Mission Brief (TL;DR)
The much-hyped global chip manufacturing alliance, designed to diversify semiconductor production away from Taiwan and South Korea, is facing major delays and cost overruns. Several key projects in the US and Europe are behind schedule due to a combination of factors: skilled labor shortages, NIMBY resistance to construction, and bureaucratic red tape. The promised "chip independence buff" is looking increasingly like a debuff for the economies involved.
Patch Notes
The initial enthusiasm for onshoring chip production, fueled by geopolitical anxieties and government subsidies, has run headfirst into reality. The US CHIPS Act and the EU Chips Act allocated billions in funding to attract semiconductor manufacturers. However, these incentives haven't been enough to overcome fundamental challenges. Several major projects are facing delays of 12-18 months. Construction of new fabs (fabrication plants) is being held up by local opposition concerned about environmental impacts and property values. Securing necessary permits is taking far longer than anticipated, and the skilled labor pool needed to operate these advanced facilities remains critically low, despite efforts to boost vocational training programs. Furthermore, rising energy costs are impacting the economic viability of fabs in Europe, reducing the competitive advantage of the EU Chips Act. While companies like Intel and TSMC have broken ground on new facilities, the actual output of chips is not expected to ramp up significantly until late 2027 or early 2028 at the earliest.
The Meta
The delays in expanding chip production capacity outside of Asia will have several significant consequences. First, it prolongs the vulnerability of global supply chains to disruptions in Taiwan and South Korea. Any geopolitical instability in those regions could still cripple industries reliant on advanced semiconductors. Second, it creates a window of opportunity for Chinese domestic chipmakers to catch up technologically. Despite US sanctions, China has been investing heavily in its own semiconductor industry, and the delays in the West could allow them to close the gap faster than anticipated. Third, the higher costs associated with building and operating fabs in the US and Europe will likely translate into higher chip prices, impacting the competitiveness of downstream industries like electronics and automotive. Finally, expect increased lobbying efforts from semiconductor companies seeking further government subsidies and regulatory relief.
Sources
- Reuters: "US Chip Manufacturing Faces Permit Delays."
- Financial Times: "Local Opposition Slows Down European Fab Construction."
- Bloomberg: "Energy Costs Threaten EU Chip Ambitions."