Supporting the U.S. Semiconductor Industry Challenges and Opportunities for the Uof your publication

Supporting the U.S. Semiconductor Industry

Challenges and Opportunities for the U.S. Department of Commerce

Princeton School of Public and International Affairs

January 2022

Supporting the U.S. Semiconductor Industry Challenges and Opportunities for the U.S. Department of Commerce

Policy Workshop Report January 2022

Authors: Jessica Gott Lynne Guey Susan Ragheb Matt Romanowski Juan Carlos Urcia Barea Isaiah Wonnenberg

Faculty Advisor: Doyle Hodges

Preface This report is the final product of a graduate policy workshop at the School of Public and International Affairs (SPIA) at Princeton University. The policy workshop is a requirement of the Master in Public Affairs (MPA) degree program curriculum at SPIA. Graduate students in the policy workshop are tasked with investigating a public policy issue and producing a report offering analysis and recommendations for clients in the public or nonprofit sectors.

This report was written for a policy workshop that focused on the semiconductor industry, in light of the global semiconductor shortage experienced during the COVID-19 pandemic and renewed interest in strengthening domestic production capacity. The client for this report is the Office of the U.S. Secretary of Commerce within the U.S. Department of Commerce (DOC). The findings and conclusions of this report were the result of our own research and interviews with experts in government, industry, and academia.

Please note that the findings, conclusions, and recommendations presented in this report are solely the product of the policy workshop and do not necessarily reflect the views of any individual author or individual associated with the workshop, Princeton University, the U.S. Department of Commerce, or any interviewed individual or organization.

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About the Team Jessica Gott is a first year security studies PhD student researching geopolitical risk and U.S. allied cooperation towards Northeast Asia. She has served in the department of defense since 2005 in both military and civil service capacities. Most recently she was serving as an IndoPacific International Relations Strategist and advisor to the Commander and Headquarters staffs of United Nations Command, Combined Forces Command and U.S. Forces Korea.

Lynne Guey is a MPA candidate studying international relations and emerging technologies.

She has worked in marketing and communications roles at the New York City Economic Development Corporation, Business Insider, and startup firms. This past summer, she interned at the Daniel K. Inouye Asia-Pacific Center for Security Studies.

Susan Ragheb is a MPA candidate studying international relations and emerging technologies.

She has previously worked for the NJ State Assembly and the Democratic National Committee.

Most recently, she has interned for the Electronic Frontier Foundation.

Matt Romanowski is a MPA candidate studying international relations and emerging technologies. He is a U.S. Army officer with deployments to Afghanistan and throughout the Indo-Pacific. He interned in the Office of the Undersecretary of Defense for Policy as a Taiwan and Mongolia Policy Advisor.

Juan Carlos Urcia Barea is a MPA candidate studying macroeconomics and financial policy.

He previously served as an advisor for U.S. Senator Ben Cardin. Last summer, he interned in the U.S. Treasury Department’s Office of International Financial Markets.

Isaiah Wonnenberg is a MPA candidate focused on transportation and technology policy. He previously served as a professional staff member for the U.S. Senate Committee on Commerce, Science, and Transportation.

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Acknowledgments We would like to express our gratitude to the many individuals and organizations without whom this report would not have been possible. Through in-person and virtual interviews, class lectures, and the sharing of materials, their contributions were essential for shaping this report. We thank them for lending us their time and helping us understand a truly complex but fascinating and important field. In particular, we would like to thank Professor Doyle Hodges, who served as facilitator of our policy workshop. Throughout the semester, Professor Hodges learned alongside us about the semiconductor industry, while also providing us with pivotal direction and guidance. We also thank the administrative staff of the Princeton School of Public and International Affairs, particularly Associate Dean Karen McGuinness and Associate Director of Finance and Administration Ryan Linhart, for their instructions, advice, and resources. Lastly, we thank our client, the Office of the U.S. Secretary of Commerce, for showing an interest in our work and allowing us to carry out this research.

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Table of Contents Executive Summary.................................................................................................1 Introduction ............................................................................................................3 Recommendation 1................................................................................................19 Recommendation 2................................................................................................21 Recommendation 3................................................................................................26 Recommendation 4................................................................................................38 Conclusion.............................................................................................................45

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Executive Summary This report provides recommendations to the U.S. government, primarily the U.S. Department of Commerce, on implementing the CHIPS Act and establishing a viable and resilient domestic semiconductor manufacturing ecosystem. The report is the culmination of research into the global semiconductor industry, dozens of interviews with industry experts, surveys of recent legislative and regulatory proposals in the United States and abroad that intended to promote semiconductor manufacturing, as well as of academic literature on industrial policy and international affairs, and review of economic data. The following recommendations promote a comprehensive approach to addressing the current semiconductor supply shortage and ensuring long-term U.S. leadership and competitiveness in the microelectronic industry.

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RECOMMENDATION 1: New research and development projects should be implemented in a way that is focused on basic research that maximizes research spillovers and encourages complementary private investment. Public funds used to subsidize private research and development should stimulate complementary private sector investment to generate new technologies and production processes.

RECOMMENDATION 2: The National Semiconductor Technology Center (NTSC) should enable pre-competitive research collaboration with all stakeholders in the semiconductor industry that results in the commercialization of new ideas. Less-established firms, including startups, should be encouraged to participate in the NTSC along with industry leaders and academia, and the structure of the NTSC should be modeled after similar government programs that resulted in the successful commercialization of advanced technologies.

RECOMMENDATION 3: The U.S. government should invest in domestic STEM education, streamline workforce development programs, and implement immigration reforms to attract and retain global STEM talent. As the United States expands its domestic semiconductor manufacturing capacity, it must maintain a ready supply of talent investing in more domestic STEM education programs that align with national goals and semiconductor industry needs, promoting workforce development efforts between federal, state, and local authorities, and implementing immigration reforms that build a deep bench of global STEM talent.

RECOMMENDATION 4: Financial assistance provided through the CHIPS Act should be available to all segments of the semiconductor industry, including manufacturers of legacy chips, and should be conditioned on firms refraining from issuing dividends or conducting equity buybacks. Doing so would encourage participation throughout the entire industry, including startups and less-established businesses, and would ensure that public investments in the sector are efficiently used for the goal of establishing a viable and resilient semiconductor supply chain.

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Introduction The COVID-19 pandemic and related public health measures resulted in an economic recession and widespread supply chain issues beginning in early 2020. Of particular concern was the disruption to the global semiconductor supply chain, a sector with widespread influence throughout the economy. Semiconductors are a foundational technology essential to equipment ranging from medical devices, automobiles, and smartphones, as well as for military applications. For the automobile industry alone, recent estimates find that the semiconductor shortage contributed to a loss of 7.7 million units of global vehicle production in 2021, totaling $210 billion in lost revenue.1 Even as production continues to ramp up domestically and abroad, semiconductor demand is expected to outpace supply, potentially elongating the shortage into 2023 or beyond.2 The global semiconductor supply chain is complex, with the United States and its allies specializing in differing segments of the production process. The United States is the global leader in research and development, but has limited production capacity for the most advanced semiconductors and limited assembly, testing, and packaging capabilities (ATP).3 East Asia dominates semiconductor manufacturing. Ongoing geopolitical turmoil in the region raises concern over U.S. access to leading-edge chips in the event of conflict. However, leading industry firms, including Intel, Taiwan Semiconductor Manufacturing Co., and Samsung Electronics, have invested billions of dollars to build fabrication facilities within the United States. in recent years, bolstering domestic output once they begin production.

The U.S. government has taken multiple steps to identify obstacles to a viable domestic semiconductor manufacturing ecosystem and incentivize domestic production. The William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (Public Law 116-283), enacted on January 1, 2021, included certain provisions from the Creating Helpful Incentives to Produce Semiconductors for America Act (CHIPS Act).45 Those provisions include authorization of incentives for investments in semiconductor manufacturing, a survey conducted by the U.S. Department of Commerce (DOC) on the status of microelectronics technologies in the U.S. industrial base, the formation of a National Science and Technology Council subcommittee focused on U.S. leadership and competitiveness in microelectronics technology and the development of a national strategy on those matters, and additional authorizations for research, development, and advancements in manufacturing, including the establishment of a National Semiconductor Technology Center (NSTC) for public and private sector collaboration.

The United States Innovation and Competition Act of 2021 (USICA; S. 1260), which passed the Senate on June 8, 2021, would authorize over $50 billion in emergency appropriations for the CHIPS Act. Additionally, on February 24, 2021, President Joseph R. Biden signed an executive order directing federal agencies to assess supply chain vulnerabilities across four key sectors, including semiconductor manufacturing.6 The findings of the 100-day survey were published in June 2021.7

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What is a semiconductor?

Semiconductors, also referred to as chips and microchips, are a set of electronic circuits on a small flat piece of silicon or germanium. They contain properties that fall between conductors [able to conduct electricity] and insulators [unable to conduct electricity].8 On a semiconductor, transistors act as miniature electrical switches that can turn an electrical current on or off. The pattern of tiny switches is created on the silicon wafer by adding and removing materials to form a multi-layered latticework of interconnected shapes.9 Semiconductors are classified into four major product groups based on their functionality:10 1. Microprocessors and logic devices, used for interchange and manipulation of data in computers, communication devices, and consumer electronics, including central processing units (CPUs) and graphics processing units (GPUs); 2. Memory devices, used to store information, including dynamic access memory (DRAM), a common type of memory used for temporary storage of information in computers, smartphones, tablets, and flash memory; 3. Analog devices, used to translate analog signals such as light, touch, and voice into digital signals; and 4. Optoelectronics, sensors and discretes (OSD), used mainly for generating or sensing light in devices including traffic lights and cameras.

In 1965, Gordon Moore, the co-founder of Intel, posited that the number of transistors on a semiconductor would double every two years. In the decades since, this prediction, known as “Moore’s Law,” as well as other scaling laws, guided the semiconductor industry in long-term planning and setting of targets for research and development.11

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The Supply Chain While semiconductor manufacturing has captured significant attention in recent years due to the declining U.S. share of global production, semiconductors have a complex global supply chain involving many different steps beyond manufacturing. As the industry evolved, firms conducted fewer manufacturing steps in-house, instead diffusing operations across different firms and geographic regions. Reshoring manufacturing left domestic semiconductor production highly dependent on other countries for different steps in the production process.

The first stage of the production process consists of design, in which companies formulate and create blueprints for new semiconductor products. Semiconductors for simpler tasks are used in analog devices and optoelectronics, sensors, and discretes (OSD). Crucial for the design process is electronic design automation software (EDA) and core intellectual property (IP), which provide templates for semiconductor products and help streamline the design process.

Once a chip design is ready, the next stage in the process is front end fabrication, where the chip design circuitry is etched onto silicon wafers. Chipmakers will either use their own factories or, more commonly, lease third-party manufacturing capacity. “Manufacturing” most often refers to this process, which represents the most capital-intensive stage in the supply chain. The next step is assembly, testing, and packaging (ATP), where the etched wafers are refined and made into individual semiconductor products. The equipment and tools used for the production process can cost hundreds of millions of dollars, and maintaining access to advanced equipment and tools is essential for semiconductor manufacturing.

Electronic Design Automation (EDA) Core Intellectual Property (IP)

Design

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Fabrication

Equipment and Tools

Assembly, Testing, and Packaging

Geopolitics and National Security In response to the chip shortage, leading states across the global semiconductor supply chain pledged to improve access to semiconductors through plans to increase domestic capacity and cooperation with global partners. Global cooperation is integral to a resilient global semiconductor supply chain, but is stymied by significant geopolitical tensions in East Asia.

The June 2021 White House report on strengthening supply chains stated that the U.S. would seek to work with allies and partners toward a cooperative approach to enable harmonization of export control policies and mitigation of supply chain vulnerabilities by establishing a diverse supplier base.12 The security of the global semiconductor supply chain is threatened by the hyperconcentration of the industry in East Asia. Taiwan dominates production of the chips that power almost all advanced global civilian and military technologies, which “leaves the U.S. and [People’s Republic of China (PRC)] economies extremely reliant on plants that would be in the line of fire in an attack on Taiwan.”13 The Taiwan Semiconductor Manufacturing Corporation (TSMC) dominates fabrication of the most advanced semiconductors, accounting for more than 90 percent of global output.14 The U.S. Intelligence Community (IC) recently assessed that the PRC will continue to press Taiwan’s authorities to move toward unification and condemn what it views as U.S.-Taiwan engagement.15 The IC expects the friction will grow as Beijing continues to use its military to antagonize the island nation.16 Further complicating matters, TSMC’s foundries are located along Taiwan’s west coast, facing China, near beaches considered by observers as probable landing sites of a potential Chinese invasion. The possibility of the PRC overtaking or damaging TSMC’s foundries in the event of a cross-strait conflict could sever the supply of chips to the U.S, its allies, and partners.17 In a report covering the PRC’s New Semiconductor Policies, the Congressional Research Service (CRS) notes that the PRC’s state-led efforts to develop an indigenous vertically integrated semiconductor industry are unprecedented in scope and scale. The PRC’s ambitions to lead across the entire semiconductor value chain, the targeting of U.S. and foreign capabilities, and Chinese challenges to current global rules and norms amplify this concern. While the PRC’s current share of the global semiconductor industry is still small and its industry produces predominantly low-end chips, the PRC’s industrial policies aim to establish global dominance in semiconductor design and production by 2030. Also of concern are the PRC’s state-led efforts to acquire companies and access semiconductor technology through technology transfer pressures and targeted intellectual property (IP) theft. These actions may violate provisions of the U.S.China Phase One Trade Deal, in which the PRC agreed it would not require or pressure firms to transfer technology as a part of investment transactions or as a condition for parties to receive or continue to receive any advantages conferred by the PRC.18

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The increasing prevalence of cutting-edge and advanced chips requires efforts to safeguard their end use. However, current U.S. efforts to unilaterally impose semiconductor industry export controls are ineffective in mitigating national security concerns driven by single state actors. Industry leaders request that the U.S. government consider more private sectorgovernment cooperation on export controls, while the Biden Administration stresses the need for more multilateral cooperation, allowing each government to internally debate the merits of export controls presented.19 The current multilateral export control agreement, the Wassenaar Arrangement, is ill-suited for promoting multilateral actions against single state actors. Among the aims of the Wassenaar Arrangement is to contribute to regional and international security and stability by promoting transparency and great responsibility in transfers of items that could have military purposes.20 The presence of Russia among the 41 member states, however, and increasing Russia-PRC cooperation diminish the likelihood of multilateral cooperation on semiconductor export controls under the Wassenaar Agreement in response to the PRC’s actions.

The adoption of an agreement similar to the Coordinating Committee for Multilateral Export Controls, the Wassenaar Agreement’s predecessor, could be more effective in targeting a specific state, such as the PRC, in an increasingly competitive environment.

Efforts to coalesce U.S. allies and partners towards a unified approach to securing global semiconductor supply chains are also hindered by an ongoing trade dispute between South Korea and Japan. In July 2019, amid a host of tit-for-tat moves between Japan and South Korea due to a host of historical grievances, Japan, citing end security concerns, tightened export controls on materials that South Korea’s semiconductor industry uses to make circuits (hydrogen fluoride and extreme ultraviolet (EUV) photoresists), as well as on fluorinated polyimide, which South Korea uses in its smartphone panels. South Korea responded by threatening to terminate the South Korea-Japan General Security of Military Intelligence Agreement. South Korea’s upcoming presidential election in March 2023 will bring a new opportunity for the U.S. to mediate South Korea-Japan relations, especially since this is the first time both states will have new heads of government since Japan’s imposition of export controls in June 2019.

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Competing Incentive Packages The common narrative of the decline in U.S. semiconductor manufacturing share asserts that governments in Asia are providing their semiconductor industry with lavish subsidies which greatly reduce the cost to firms of constructing new fabrication facilities, suggesting that these subsidies are to blame for a decline in the U.S. share of global semiconductor manufacturing. To emphasize the point, it is often noted that the United States has no fabrication facilities capable of producing the most advanced nodes that are 10 nanometers (nm) or smaller.

There are two major challenges with this narrative. First, disaggregated subsidy data calls into question the assumed effectiveness of subsidies. A widely-cited 2019 Organization for Economic Cooperation and Development (OECD) report found that the level of support from East Asia states for their semiconductor firms between 2014-2018 varied greatly. In the study, the OECD cataloged five types of government support, including direct funds transfer, foregone tax revenue, other foregone government revenue (e.g., waiving fees), transfer of risk to the government (e.g., loan guarantees), and induced transfers (e.g., import/export subsidies, wage controls).

Figure 1

Total budgetary support 2014-18 (millions USD) 0

Total budgetary support, 2014-18 (% of firm revenue)

2000 4000 6000 8000 10000 0% 1% 2% 3% 4% 5% 6% 7%

Amkor ASE Hua Hong Infineon Intel JCET Micron Nvidia NXP Qualcomm Renesas

Samsung Electronics SK Hynix SMIC STMicroelectronics Texas Instruments Toshiba Tsinghua Unigroup TSMC UMC Vanguard Semiconductor

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Taiwan

PRC

Japan

USA

ROK

EU

Toshiba data from 2013-2017 Chart adapted from “Measuring Distortions in International Markets: The Semiconductor Value Chain,” OECD Trade Policy Papers (Paris: OECD Publishing, December 12, 2019), http://dx.doi.org/10.1878/8fe4491d-en, page 60.

State support levels for TSMC and Samsung, the only two firms capable of producing leading-edge chips, do not support the narrative that extensive government intervention resulted in concentrating manufacturing within either state. For example, TSMC received less total government financial support than Intel, though that support consisted of a higher percentage of overall revenue. The value of the budgetary support Samsung received was higher than Intel in dollar terms, but is less than half the level of Intel’s support when measured as percentage of revenue. The concentration of leading edge chip manufacturing in Taiwan and South Korea, then, cannot simply be attributed to state subsidies.

Data from Japanese firms in the study (Toshiba and Rensas) showed both firms received significantly less support, in both net dollars and as a percentage of revenue, than their U.S. or PRC counterparts.21 Relative to the support given to U.S. firms, PRC firms received less total financial support in dollar terms; however, the funds they received consisted of a much higher percentage of their overall revenue. Firms in the PRC do benefit from unique support mechanisms absent in other countries, including in the U.S. The OECD noted that the “overwhelming majority of all below-market borrowing” offered to the semiconductor industry came from the PRC financial system.22 Additionally, PRC firms have access to government-backed equity financing through the China National Integrated Circuit Industry Investment Fund and other similar funds at the provincial and municipal level. The OECD notes that there “appears to be a direct connection between equity injections by China’s government funds and the construction of new semiconductor foundries.”23 At this time, no PRC semiconductor company can produce leading-edge nodes for logic, DRAM, or 3D NAND memory.24 As a result, government support for existing PRC fabrication facilities primarily threatens production of legacy and trailing-edge chips in the United States and elsewhere.

Costs associated with semiconductor fabrication and production only tell part of the story, however. Products which are costly to produce may still be economical to a firm to manufacture, given an assumed higher price per unit and greater profit margins associated with such products.

Examining financial disclosures from major IDMs and pure-play foundries reveals that state support intended to lower capital costs does not necessarily translate into highly profitable or efficient companies.

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Figure 2

The Other Side of Cost: Efficiency and Profitability Net Income

Assets

Return on Assets

Revenue

Net Profit Margin

Intel

6,832

167962

4.06%

19192

35.56%

GlobalFoundries

5

12322

0.04%

1700

0.29%

Texas Instruments

1,947

23,273

8.37%

4,643

41.93%

4.70%

414,670,379

37.74%

TSMC

156,479,154 3,332,311,884

SMIC

373

14,327

2.60%

1,415

26.34%

Hua Hong

395

45,732

0.86%

3,512

11.25%

TMSC figures reported in New Taiwan Dollars, all other reported in millions of U.S. dollars.

Data taken from Q3, 2021 10Q statements.

As seen in Figure 2, Intel and TSMC maintain healthy profit margins which are significantly greater than their nearest competition in the PRC. Data from Q3 2021 shows that both Intel and TSMC achieved profit margins over 30 percent greater than Semiconductor Manufacturing International Corporation (SMIC). Texas Instruments, an integrated device manufacturer (IDM) which primarily serves industrial and automotive customers, maintains a higher return on assets ratio and profit margin than TSMC, Intel, GlobalFoundries, SMIC or Hua Hong.25 Data from leading PRC firms SMIC and Hua Hong Semiconductor reveals that both companies struggle to generate profits and use their subsidized assets efficiently. While they are more profitable and efficient than GlobalFoundries, they lag significantly behind Texas Instruments which focuses its efforts on similar products.

New fabrication facility projects in the United States recently announced by TSMC, Intel, and Samsung all focus on leading-edge technologies that the PRC cannot currently produce. Private sector investment in the United States does not appear to compete with the PRC’s investments in trailing-edge chips, with only $1 of every $6 being invested into the semiconductor industry being aligned to legacy chipmaking.26 Concerns about rational capacity and long-term sustainability reportedly dampen private sector willingness to invest in production of legacy semiconductors.27 See Figure 3 on recent efforts (2021) to incentivize high-end semiconductor manufacturing by other countries (endnotes for data sources on South Korea28, 29, Japan30, and E.U. 31, 32, 33, 34).

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Figure 3

2021Efforts Global Efforts tosemiconductor Incentivize 2021 to incentivize manufacturing byManufacturing other countries Semiconductor Japan

$6.8 Billion

Country Snapshots

National Budget Includes: •$5.3 billion for domestic investment in cutting-edge chip manufacturing •$406 million for legacy analog and power management chips •$952 Million for R&D of next-gen silicon

South Korea $450 Billion

E.U.

Proposal by President Moon to offer: •Tax deductions for up to 50% of R&D •Water and power supply guarantees •$800 million in low interest facility investment loans •Subsidies training and education for 36,000 chip experts •Contributes $1.25 billion to R&D

$52 Billion

Proposal to match U.S. investment: •Aims to acquire 20% of semiconductor market share by 2030.

•€6 billion pledged by France •€3 billion pledged by Germany •€ 500 million pledged by Romania •Planned legislation for Q2 of 2022

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Domestic Industry Landscape The United States was the birthplace of semiconductor devices, and historically dominated the industry. It retains a strong position in research and development, chip design, EDA, and certain manufacturing equipment segments, as well as in logic and analog devices. However, recent decades have seen the United States fall behind in overall semiconductor manufacturing.

In 1990, the United States contributed 37 percent of global semiconductor manufacturing capacity, as compared to only 12 percent in 2020.35 U.S. firms are global leaders in chip design. Major players in chip design include firms that conduct manufacturing in-house (IDMs), those that outsource their manufacturing to thirdparties (fabless), and others that utilize a combination of manufacturing methods (fab-lite). The largest semiconductor firm in the world by revenue is Intel, an IDM. Other large firms include Nvidia, AMD, Broadcom, Qualcomm, Texas Instruments, and Micron. See Figure (X) below for a breakdown of the largest semiconductor firms by revenue.

GlobalFoundries is the only pure-play foundry (fabricating semiconductors for clients) in the United States, and is itself the product of AMD spinning off its manufacturing arm in 2008. Intel, Texas Instruments, Micron, and GlobalFoundries manufacture semiconductors domestically and abroad (primarily in Asia) at different feature sizes. While most firms historically manufactured chips in-house as IDMs, recent decades have seen many firms spinning off their manufacturing arms – in response to growing costs and difficulties with smaller feature sizes – to focus on chip design. Intel remains the last major American IDM, and given its challenges in recent years in the face of competition from TSMC, Intel has faced increasing pressure to reevaluate its business model. Rivals Nvidia, Broadcom, and Qualcomm have overtaken Intel in market capitalization, and others like AMD are not far behind.

EDA companies Synopsys, Cadence, and Mentor Graphics (the last of these operating as a division of German firm Siemens since 2017) account for 85 percent of EDA software tools.36 Likewise, U.S. firms are pivotal for certain categories of manufacturing equipment in deposition tools, dry/wet etch and cleaning, doping equipment, process control, and testers.37 Major players in the manufacturing equipment segment include Applied Materials, Lam Research, KLA Corporation, and Teradyne.

See Figure 4 for an overview of the largest U.S. semiconductor firms broken down by segment and business model (note source for data is latest annual revenue publicly available on Yahoo Finance).

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Figure 4

U.S. Semiconductor Companies by Revenue

Intel $77.9B

Applied Materials $23.10

Qualcomm $33.6B

Broadcom $25.70B

Synopsys $4.2B

GlobalFoundries $4.9B

LAM Research $14.6B Cadence $6.9B

Teradyne $3.1B

AMD $9.8B

IDM Fabless Design

Tool Maker Pure Play Foundry

Mentor Graphics $1.3B

Nvidia $16.7B

Texas Instruments $14.5B

Micron $27.7B

KLA Corporation $6.9B

EDA Software Developer

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Collaboration and Government Support The U.S. semiconductor industry’s history features multiple instances of collaborative efforts, some focused more on research and development while others worked to advance collective interests through policy. The cases considered here have predominantly featured, and been driven by, private industry. However, in some cases the federal government took an active role in encouraging collaboration.

The first major collaborative effort in the semiconductor industry began in the late 1970s, when, in response to growing Japanese competition, major American businesses together formed the Semiconductor Industry Association (SIA).38 SIA continues to operate as a trade association representing the interests of private businesses across different sectors of the industry and supply chain, and maintains some involvement from international players as well.39 In 1982, SIA created the first major organization aimed at collaborative research in the semiconductor industry in the form of the Semiconductor Research Corporation (SRC).40 Membership in the SRC includes private businesses as well as government agencies and universities. Since its creation, the SRC has funded more than $2 billion in research, nurtured a talent pool, and helped secure patents for its member companies.41 In 1987, private businesses partnered with the U.S. federal government to create a public-private research consortium known as SEMATECH.42 Through the National Defense Authorization Act (NDAA) for Fiscal Years 1988 and 1989, Congress authorized the Secretary of Defense to provide $100 million in annual grants to SEMATECH, with another $100 million annually contributed by private industry.43 Private industry led the organization and its research and development program, while the Department of Defense (DOD) Defense Advanced Research Projects Agency (DARPA) participated in its board meetings in a monitoring capacity. Firms contributed technical staff to serve on rotations from six to 30 months. The goal of SEMATECH was to benefit members with research that would both reduce duplicative efforts and lead to advances and spillovers for the industry without threatening the core business of any firm.44 According to a report from the U.S. Government Accountability Office (GAO), there were many cases where members “found that they were protecting similar trade secrets and experiencing similar problems.”45 Congress established a National Advisory Committee on Semiconductors (NACS) to devise and promulgate a national semiconductor strategy through the National Advisory Committee on Semiconductor Research and Development Act of 1987.46 Membership consisted of 13 cabinet members and agency heads, including the Secretary of Commerce and private industry representatives. The NACS operated for just three years, resulting in recommendations for a national strategy and additional funding for research and development.

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Recent years, however, have seen a “fracturing of the pre-competitive collaborative research structure” just as the industry is facing mounting technological challenges and higher research and development expenditures, according to Hassan N. Khan, David A. Hounshell, and Erica R. H. Fuchs of Carnegie Mellon University.47 As they note, full membership in the SRC has fallen, and SEMATECH saw federal funding end in the mid-1990s and then cease to exist as an independent organization. Industry players turned away from an earlier model of multiple consortia on extreme ultraviolet (EUV) technology towards concentrated research and development efforts and equity ownership in EUV supplier ASML. According to Khan et al., the pattern of collaboration seen at organizations such as SRC has shifted toward a “customer-client model” where firms target their funds toward particular projects.48 SEMATECH and SIA have ceased to support the development and publication of the International Technology Roadmap for Semiconductors (ITRS), a critical report projecting future technological advancements that historically guided research and investment decisions across industry, contributing to the defragmentation of the pre-competitive research ecosystem that Khan et al. cite as arising due to “worsening economics of leading-edge semiconductor production, industry consolidation and shifts in the industry’s end-markets.”49

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Recommendation 1 Research and development projects should be implemented in a way that is focused on basic research that maximizes spillovers encourages complementary private investment.

Summary: Our review of reports and analyses on the state of the semiconductor supply shortage finds near-universal agreement on the need to fund research and development. However, public funds used to subsidize private research and development should stimulate complementary investment from the private sector and generate new technologies and production processes.

Another important consideration when using public funds is how to incentivize industrial research and development without crowding-out private investment.

1.1 Focus on Incentives for New Research In implementing the CHIPS Act, the DOC should seek to maximize comparative advantages of the U.S. semiconductor industry, including in producing logic and analog devices as well as in chip design. While supporting efforts to maintain U.S. leadership in those subsegments of the industry, it is also essential that the DOC encourage research into new and emerging technologies and processes. The DOC and the federal government as a whole should pursue groundbreaking, disruptive projects that could fundamentally alter the industry as a whole. For example, given the increasing salience of problematic scaling limits such as Moore’s Law, the DOC could look to support research in Beyond CMOS (complementary metaloxide-semiconductor) technologies that disrupt current paradigms of chip design and production processes. Other areas of focus could include advanced packaging, electronic design automation (EDA), Group III-V semiconductors, and analog and mixed signal devices.50 1.2 Matching Funds for Investment Investment in research and development is critical for the semiconductor industry given its high capital costs, increasingly complex technology and processes, and the need for constant advances to the technological frontier. In supporting the research and development activities as outlined by the CHIPS Act, the DOC should aim to not absorb the financial costs of private research activity, but to spur new research and development entirely, looking at areas that include not just commercial viability but also the promise to disrupt current paradigms. The DOC should consider making the awarding of grants to private sector entities for research and development contingent on complementary investments by the private sector into research and development.

Without such restrictions, federal contributions may crowd-out private investments into research and development that might have occurred in the absence of the federal funding. Requiring matching contributions from firms for federal subsidies encourages the private sector to commit to research and development apart from government efforts.51 The goal of providing federal funding for such efforts should be to generate greater investment in research and development, not to offset private investment.

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1.3 Increasing Spillover Effects Research and development projects commenced as a result of the CHIPS Act should focus on basic research that maximizes the research spillover effect. The benefit of prioritizing areas with higher promise for spillover effects is that it potentially minimizes the cost of less successful projects. Naturally, many research projects fail to result in scientific breakthroughs or market-ready technologies. However, economic analysis shows that investing in basic research over applied research is more likely to produce positive knowledge spillover effects.52 One way to measure the extent of spillovers produced by a project would be to count the number of patents created that are tied to the research, or, alternatively, at the amount of activity and researchers attracted to the field.53 The point of research and development may not necessarily be to lead to changes in the short-term, but could nevertheless lead to lessons learned that pave the way for success at a later date or in a different field.

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Recommendation 2 The National Semiconductor Technology Center should support precompetitive research collaboration with diverse stakeholders from the semiconductor industry that results in the commercialization of new ideas.

Summary: The CHIPS Act calls for the Secretary of Commerce to establish the National Semiconductor Technology Center (NSTC) in collaboration with the Secretary of Defense. In this leadership role, the DOC should focus its efforts on pre-competitive research collaboration, the commercialization of new ideas, and enabling collaboration and partnerships among government, industry, and academia.

The NSTC will be a public-private consortium with participation from the private sector, the Department of Energy (DOE), and the National Science Foundation (NSF). Its primary functions will be to: (1) conduct research and development; (2) invest in startups and collaborations for commercialization; and (3) support workforce development and human capital. The NSTC will also assist in carrying-out the National Advanced Packaging Manufacturing Program. The United States Innovation and Competition Act of 2021 (USICA), which the Senate passed on June 8, 2021, would allocate $2 billion to fund the NSTC for fiscal year 2022, with smaller amounts provided through fiscal year 2026. Through proper institutional design, engagement of industry and academia, and consistent long-term support, a well-organized and well-equipped NSTC can help improve coordination of resources and expertise to solve major challenges.

2.1 Support Pre-Competitive Research Collaboration Opportunities for pre-competitive research collaboration are more limited and fragmented than in previous decades.54 Heightened foreign competition, technical challenges stemming from the physical limits of existing technologies, and industrial consolidation reinforce the need for federal encouragement of and participation in more collaborative efforts. The NSTC benefits from the unique scale and access made possible by its diverse membership across government, industry, and academia and their combined resources and expertise. Pre-competitive research collaboration should be a major feature of the NSTC, given its potential to build foundations for new innovations without threatening the integrity or core business interests of any participating entity. It should focus on addressing fundamental problems that the industry as a whole has an interest in solving, such as the limits of technological scaling processes (e.g., Moore’s Law), and the creation of entirely new technologies, including Beyond CMOS devices.

2.2 Provide Access to Facilities, Infrastructure, and Resources The DOC should enable participation from small firms and startups by providing access to facilities for organizations participating in the NTSC and other research and development

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activities. Coupled with a reduction in collaborative research is a gap in support for new innovations between the basic research stage and the commercialization process which brings ideas to the market.55 The DOC should ensure that the NSTC is able to access a broad network of facilities, infrastructure, and other resources that can be used for its goal of research, prototyping, and helping to bring innovations to the market.56 Given the high capital intensity in certain parts of the semiconductor production process, the benefit of this service would be to give smaller, less-connected players access to capital they would not have otherwise.

Given budgetary costs and time necessary to build or acquire facilities, the NSTC should consider alternative measures for securing facilities for NSTC participants. One option would be for DOC to review its authorities and relationships with other agencies at the federal, state, and local levels to identify any potential public properties that could be utilized by the NSTC and its membership. Coordination with the General Services Administration (GSA) and the Public Buildings Reform Board would assist in identifying excess federal government facilities that may be appropriate for use by the NSTC. The DOC should also coordinate with private sector NSTC participants who could provide facilities for activities that are aligned with the aims set out by the CHIPS Act for the NSTC and do not threaten the core business or integrity of any entity. Partner entities could contract out their facilities, infrastructure, and other resources.

The DOC may also benefit from seeking additional authorizations that enable the use of excess government facilities for private-sector use, such as Enhanced Use Lease (EUL) authorizations currently granted to NASA and DOD. These EUL agreements allow federal agencies to lease underutilized real estate, including land, buildings, and other structures, to other entities, with the federal agency retaining and using the proceeds derived from the leasing agreement.57 2.3 Leverage the Investment Fund The last major component of the NSTC, the investment fund, should serve as another major source of government funding in the semiconductor space. This funding should aim to support basic research in areas typically neglected by industry, as well as supporting the research of early-stage and start-up companies that may not have sufficient access to capital. Through a portfolio approach to public investments, the NSTC and government managers should embrace different, parallel, or competing ideas and opportunities as they arise, rather than concentrating bets in one particular area of the industry.58 In addition to monetary investments, the NSTC could also provide in-kind support to its members that might come in the form of engineering and technical assistance, wafer starts, facility access, and connections with business partners and customers.59 2.4 Maximize Participation from the Entire Semiconductor Industry An important consideration will be who to invite for participation in the NSTC. The NSTC should include not just manufacturers but also firms engaged in other parts of the value

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chain, such as design, assembly, packaging, testing, electronic design automation (EDA), lithography, equipment, and materials. Even beyond the value chain, membership of the NSTC could include automakers and end users of semiconductor products such as medical devices, high-end electronic device makers, or smartphone makers. While the NSTC will naturally include leading companies, it should also include start-ups and smaller, non-traditional businesses that are operating in areas other than leading-edge technologies. Participation from certain foreign businesses could also be helpful, particularly in light of their advantages in certain areas of the supply chain, provided that they do not receive public funding. Universities and other academic institutions should be encouraged to participate in the NTSC, as well as individual researchers.

The DOC could look to earlier examples such as SEMATECH, in determining what membership or participation in the NSTC might entail. SEMATECH, for instance, drew approximately half of its funding from its private members, who agreed to contribute in proportion to their revenues.

If there are any private sector contributions towards the budget or operations of the NSTC, the DOC should seek a structure that enables the participation of smaller firms with less resources while still limiting free-riders. In its assessment of SEMATECH, the GAO suggested different tiers of membership or participation for firms to contribute and engage as much as they desire.60 2.5 Structure Research Initiatives The NSTC may benefit from structuring its research initiatives in a manner aligned with the DOD Defense Advanced Research Projects Agency (DARPA) and the National Aeronautics and Space Administration’s (NASA) Commercial Crew Program, among others. In both cases, innovative project management led to successful public-private partnerships in advanced research. The NSTC is uniquely positioned to take novel approaches to advanced research and development in the semiconductor industry, and it should leverage its broad statutory directives to pursue effective and innovative research activities. Of course, both DARPA and NASA benefit from flexible acquisition and personnel authorities in pursuing their research activities beyond those currently available to the NSTC. Seeking similar authorities for the NSTC would enable it to efficiently establish the NSTC and satisfy its personnel requirements. However, the NSTC may still apply lessons learned from those programs to its own research efforts while adhering to its current statutory and regulatory requirements.

In carrying out its research objectives, the NSTC could employ a horizontal program structure similar to the one used by DARPA. The “DARPA Model” has a successful record of funding competitive research projects that result in mature technology development.61 In particular, DARPA is known for empowering program managers and providing relative autonomy as they pursue high-risk, high-reward research and development. Program managers are typically hired for a limited tenure, with high turnover rates, which is believed to result in the hiring of impassioned and driven managers who seek to quickly complete their programs.

Currently authorized for only five years, the NSTC must foster a research environment focused on quickly developing advanced technologies and prototypes and accepting risk while mitigating bureaucratic impediments.

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NASA’s Other Transaction Authority (OTA, also known as Space Act Agreements) similarly allows for innovative private-public partnerships. In carrying out the Commercial Crew Program, NASA reviewed private sector designs and technical specifications for human spaceflight capabilities to low-Earth orbit, and selected multiple corporations to develop their designs through Space Act Agreements.62 As the designs were developed, NASA determined safety and mission requirements for each design to meet, and provided continuous technical guidance throughout the development phase. The private companies own and operate their own spacecraft and infrastructure, with NASA a consumer of the resulting services. By contracting with multiple private partners engaged in a competitive research directive, the Commercial Crew Program reduced the risk of programmatic failure and enabled a competitive process. A similar contracting agreement may assist in developing next-generation semiconductor manufacturing equipment and capabilities, such as advanced lithography systems.

NSTC

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sine s s 24

vate Indus t r y P ri

Academia

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Lessons from the Netherlands In the early 1980s, Philips was skeptical of pursuing microelectronic research because it considered it risky.63 After years of discussion, it agreed to collaborate with a little-known company, ASM International, on lithography machines. By September 1983, the two companies established a joint venture and named it ASM Lithography (ASML).64 ASML started in a few wooden huts near Eindhoven, Netherlands, and eventually built a nearby headquarters. Seeded by government funds and assisted by research facilities from the Technical University of Eindhoven, the company set its sights on being a competitive manufacturer of lithography machines. ASML, as a small company with no more than 30 employees, faced many challenges prior to reaching its goal. The company’s founder Arthur Del Prado, a Harvard Business School drop-out, did not have any scientific or engineering background.65 The company overcame the obstacles, and today reigns supreme as the world’s sole supplier of advanced lithography machines for semiconductor manufacturing.

During ASML’s early days, the European Economic Council (EEC), under the leadership of Étienne Davignon, sought to improve the competitiveness of the microelectronic industry within the EEC member states.66 The EEC decided to subsidize pre-competitive research in support of the European microelectronics industry. Dubbed the ‘Microelectronics Program’, the EEC covered the equivalent of $70 million at the time. Subsidies were doled to industrial players to cover half of the estimated costs. Through its collaboration with Philips, ASML acquired significant research funds. In the second half of the 1980s, ASML’s business strategy of risky innovations undermined its performance, as few assets leveraged it.67 The company continued to rely on government and EEC subsidies to sustain its lithography research despite revenue losses. ASML moved away from becoming its own equipment supplier, and instead focused on the research needed to develop a lithography machine that could push the limits of Moore’s Law. In the mid-1990s, the engineers at ASML began to realize that packing more transistor nodes onto semiconductors required a thinner and more precise dry-etch process. Research for EUV lithography was ongoing, but was considered a costly pursuit. Despite worries about the high cost, the company decided to pursue the technology fully. 68ASML wanted to make its products indispensable, and chose to do so by raising the quality and, as a result, the barrier of entry for advanced lithography machines. EUV lithography research ran millions of dollars over budget and was several years behind schedule. Despite those issues, ASML succeeded in improving the accuracy of lithography, integrating new materials, and innovating fabrication techniques. The risk paid off, as ASML’s machines currently enable the construction of the tiniest transistors, lowering cost per transistor, and subsequently progressing Moore’s Law.

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Recommendation 3 The U.S. should invest in domestic STEM education, streamline workforce programs, and implement immigration reforms to attract and retain global STEM talent.

Summary: As the United States expands its domestic semiconductor manufacturing capacity, ensuring a ready supply of talent is a crucial link for meeting the industry’s needs. In a recent survey, American semiconductor companies identified workforce investments and immigration reforms as the “number one policy change that would help the industry in the near term.”69 However, an unstable environment for high-skilled immigration, coupled with declining domestic investment and interest in Science, Tech, Engineering, and Math (STEM) education, have crippled the U.S. talent pipeline. In contrast, countries like China have been steadily laying the groundwork for a generational advantage in artificial intelligence (AI), semiconductor manufacturing, and other advanced technologies through innovation-driven development strategies that are centered around talent.70 Without a clearly defined education and workforce policy, the long-term competitive advantage of the United States risks being eclipsed. The United States should expand its human capital pipeline by investing in more domestic STEM education programs that align with national goals and semiconductor industry needs, promote workforce development efforts between federal, state, and local authorities, and implement immigration reforms that build a deep bench of global STEM talent.

3.1 Invest in Domestic STEM Education The U.S. education system is poorly aligned with the needs of the semiconductor industry, with a declining proportion of American students at all levels of education possessing the prerequisite STEM skills for success in the workforce.71 In order to build the next generation of talent in the semiconductor industry, the United States needs a long-term plan to attract young students at the K-12 level in STEM subjects and maintain their interest through the higher education system. In the short-term, the United States should also increase the supply of graduate, certificate, and industrial training programs in semiconductor manufacturing at fouryear universities and community colleges.

We recommend that the DOC work with the Department of Education (DoEd), NSF, and the White House Office of Science and Technology Policy (OSTP) on the following domestic STEM education initiatives.

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3.1.1 Integrate STEM Education into K-12 Curricula Without an emphasis on STEM in K-12 education, the U.S. is unlikely to foster the longterm pipeline of U.S. students required for a vibrant semiconductor ecosystem. Studies have shown that if students are not interested in STEM by middle school, they are much less likely to choose a STEM education path and career.72 Given that the majority of funding for K-12 education currently comes from state and local budgets, the federal government could consider supplementing STEM education funding at the K-12 level for states that incorporate hands-on classroom experiences with semiconductors.

It could deploy funds through the Department of Education’s Innovation and Modernization Grant Program, as part of the amended Strengthening Career and Technical Education for the 21st Century Act (known as Perkins V). The program identifies and supports activities that improve career and technical education, effectively aligning workforce skills with labor market needs.73 P-TECH, a new model of public education, is one example of a Perkins-funded program that helps bridge the gap between classroom education and workforce needs. Initially started as a partnership between IBM, the New York City school system, and City Tech, P-TECH schools work with companies in high-growth industries to develop industry-relevant curricula and work experiences for students who then graduate with a high school diploma and Associate’s degree at no cost to the student.74 After graduation, students are often guaranteed entry-level jobs in competitive STEM fields at partner firms, or choose to continue their education at a four-year university for further study.

Funding for P-TECH schools comes primarily from local school districts, which is distributed through the Perkins Act. While the P-TECH model is growing in popularity, with 266 schools in 12 states around the country, participation is limited to students who are admitted via lottery. Expenses are high, with additional staff needed to coordinate workplace learning, internships, and lab equipment related to a chosen career area.75 More models like P-TECH’s that integrate career and technical education into K-12 schooling and feed into Associate’s degrees should be encouraged. In order to increase enrollment capacity, CHIPS Act funds could supplement existing DOE Perkins V funds to school grant recipients who integrate classroom semiconductor activities, visits to fabrication facilities, and mentorship programs. The prospect of a guaranteed job at a semiconductor firm after graduation may further incentivize student interest in P-TECH comparable programs, which typically targets students from historically underserved backgrounds.76

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3.1.2 Increase access to graduate and certificate semiconductor manufacturing programs by investing in VR technology to scale the lab experience While investments in K-12 STEM education are crucial, the benefits of those investments would not be realized for at least a decade. The CHIPS Act appropriately calls for the Secretary of Labor, Director of the NSF, Secretary of Energy, the private sector, institutions of higher education, and workforce training entities to “develop incentives to expand domestic participation in graduate and undergraduate programs in advanced microelectronic design, research, fabrication, and packaging capabilities.”77 One obstacle to expanded student enrollment is the relatively limited access provided to labs with cutting-edge equipment. These labs are crucial for handson education regarding semiconductor manufacturing and nanofabrication processes that can be difficult to replicate. While these laboratories are available to partner companies and some students outside of universities, it is generally difficult to gain access without direct affiliation to a university with a well-funded engineering program. These laboratories are also expensive to maintain and typically afforded to only the most established universities through public and private-sector grants.

A possible solution involves investing in technology that enables rapid scaling of the lab experience. Dr. Terry Alford, a materials science professor at Arizona State University (ASU)’s Fulton engineering school, is encouraged by the prospect of Virtual Reality (VR) and Augmented Reality (AR) platforms to expand access, especially for the growing number of remote students enrolled in the Certificate in Semiconductor Processing that he helped start (see sidebar).

He says that students, both in-person and remote, would benefit greatly from VR and AR simulations because they allow students to make otherwise costly mistakes in a safe and controlled learning environment. It would bring significant cost savings for universities and companies who can’t build or secure access to expensive, state of the art facilities and equipment.

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ASU Certificate Program As more semiconductor companies expand their manufacturing capacity with new fabrication facilities in Arizona, ASU developed a Certificate in Semiconductor Processing that could serve as a model for other universities looking to provide practical training options to students with an engineering or physical sciences background. To date, there are only a handful of programs (outside of select classes in engineeridegree programs) that offer a dedicated certificate program specific to semiconductor manufacturing. Unsurprisingly, these postsecondary institutions tend to be located in regions with semiconductor talent clusters, such as Oregon (Portland State University), or Upstate New York (Hudson Valley Community College).

In Fall 2020, ASU launched a graduate-level Certificate in Semiconductor Processing that consists of 15 credits and provides professional training in multiple aspects of the chip production process.78 The program consists of three core courses: ● Advanced Silicon Processing, an electrical engineering course ● Design Engineering Experiments, an industrial engineering course, and ● Advanced Materials Characterization, a materials science and engineering course.

The certificate is open to current Fulton School engineering graduate students at ASU, as well as undergraduates participating in the accelerated 4+1 combined bachelor’s and master’s degree program. But the program is also designed for technology industry professionals who are considering a return to school to upgrade their skills. Dr. Alford, an ASU professor of materials science who started the certificate program, says he drew on direct connections from his former professional experience at IBM, Texas Instruments, and other semiconductor firms, and former PhD advisees to design the curriculum. While the certificate program is not meant to make students “experts” in photolithography or semiconductor manufacturing, Dr. Alford says its core advantage lies in its close ties to industry. With an ear to the ground on changing needs and priorities, the program can quickly tailor its classes to prepare students for the realities they will face in the workplace.

Another notable element of the program is its accessibility, since the course is offered both in-person and online. For students who are able to make it to campus, cutting-edge laboratory equipment and other tangible elements of the semiconductor fabrication process provide concrete ways to gain hands-on experience through ASU’s comprehensive suite of facilities.

However, Dr. Alford says that remote students are still able to hit the ground running upon graduating with a basic understanding of the semiconductor manufacturing process.

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3.1.3 Launch a national information campaign to increase social awareness of the semiconductor industry On average, there are more than 4,000 open technical positions in U.S. semiconductor firms at any given time, according to a 2018 Semiconductor Industry Association survey among its charter members.79 Many of these positions remain open for months. While this could be partially due to a lack of qualified applicants, another significant factor may be low awareness or interest in semiconductor-related jobs among target populations of graduate students in engineering and computer science. Many of these same graduates are recruited to work in lucrative positions at finance or other technology companies, without knowing how dependent those industries are on semiconductors..

An information campaign about the history of the semiconductor, its evolution, and the possibilities for next generation innovation as we near the end of Moore’s Law could attract talent to the sector. The campaign could profile leaders in the industry and distribute the campaign through the traditional media (TV, radio, print, YouTube, Facebook, Twitter) as well as emerging platforms such as the Metaverse, Discord, TikTok or Twitch. Perhaps the federal government could even offer income tax credits or student loan forgiveness to engineers who decide to work at a government-sponsored semiconductor research consortium. Whatever form it takes, the campaign should be an interagency effort that is potentially woven into the OSTP’s overall strategy to bolster interest in STEM. 3.2 Streamline Federal, State, and Local Workforce Development Programs A common issue cited by industry leaders is that new recruits often lack the skills to “hit the ground running.”80 Workforce development programs would benefit from becoming more closely integrated with industry to better align technical development and workforce readiness skills. The Manufacturing USA Institute authorized under the CHIPS Act is tasked with “developing and deploying educational and skills training curricula needed to support the industry sector and ensure the United States can build and maintain a trusted and predictable talent pipeline.”81 We recommend that NIST engage with relevant stakeholders in the public and private sectors, as well as academia, to ensure that the resulting curricula contributes to a consistent workforce pipeline that is prepared to quickly transition into the workforce.

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3.2.1 Expand the Industry-Recognized Apprenticeship model to establish more vocational training programs that align workforce development with semiconductor industry needs Vocational training programs are promising avenues to deploy curriculum for re-skilling at scale. The Industry-Recognized Apprenticeship Program (IRAP) model that adheres to Department of Labor (DOL) standards, as put forth by the federal Task Force on Apprenticeship Expansion, could be applied, in coordination with domestic semiconductor firms, to ensure the Manufacturing USA curriculum is aligned with today’s rapidly changing manufacturing landscape.82 While the semiconductor industry generally attracts workers with advanced degrees, certain technician roles that do not require a college degree are in high demand. A dedicated workforce strategy that recruits and trains for these roles, particularly in regions with semiconductor talent clusters, should be prepared by local workforce agencies, community colleges, and relevant federal agencies such as the DOC, DOL, and NIST. Notably, these jobs provide an entryway to the middle class.83 Federal funding from the DOL’s IRAP program or the Manufacturing USA Institute, as stipulated in the CHIPS Act, could offer matching grants to state or local workforce or economic development agencies that propose to host these training efforts for the semiconductor industry.84 For example, the Arizona Advanced Manufacturing Institute (AzAMI) offers vocational training in manufacturing with classes in electronics, drafting, automation and machining, and welding.

This includes “short-term certification Boot Camps for skilled technicians with pre-assessed competencies to help them obtain the recognized industry credentials required in specific technical areas,” with the option to transfer many of these degrees to bachelor’s degree programs.85 Industry partnerships are mutually beneficial; vocational training program participants learn from practicing engineers who serve as professional mentors to students, and firms receive access to a talent pool that is more familiar with industry-relevant skills that are transferable to a real-world setting. The NSTC could be used as a potential work site for young students to gain experience through internships or apprenticeships.86 In coordination with the DOE and other relevant government actors (e.g., NIST, NSF, DOD, etc.), this program would support and develop skills in areas that align with both student’s professional advancement and the country’s national goals.

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3.3 Retain and Recruit International Talent The U.S. semiconductor industry’s labor needs are too large to be met by domestic talent alone. A 2020 CSET’s analysis of high-skilled occupations identified approximately 220,000 highly-skilled technical workers in the “electronic components and products” industry, which includes most of the semiconductor industry as well as adjacent industries. Of these workers, about 41 percent are either non-citizens or naturalized citizens born outside the U.S.87 This is comparable to the semiconductor industry, where approximately 40 percent of workers in the U.S. are foreign-born.88 A natural entry point for most foreign talent into the domestic semiconductor workforce is through the U.S. American university system. American universities are consistently ranked among the best in the world for the five most important academic disciplines feeding into the semiconductor industry. As seen in Figure 5 (right), more than half of the top 10 programs in semiconductor-relevant fields are located in the U.S.89 Yet current U.S. highly-skilled immigration policy discourages the retention of electrical engineers and computer scientists, positions that semiconductor firms rely heavily on.

In addition, policies promulgated in response to the COVID-19 pandemic placed significant barriers on international students, with international travel restrictions and routine visa processing suspended in U.S. embassies and consulates worldwide. The uncertain status of the popular Optional Practical Training Program (OPT), which allows international students studying STEM fields to work for up to three years in the U.S. after graduation, has also created uncertainty ever since the Trump administration threatened to curtail it during the pandemic.

OPT is an essential student-to-worker pathway that is necessary to retain promising international STEM graduates at American firms. Intel has said that without OPT, it would “only be able to hire 30% of the highly skilled graduates they currently hire.”90 Codifying the OPT program would reduce uncertainty and protect it from political and legal challenges. While overall international student enrollment numbers have since stabilized after a sharp decline in 2020 (-15 percent), the most recent U.S. State Department Open Doors Report shows that the number of international students staying in the U.S. on OPT decreased by 10 percent in Fall 2021.91 If these trends continue, OPT’s shaky status may affect the willingness of international students to stay in the U.S.

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Figure 5

Figure 5

Source: The Chipmakers: U.S. Strengths and Priorities for the High-End Semiconductor Workforce (September 2020 CSET Report)

According to research by the National Foundation for American Policy, international students make up significant majorities in these graduate programs at U.S. universities, for instance, 81 percent of electrical engineering degrees and 79 percent computer science degrees.92

As global competition for technological and scientific leadership accelerates, U.S. immigration policy should enable talented scientists, engineers, and academics abroad to come to the U.S., and offer them permanent residency or even citizenship. The task of scouting could be assigned to a new unit housed within the State Department, or even the OSTP, rather than the Department of Homeland Security which is the usual agency responsible for processing visa applications. The unit would be tasked with identifying and recruiting foreign talent with skills that are aligned with U.S. national interests.

The government of the United Kingdom created a similar program, known as Tech Nation, that is run by a private entity to sponsor Global Talent visas for promising founders and employees with technical or business backgrounds, and help them get established in the country.

The Global Talent visa is valid for up to five years and after the initial period, individuals can apply for an extension or permanent settlement in the UK.93 This also opens an opportunity for civil society organizations to help vet, identify, and support promising candidates. The Institute for Advanced Study (IAS) at Princeton played this role for the U.S. in the lead-up to World War II by recruiting academics persecuted by the Nazis who were dismissed from university posts and helped them find positions and settle in the U.S. Many of these scientists, including Albert Einstein, ended up contributing to the Manhattan Project.94 Centers like the IAS and other nongovernmental institutions could be activated again with an allocated number of visas to distribute to promising talent around the world. Inevitably, attracting international scientists will lead to increased exchange between them and their home country. The unit should, therefore, closely coordinate with the Bureau of Industry and Security and the Department of Defense to determine clear guidelines that balance appropriate knowledge sharing with national security concerns.

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Lessons from Arizona Building the Arizona Ecosystem: Workforce, Infrastructure, and State Support As the United States seeks to become more self-sufficient in its semiconductor needs, Arizona is emerging as a regional model for growth and success. Our team had the opportunity to visit Phoenix, Arizona, in October 2021 to interview key individuals involved with bolstering the semiconductor industry in the region. These included leaders at ASU’s Electrical Engineering and Business School, the Greater Phoenix Economic Council, the Arizona Commerce Authority, and the Arizona Technology Council. The key elements contributing to Arizona’s vibrant semiconductor ecosystem are a skilled workforce pipeline, state and local government support, and a robust infrastructure to support the industry.

Arizona’s position as a semiconductor hub started in 1949 when Motorola opened a research and development facility in Phoenix, followed by Intel establishing a facility in 1979.

Since then, semiconductors have become Arizona’s second largest export, totaling $3.5 billion in revenue. Semiconductor manufacturing employs over 22,000 people in Arizona alone, making it fourth in the country behind California, Texas, and Oregon for semiconductor jobs.95 More recently, Intel announced the construction of two additional fabrication facilities at its campus in Chandler that will bring 3,000 new jobs to the area by 2024. Taiwan Semiconductor Manufacturing Company (TSMC) has also started construction on a fabrication facility north of Phoenix that will create up to 1,900 new jobs when it opens – the same year as Intel’s new facilities.

Workforce A primary attraction of the Phoenix area for semiconductor firms is the pipeline of available technical talent. Phoenix is surrounded by educational institutions like Arizona State University (ASU), Mesa Community College, Chandler Gilbert Community College, and dozens of other educational facilities. Arizona offers a wide array of degree programs aligned with industry needs. ASU also boasts the largest engineering school in the country, the Ira A. Fulton School.

As of Fall 2021, nearly 27,000 students were enrolled across its 24 departments.96 Notably, its five most popular programs for undergraduate and graduate students - computer science, electrical engineering, information technology, mechanical engineering, and software engineering - are closely aligned with the areas of study most critical to growth of the semiconductor industry.

Rick Cassidy, CEO of TSMC Arizona, has said that this robust engineering pipeline is one of the key factors that led the company to establishing a presence in Arizona, with plans to build five more in the coming years.97

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ASU’s strong connections to semiconductor firms, both locally and outside of the state, allow it to provide relevant internship and training opportunities that prepare students for the industry’s challenges before graduation. Partnerships such as ASU’s collaboration with ON Semiconductor, a Phoenix-based company, provide funding for selected faculty members to work with graduate students, translating their university research discoveries into immediate application with a company. This partnership is just one example of many learning opportunities for students to hit the ground running once they start working at a semiconductor firm.98 Drawing from these industry connections, ASU also recently added a School of Manufacturing Systems and Networks and a Certificate in Semiconductor Processing within its engineering school (see Recommendation 2). Dr. Terry Alford, a materials science professor who organized the certificate program with two ASU colleagues, drew on direct connections from his professional experience within the semiconductor industry to create the curriculum.

Outside of ASU, community colleges are also plugged into the semiconductor ecosystem. Mesa Community College, for instance, created a boot camp for semiconductor manufacturing that will launch in March 2022, to fill the demand for technician roles at Intel’s fabrication facilities.

State / Local Government Support In addition to ASU, state and local government support has been instrumental in building Arizona as a semiconductor hub. The Greater Phoenix Economic Council (GPEC), the Arizona Tech Council, Phoenix City Council, Chandler Chamber of Commerce, among other local and state entities have made significant investments in the surrounding infrastructure. The municipal government of Phoenix has committed $205 million to improve public infrastructure for TSMC: ● $61 million for projects to build streets and sidewalks, put up streetlights and perform landscaping. ● $37 million to upgrade the city’s water infrastructure ● $107 million for the sewer and wastewater treatment system.99 TSMC Chairman Mark Liu also told reporters last year that his company requested subsidies and support from state and federal government to cover the higher costs of constructing and maintaining a fabrication facility in the U.S. as compared to Taiwan. Those incentives, he said, will be the “key factors for why TSMC could agree to build a new American plant.”100 The incentives provided through the Arizona Chamber of Commerce are performance-based, meaning companies only receive cash benefits once they fulfill their commitments. Arizona’s Commerce Authority also actively connects local manufacturers to U.S.-based suppliers through a program called Supplier Scouting - thanks to the NIST Manufacturing Extension partnership highlighting the role of public-private partnerships as a crucial link to economic growth.101

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Infrastructure to Support the Technology Supply Chain Semiconductors are well-integrated into Arizona’s overall economy. There are more than 200 semiconductor manufacturing establishments and the industry employs more than 22,000 people in the state, placing Arizona in the top four in the nation for semiconductor employment.

See Figure 6 (below).

An ecosystem with a clustered network of suppliers, distributors, and transportation is at the heart of this infrastructure. Innovation Zones, established by ASU in partnership with local businesses, allow semiconductor firms to lease state-of-the-art lab space at subsidized rates. They also provide an opportunity for the industry to collaborate with ASU by sponsoring research or class projects, recruiting talent, becoming a potential university vendor, or licensing ASU technology. Currently, there are seven innovation zone locations. Each zone is surrounded by a cluster of high-tech manufacturing and development facilities and has easy access to transportation options like the freeway and light rail.

Figure 6 Source: ASU Thrive Magazine, Fall 2021

Arizona’s Semiconductor Ecosystem By the Numbers

#4

in the country for semiconductor jobs

107+ Semiconductor Businesses Including Intel, Microchip, ONipsum Semi Lorem

Directly employs over 22,000 people

Lorem ipsum

Lorem ipsum

2800+ advanced Lorem ipsum manufacturers

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Supports 138,000 indirectly related jobs

Figure 7 Source: Innovation Zones at ASU (innovationzones.asu.edu) Deer Valley Municipal Airport

West West campus campus

Scottsdale Airport

Key ASU Innovation Zones

High-potential, undeveloped land in the heart of an ASUcampus

Light Rail

ASU West Innovation Zone

Arizona Health Futures Center

Airport

Biomedical discovery hub offering opportunities for premier academic and clinical collaborations

Light rail Interstate

N

Federal Highway State Highway Map not to scale

Phoenix Biomedical Campus

Glendale Municipal Airport

Vibrant community built on a foundation of research, discovery, innovation and entrepreneurial activity

SkySong High-growth community for technology-based companies

Novus Innovation Corridor Downtown Phoenix campus

Prime location for large-scale regional offices or headquarters

Tempe campus

Light Rail

Phoenix Sky Harbor International Airport • 10 minutes from Tempe • Nonstop service to 95 domestic and 22 international destinations

• Among the largest commercial airports in the United States • More than 1,200 aircraft operations, 120,000 passengers and 800 tons of cargo a day

ASU Research Park

ASU Polytechnic Innovation Zone

One of the most sought-after office parks in Greater Phoenix

Ideal for advanced manufacturing, aviation and alternative-energy facilities

10 MILES

Chandler Municipal Airport

Polytechnic Polytechnic campus campus

Phoenix–Mesa Gateway Airport

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Global Semiconductor Manufacturing Share by Type and Country

TAIWAN 20%

DAO 28%

Logic (45+) 22%

Logic (28-45) 9%

Logic (10-22) 8%

JAPAN 17%

SOUTH KOREA (ROK) 19%

PRC 16%

Memory 33%

USA 13%

EU 8%

TWN, 2%

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Recommendation 4 Financial assistance provided through the CHIPS Act should be available to all segments of the semiconductor industry, including manufacturers of legacy chips, and should be conditioned on firms not using the funds to issue dividends or equity buybacks.

4.1 Incentives provided under the CHIPS Act should be directed to all segments of the semiconductor industry, including legacy chip manufacturers TSMC, Samsung, and Intel each announced or began construction on new semiconductor fabrication facilities in the U.S. within the last year, a welcome expansion of domestic advanced manufacturing capacity that ensures domestic access to advanced chips. However, some analysts warn that the current global expansion of high-end chip manufacturing could result in an oversupply of these chips in the coming years.102 While the current semiconductor shortage has captured headlines and brought attention to supply chokepoints in East Asia, it must be noted that the industry as a whole is highly cyclical. The ongoing expansion of supply capacity, coupled with the expected easing of pandemic-related restrictions at production facilities, may coincide with a reduced demand for high-end technology products as lockdowns dissipate and populations shift from working from home.

The PRC’s most advanced logic node it produces is 12 nm, according to a SIA summary of the Chinese semiconductor industry.103 Approximately 95 percent of the PRC’s established fabrication facility capacity produces nodes larger than 28 nm.104 In the U.S., fabrication facilities making logic chips at nodes larger than 10 nm account for over 47 percent of the total domestic chip manufacturing base, while trailing-edge logic chips greater than 28 nm comprise 20 percent.105 As a result, trailing-edge chips are the subsegment most directly threatened by the PRC’s heavily-subsidized industry. Globalfoundries, which focuses exclusively on trailing-edge chips larger than 12 nm, is also the domestic firm most financially vulnerable to competition from PRC firms. In Q3 2021, GlobalFoundries generated a profit margin of 0.29 percent and a return on assets of 0.004 percent.106 However, GlobalFoundries notably benefited from statebacked equity investments and other forms of support from the UAE’s state investment fund for many years.107

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4.2 Firms receiving financial assistance provided under the CHIPS Act should be prohibited from issuing dividends or conducting equity buybacks When reviewing applications for financial assistance authorized under the CHIPS Act, the Secretary of Commerce should consider conditioning assistance provided on an applicant firm’s ability to issue dividends or equity buybacks. The CHIPS Act bars the use of financial assistance for activities other than financing the construction, expansion, or modernization of semiconductor manufacturing facilities or equipment, facility workforce development, related site development or modernization, or for certain operating costs.108 However, financial assistance received through the CHIPS Act could simply offset a covered entity’s pre-planned investment in those activities. In those cases, a firm could use monies previously budgeted for related investments and workforce development to issue dividends, equity buybacks, or other returns to shareholders. The availability of government subsidies risks the creation of a soft budget constraint for semiconductor firms. Firms with a soft budget constraint may be induced to seek additional subsidies rather than increasing efficiency if the cost and effort to obtain subsidies is lower than the costs of increasing efficiency. To discourage the perception of a soft budget constraint, the DOC should seek additional authorization to clawback funds should a firm pay dividends to shareholders or repurchase outstanding stock. Conditioning firms’ ability to resume dividend payments or stock repurchases on meeting production targets would help harmonize private incentives with public goals.

In its latest quarterly report, Texas Instruments stated that it would devote the majority of its free cash flow to dividends and share buybacks totaling $4.2 billion and increase dividends by 13 percent.109 While Intel paused its own share repurchase program in the Q2 2021, it had spent over $50 billion (more than the amount that would be appropriated by USICA for financial assistance authorized by the CHIPS Act) on share buybacks in just seven fiscal years.110 However, Intel has not announced plans to alter its dividend payments. TSMC does not appear to have an active share repurchase program in the last decade, though it issues a quarterly dividend to its shareholders.

4.3 Industry performance should be measured by output capacity metrics, including wafers produced per month, as opposed to the number of fabrication facilities in a region Current forecasts of domestic semiconductor industry growth resulting from government interventions, including the incentive programs authorized under the CHIPS Act, emphasize the creation of new fabrication facilities. However, output capacity metrics, including wafers produced per month (wpm), would more accurately capture industry performance. A recent report from Boston Consulting Group and the Semiconductor Industry Association (SIA) predicted that a $50 billion U.S. government incentive program would lead to the construction of 19 fabrication facilities domestically, capturing 24 percent of global addressable semiconductor manufacturing capacity from 2020-2030 and resulting in the United States ranking second in global share of

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new capacity as opposed to its current fifth-place status.111 The BCG-SIA report notes that their predictions assume new fabrication facilities produce 75,000 wpm, though it assesses the 20102020 U.S. fabrication facility average as only 40,000 wpm.112 TSMC’s new Arizona fabrication facility is expected to produce only 20,000 wpm, half of the trailing ten year average fabrication facilities in the U.S. according to BCG/SIA.113 If that rate of production continues following the construction of new fabrication facilities, U.S. semiconductor manufacturing may fall short of forecasts.

Measuring domestic semiconductor production by output rates, including wafers produced by month, instead of the number of fabrication facilities in a region would result in more accurate forecasts for the industry. For instance, even if the CHIPS Act results in the creation of 19 new fabrication facilities, the U.S. share of total global manufacturing may still decrease due to other states constructing new fabrication facilities that produce wafers more efficiently. In addition, fabrication facilities with low rates of production, as measured by wafers per month, are subject to higher marginal production costs and are thus more vulnerable to falling prices.

This is especially concerning, as the relatively lower rate of production in TSMC’s planned Arizona fabrication facility may lead to operating costs that are 10 percentage points greater than TSMC’s Taiwan fabrication facilities.114

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TSMC Morris Chang, a Taiwanese-American engineer, founded TSMC in 1987 as the world’s first pure-play semiconductor foundry. Taiwan’s Electronics Research and Service Organization provided technology, facilities, workforce, and government support, including securing investors for TSMC.115 TSMC then spent over 20 years building its business to compete with contemporary industry-leading IDMs. In 2010, the cutting-edge semiconductor node was 28 nm, and TSMC’s technology lagged behind rivals Samsung and GlobalFoundries. TSMC invested in “gate last” processes, which at the time were unproven technologies. Chang convinced TSMC’s board to invest $8 billion annually and hire 3,000 engineers to dominate the 28 nm market. The gamble paid off, as Samsung struggled to perfect a rival “gate first” process and lost market share to TSMC. The next year, TSMC acquired a contract to manufacture iPhone chips for Apple Inc. after allegations surfaced that Samsung, Apple’s previous supplier, stole Apple’s intellectual property to launch a rival product.116 Apple became TSMC’s largest customer, and therefore wielded considerable influence. Apple pushed TSMC to develop a new node annually to keep pace with the launch of new iPhones. Some critics point out that this resulted in some creative labeling of incremental improvements; however, the method of incremental improvement reduced risks and resulted in the capturing of additional market share. TSMC’s relationship with Apple continued to pay dividends as the industry advanced to a seven nm node and sought ways to make even smaller transistors. Extreme ultraviolet etching (EUV) technology offered a way to create transistors smaller than 10 nm, though doubts about the technology’s effectiveness and high costs led TSMC to hesitate in adopting EUV. Apple demanded TSMC adopt EUV and offered to help fund the acquisition of EUV machines, leading TSMC to abruptly reverse course and become an early adopter of EUV technology.117 Apple’s influence on TSMC benefited the chip manufacturer greatly, as today’s most advanced chips can only be made using EUV. TSMC’s early mastery of EUV technology allowed it to capture 90 percent of the cutting-edge (≤10nm) semiconductor manufacturing market, which it retains today.

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Intel The Intel Corporation was founded in 1968 in Mountain View, California, by Gordon Moore and Robert Noyce, both former employees of Fairchild Semiconductor. Long a technology and market pioneer in the American semiconductor industry, Intel initially focused on memory products.

Japanese competition in the memory market, and the success of Intel’s partnership with IBM, pushed Intel into logic chips in the 1980s, where it served as the largest hardware supplier for IBM and other computer-makers in the new personal computer (PC) market. A collaboration between Intel and Microsoft to develop the Windows operating system coined the industry nickname “Wintel.” Intel remains the last major U.S. IDM, and continues to perform its chip design and manufacturing in-house. Other U.S. firms went “fabless,” shedding their manufacturing arms to focus solely on chip design.

Intel began to experience delayed transitions between process nodes (new generations of technology) starting with its 14 nm node, and soon lost its technological leadership to TSMC.118 These delayed transitions reflected Intel’s production problems and demonstrated the success of TSMC’s early bet on EUV lithography. Other business decisions closed Intel out of new markets, including declining an offer to source hardware for the Apple iPhone.119 In time, the smartphone market shifted to using ARM architecture rather than Intel’s x86 technology.

Heightened competition from fabless chip design firms, such as AMD and Nvidia, diminished Intel’s market share, partially due to their relationships with TSMC which produced leadingedge technology. In recent years, some investors and other observers have called for Intel to abandon its IDM model and become fabless. In 2021, Intel announced its pursuit of a new IDM 2.0 business model that would see the company expand its manufacturing capacity through the use of other foundries while simultaneously launching its own foundry business for potential customers.120

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Conclusion Advancing the goal of establishing a viable and resilient semiconductor manufacturing ecosystem in the United States requires a comprehensive government response beyond financial assistance to the sector. Unless the United States adopts a clear and consistent national strategy that includes coordinated research and development programs and investments in STEM education, simply providing financial incentives to the private sector will be insufficient in attaining that goal. Challenges to U.S. dominance in the sector remain, and geopolitical tensions in certain regions threaten U.S. access to the global supply chain. Critical segments of the industry, including assembly, testing, and packaging, will be difficult to establish domestically. Joint collaboration with international allies and partners is essential for embedding redundancy and ensuring access within the global semiconductor supply chain.

Maintaining long-term U.S. leadership in the semiconductor manufacturing sector will require action beyond the initiatives contained in the CHIPS Act. A venue for collaboration among diverse stakeholders in the sector is crucial for advancing semiconductor technology beyond its current limits, and the National Semiconductor Technology Center is a promising venture. Appropriations for the NTSC and other CHIPS Act provisions are essential, and we encourage Congress to act quickly to provide the financing needed for full implementation. Promoting the semiconductor industry will have benefits beyond the sector alone, particularly given the increased usage of chips in everything from consumer electronics to medical devices. If the current chip shortage is prolonged further, the entire domestic economy will suffer, and foreign states could gain additional influence in the microelectronics sector.

The U.S. government is encouraged to find additional avenues for supporting the semiconductor industry, particularly through methods that result in benefits throughout the economy. Opportunities for further government action should continue to be explored to ensure long-term U.S. leadership in the semiconductor industry.

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Endnotes 1

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2

Fitch, Asa. “Intel CEO Says Chip Shortage Could Stretch Into 2023.” Wall Street Journal, July 22, 2021, sec. Business. https:// www.wsj.com/articles/intel-intc-2q-earnings-report-2021-11626899296.

3

Center for Security and Emerging Technology. “Securing Semiconductor Supply Chains.” Accessed January 7, 2022. https:// cset.georgetown.edu/publication/securing-semiconductor-supply-chains/.

4

U.S Congress. William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021. Public Law 116-283Jan 1, 2021. https://www.congress.gov/116/plaws/publ283/PLAW-116publ283.pdf

5

U.S. Congress, House, Creating Helpful Incentives to Produce Semiconductors for America Act or the CHIPS for America Act of 2020. H.R. 7178, 116th Congress. Introduced in House June 11th, 2020. https://www.congress.gov/bill/116th-congress/ house-bill/7178

6

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11

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19

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Endnotes 1

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Endnotes 4

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Media Citations Cover Image: Macro Photo. Silicon wafer in die attach machine in semiconductor manufacturing. Photograph. Shutterstock. https:// www.shutterstock.com/image-photo/silicon-wafer-die-attach-machine-semiconductor-1015265728 Page 5: Marco Verch Professional Photographer. Macro-shot of CPU chip. 2021. Photograph. Flickr. Licensed under CC BY 2.0. https://www.flickr.com/photos/30478819@N08/51624002186/, https://creativecommons.org/licenses/by/2.0/ Page 9: Marco Verch Professional Photographer. The great car-chip shortage in US. 2021. Photograph. Flickr. Licensed under CC BY 2.0. https://www.flickr.com/photos/30478819@N08/51624860400, https://creativecommons.org/licenses/by/2.0/

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