure—Fabs employ hundreds or even thousands of workers. Surrounding roads must be designed to support the increased load from commuting workers and supply trucks and be well maintained.?

Receptive community—When starting a project, fab owners must seek community input and develop creative ways to meet its needs. Designing solutions to reduce carbon footprint, mitigate hazards, and minimize disruption can demonstrate an owner’s commitment to cultural and environmental preservation.?

Proximity to suppliers—New fabs should develop a diverse supplier network and work to lock in favorable long-term contracts with key supply partners. When possible, owners should consider co-locating with these suppliers as well as building near critical trade hubs that can shorten supply lines.?

Satisfying these requirements can be far from easy. Partnering with an experienced design-build team with a strong network of suppliers and subcontractors can assist in this process.?

Byte: Every industrial operation has criteria for site selection, but fab owners in particular must be assured that a preferred locale will support their immediate needs as well as their long-term growth strategy. An experienced firm in design, construction, engineering, and real estate development can provide peace of mind and take the guesswork out of finding the perfect site.?

For more on the challenges of building a semiconductor fab, read the complete article on gray.com .

Clean Living and Following the Rules?

If you think a fab’s site selection criteria are fastidious, you may redefine “meticulous” when you see its clean room environments. Understandably so; contamination of these process areas by even a microscopic amount of dust, grit, or other material can jeopardize product quality and lead to untold damages. To protect sensitive processes such as silicon crystal growth and wafer fabrication, these facilities must implement strict controls for temperature, airflow, and humidity. Clean room controls are similar for EV plants, which involve delicate processes for electrode shaping and stacking, cell assembly, electrolyte filling, and more.?

Semiconductor and battery clean rooms are classified under ISO 14644-1 standards, which specifies the maximum allowable number of particles of various micron lengths per cubic meter of air. Semiconductor manufacturing clean rooms typically fall from ISO 4 (10,000 particles of 0.1 μm) and ISO 6 (1,000,000 particles of 0.1 μm). For context, an average bacterium is about 2 μm long—20 times as long as a 0.1 μm particle.?

A battery plant’s clean rooms may fall under different ISO classifications. Cell production, an earlier and more vulnerable process stage, typically requires ISO 5 or 6 clean room standards. For module and pack assembly, ISO 7 or 8 classification is often sufficient. While the clean room classifications for battery production are somewhat less rigorous than for semiconductor fabrication, these are still highly controlled environments.

Unsurprisingly, semiconductor and battery production facilities are also under close scrutiny from regulatory bodies. In the U.S., agencies such as the Occupational Safety & Health Administration (OSHA), the Environmental Protection Agency (EPA), and the Consumer Product Safety Commission (CPSC) ensure that fabs and battery plants maintain compliance with laws intended to safeguard workers, surrounding communities, end-users, and wildlife and natural resources.?

Securing permits is the first step in compliance and continues throughout a project. Depending on location, facility size, and other factors, the project can require permits for air quality, storm water, pollutant discharge, hazardous waste, and many more. Delays in applying for and receiving these permits can severely impede progress if the manufacturer or its design and construction partners fail to learn the requirements, follow procedures, or take corrective actions.?

Capacity issues in local government can also be a source of delay and frustration for semiconductor fabs, which makes it all the more important for manufacturers to partner early with a firm that offers relevant experience in the region.?

Byte: Semiconductor and battery manufacturing are held to high standards for cleanliness and safety by regulatory agencies as well as from within the business. In addition to maintaining a healthy and stable working environment, these high standards foster innovation, efficiency, and resiliency. Such a system benefits businesses, suppliers, and all who rely on these critical technologies.?

Despite some temporary growing pains, the advanced technology industry is poised for a breakthrough. With a supportive public and the backing of the government and investors, all that’s needed now are the willing and able bodies to get the job done.

For a closer look at how Gray serves the Advanced Technology industry, check out our Markets page .??