In the early days of the COVID-19 pandemic, auto factories shut down production of vehicles and began producing ventilators. Schools across the U.S. pivoted to in-home, online learning at the same time that companies were shifting to work-at-home arrangements for employees. The rapid rise of e-learning, homebound video conferencing and cloud collaboration, and on-demand streaming created huge demands for bandwidth capacity, ultimately straining network resources to their limits and exposing a glaring need to expand data center capacities.
What followed reflects the breadth of the electronics ecosystem throughout the United States and the world.
While factory shutdowns temporarily dried up demand for automotive semiconductor chips, demand for other parts—including the chips that go into PCs, laptops, tablets, and game consoles—grew. There was a spike in data center construction that sent demand for essential tech hardware through the roof. Server rack companies and businesses that supply hardware for data centers got busy, contracting with sheet metal fabricators that could produce the needed parts—data storage racks, chassis, cabinets, enclosures, and the like.
In the U.S., the chip shortage has implications for the entire ecosystem that supports the breadth of electronics design and manufacturing—from semiconductor production to PCB assemblies and fabrication of metal electronic enclosures, servers, racks, and various IT and communications hardware. It suggests that a significant increase in semiconductor manufacturing in the U.S. is likely to boost manufacturing activity in those closely related areas.
A 2020 report released by the Semiconductor Industry Association (SIA), in partnership with Boston Consulting Group, concluded that federal incentives for U.S. semiconductor manufacturing could strengthen not only America’s chip production, but also its supply chain, economy, and national security. The report, “Government Incentives and U.S. Competitiveness in Semiconductor Manufacturing,” was based on a study which found that such incentives could lead to the construction of 19 new chip manufacturing facilities and 70,000 new manufacturing jobs over the next 10 years.
“Federal incentives for U.S. semiconductor manufacturing are an investment in America’s economic strength, national security, supply chain reliability, and pandemic response,” said Keith Jackson, then president, CEO, and director of ON Semiconductor and 2020 SIA chair, in a release. “With swift, ambitious action, the U.S. government can help turn the tide of decades of decline in the share of global chip manufacturing done in the U.S., which now stands at only 12 percent, and make America one of the most attractive places in the world to produce semiconductors.”
The report found that strengthening U.S. chip manufacturing would help ensure that America leads the world in innovating rapidly advancing technologies—including artificial intelligence, 5G, and quantum computing—that will likely “determine global economic and military leadership for decades to come.” The ability to produce more semiconductors domestically, the report said, “would also make America’s semiconductor supply chains more resilient to future global crises and ensure the U.S. can domestically produce the advanced chips needed for our military and critical infrastructure.”
Today, multiple factors—including the needs to protect IP and national security while building reliable supply chains that can withstand disruption—are converging in ways that could boost demand for American-made semiconductors, electronics, and technology hardware products.
For many product innovators, contracting with domestic or local parts manufacturers located near their R&D and design centers helps them establish the “best and quickest path to the best product,” as one CEO told D2P. The shorter distance between design and manufacturing enables quicker, more efficient design iterations, faster product development, and closer monitoring and control of part quality.
“We have pretty complex designs, and they require a lot of back and forth with suppliers,” said Nate Young, director of engineering at Trenton Systems, a U.S.-based OEM that manufactures rugged industrial and military servers and other IT equipment. “Having local suppliers and people in the same time zone is helpful, versus an overseas operation. It buys us a lot of efficiency, and we have a pretty tight loop [between design and manufacturing].”
Mike Moss, technical sales director at Continental Industries, an Anaheim, California-based sheet metal fabricating company, added that having a shorter physical distance between the design and manufacturing of a product offers advantages in lead time and ability to innovate.
“Here, we can have that much shorter distance, much more intimate relationship with our customer, where their design and our manufacturing can get together, and we can collaborate. We can go out to their facility and see what they’re trying to actually do, whether they’re building a product from scratch or redesigning. We can see what their final objective is, and we can give them input from a manufacturing standpoint for design for manufacturability, or to re-engineer to reduce cost.
“We can also bring them back here and show them our processes. Their ability to see the facility and our capabilities gives them a clear idea of what they can design back. There are advantages on both sides in that way. As far as innovation, we can look at them and say, ‘We can do something similar to this and make it out of one piece,’ when they may have the design in three pieces. And lead time, of course, is an advantage, with us being able to fabricate a prototype for them, and they can test it. That’s something that’s very challenging to do in any kind of reasonable timeframe when they’re going offshore.”