—Part of an ongoing EE Times series: A Vulnerable U.S. Electronics Supply Chain. Previous parts can be found here.
A manufacturing alliance that Apple, Taiwan Semiconductor Manufacturing Co. (TSMC) and Amkor formed last month will help rebuild a semiconductor supply chain in the U.S., experts told EE Times.
Amkor, the world’s second-largest chip packager, said it plans to build a $2 billion assembly-and-test facility in Arizona to support TSMC’s nearby semiconductor plant that’s under construction. With Apple as one of the largest customers, Amkor expects the facility to be the biggest advanced packaging operation in the U.S.
Reviving U.S. chip fabrication, at the apex of the electronics industry, is unlikely without also rebuilding basic supporting industries like chip assembly and test. As the U.S. prepares to disburse by the end of this year the $52 billion package of CHIPS Act incentives to help revive the domestic industry, there is concern that most of the support will go to chipmakers that many argue don’t need the help while neglecting the dwindling U.S. assembly-and-test segment.
There are signs of a turnaround in the U.S. chip ecosystem.
“Expansion of a U.S. semiconductor supply chain is underway,” Amkor CEO Giel Rutten said in prepared remarks on Nov. 30. “The announcement of our new advanced packaging and test facility in Arizona is a clear signal of our intent to help our customers ensure resilient supply chains and be a part of a strong American semiconductor ecosystem.”
On Nov. 20, just days before the Amkor announcement, the U.S. National Institute of Standards and Technology (NIST) detailed how the CHIPS Act will support manufacturing incentives and R&D efforts. NIST will provide about $3 billion in funding for the National Advanced Packaging Manufacturing Program. The first funding opportunities for the program will be announced early next year.
The promise of funding for advanced packaging likely helped clinch the Amkor deal, TechInsights vice chair Dan Hutcheson told EE Times.
“This new advanced packaging campus certainly makes it possible for Amkor to get in line for CHIPS Act funding,” he said.
Amkor said it has applied for CHIPS subsidies.
Apple demand
“At the top of the decision criteria list has to be the market demand pull of Apple and TSMC,” Hutcheson added. “Next might be supply chain security assurance for customers.”
Advanced packaging is more closely related to wafer fabrication than assembly and test, he noted.
Given that the handoff between advanced packaging and wafer fabrication remains immature, having Amkor and TSMC production facilities closer physically makes success more likely, Hutcheson said.
Amkor worked with Apple on the initial manufacturing capability of the Arizona facility. When the Amkor facility opens, Apple will be its first and largest customer.
“Apple is committed to helping build a new era of advanced manufacturing, right here in the U.S.,” Apple COO Jeff Williams said in prepared remarks at the end of November. “Apple and Amkor have worked together for more than a decade packaging chips. This partnership will now deliver the largest overseas assembly and test [OSAT] advanced packaging facility in the United States.”
A year ago, TSMC boosted its overall investment in Arizona to about $40 billion for two chip facilities with the support of customers like Apple and AMD, stoking a U.S. effort to revive domestic chip production.
“TSMC applauds Amkor for investing in the future of the semiconductor industry with us in Arizona,” TSMC CEO C.C. Wei said in prepared remarks that his company published with Amkor and Apple.
Shifting tide
The OSAT acronym illustrates how chip packaging has shifted to Asia. Advanced Semiconductor Engineering and Amkor, the world’s largest assembly-and-test companies, have most of their factories in nations like China, Taiwan and South Korea, and they’ve been reluctant to follow up the multi-billion–dollar investments of Asian chipmakers like TSMC and Samsung in the U.S. due to higher labor intensity in the packaging segment.
The scarcity of assembly-and-test companies in the U.S. has been a gap in the American plan to rebuild a secure electronics supply chain.
“Packaging is generally more labor-intensive versus wafer fabrication,” SemiAnalysis chief analyst Dylan Patel told EE Times. “This makes it extremely difficult for companies to justify putting packaging facilities in the U.S. A high-volume packaging facility like this is unique, and it helps the U.S. achieve supply chain resiliency. The labor cost will affect profitability, but customers will be willing to pay for that supply chain resiliency, and subsidies will help blunt the blow.”
Amkor said the Arizona facility will be near a strong ecosystem of chipmakers and tool suppliers including TSMC, Intel, Applied Materials and ASML. Intel has its advanced packaging facilities in Chandler, Arizona.
Finding people to run the facility may be a hurdle for Amkor, Semiconductor Advisors President Robert Maire told EE Times.
“They’re going to have a real problem unless it becomes very highly automated,” Maire said. “There’s certainly no one in the U.S. who has experience.” Like TSMC, Amkor may need to bring a team of overseas people to Arizona to help ramp up production, he added.
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