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The U.S. Produces Zero Advanced Semiconductors

100% of all advanced chips are developed overseas.
 
   
     
The U.S. Produces Zero Advanced Semiconductors

Advanced semiconductors are the more advanced next-gen chips that are used in artificial intelligence systems, smartphones, self-driving cars, advanced medical devices, etc.

While it’s true that the U.S. is the leader in chip design and research, we have one major shortcoming when it comes to the semiconductor industry:

Although the U.S. produces the majority of the designs for advanced semiconductors, we have zero facilities in the U.S. that can manufacture them at scale.

In fact, 100% of all advanced chips are manufactured overseas, mainly in Taiwan by Taiwan Semiconductor (TSMC.)

What about the world’s total supply of semiconductors?

Well, the U.S. manufactures just 10% of the global chip supply.

Now this is just such a crazy concept to me, especially given that semiconductors are an American invention.

The first semiconductor chip was invented by Jack Kilby at Texas Instruments in 1958 and built upon William Shockley's 1947 invention of the transistor at Bell Labs.

For the longest time, the U.S. was the cradle of technology and global advancement, but much of that has since moved overseas. And when the supply chain shut off during COVID, the U.S. and legislators realized how dire of a situation we were in.

We went from inventing the technology to building less than 10% of the world’s supply — and 0% of the world's most modern and advanced chips.

Suddenly, amid lockdown, assembly lines were halted across the country with vehicles, computers, and devices all waiting for chips from overseas.
 
Something Needed to Change 

The Biden administration, capitalizing on the success of Trump’s “Made in America” initiative,  began pushing for more domestic chip production. And so the CHIPS and Science Act was born.

The CHIPS and Science Act authorized roughly $280 billion in new funding to boost domestic research and manufacturing of semiconductors in the United States, of which, it appropriated $52.7 billion for manufacturing expansions.

That breaks down to about $39 billion in subsidies for chip manufacturing on U.S. soil, 25% investment tax credits for costs of manufacturing equipment, and $13 billion for semiconductor research and workforce training.

Another $174 billion was set aside to help public sector research in science and technology, with initiatives such as advancing human spaceflight, quantum computing, materials science, biotechnology, experimental physics, and research security.

That’s a lot of money, so what's it all for?

The US’s goal is to prevent any future supply chain disruptions like the ones seen during COVID by bringing advanced semiconductor manufacturing back home.

And according to a new report published by the semiconductor industry association (SIA), things are going incredibly well.

U.S. chip manufacturing capacity is projected to triple by the year 2032. But even if that happens, the U.S.’s share of global semiconductor production will only rise to 14% of the total supply (keep in mind it's at 10% today.)

Luckily, the U.S. has maintained a lead in chip design and research through companies like NVIDIA and Intel.

Intel alone has received $8.5 billion in federal grants and has also invested more than $100 billion to expand its manufacturing operations in Arizona, Oregon, and New Mexico.
 
 Where This Leaves Us

But what the CHIPS and Science Act has done is set off a global race to boost chip manufacturing. Europe is trying to grow chip manufacturing with its own $47 billion investment package.

Japan has given $17.5 billion in grants to industry leaders such as TSMC and Micron. Meanwhile China has Invested over $150 billion to expand its chip making capabilities.
 
 

By 2032, investments in chip production are estimated to reach $2.3 trillion.

That means a lot of money will be flowing into the tech sector over the next 8 years. If we’ve learned anything in the last decade (as we’ve watched trillions printed to inflate the market), it’s that money flow is the true engine behind stock growth (remember 2020?)

And with this kind of money flow focused on one sector, there’s no doubt that explosive opportunities are going to pop up across the market over the next decade.

But while I will have a close eye on the “direct” semiconductor names, we’re going to want to plan for the secondary market plays as well.

In other words, a company like Nvidia or Intel might continue to grow as they grab U.S. market share, but they’re already massive companies.

If, however, Nvidia outsources some part of their manufacturing process to a small, $100M company, that company is a true moonshot opportunity.

I’ll be scanning for both developments to keep you informed. Thanks for reading.
 
To your trading success, 
 
 

Nate

P.S. Our 2nd Automated Option trade is close to its automated profit target. We should have another entry tomorrow. Tap here to get involved.
   
 
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