How a Niche Technology Became a Choke Point for A.I.

         

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Advanced chip packaging, which boosts computing power for artificial intelligence, has made the United States more reliant on Taiwan than ever.

Subramanian Iyer, an electrical engineer and educator, has long specialized in a sleepy niche of the semiconductor industry that has now become a major choke point in the global contest for artificial intelligence leadership.

That niche is a technology called advanced chip packaging, which bundles as many as dozens of the components in palm-size modules. As computing gains from the traditional practice of shrinking transistors to pack more of them onto each chip have diminished, Nvidia and other chip giants have turned to packaging as an essential way to deliver semiconductors capable of more complex tasks for A.I.

Dr. Iyer, 72, a former IBM technologist and now a professor at the University of California, Los Angeles, has helped drive packaging advances over decades. But he and chip industry executives have watched in alarm as U.S. leadership in the field has slipped away to the same company that dominates advanced chip manufacturing.

Taiwan Semiconductor Manufacturing Company, which makes cutting-edge chips for Nvidia and other A.I. leaders, also packages nearly all of them. Its key suppliers and partners are mainly in Taiwan, too, facing the same threat from China that caused U.S. policymakers to funnel billions of dollars into boosting domestic chip fabrication.

The packaging bottleneck has become a hot topic in Silicon Valley as TSMC has struggled to keep up with demand. Dr. Iyer tried to help by developing plans for a packaging research and development center, funded with $1.1 billion from the Biden administration and slated to be built in Arizona, but the Trump administration effectively killed the effort last year.

“The bottom line is they’ve thrown the baby out with the bathwater,” Dr. Iyer said. “We’ve ended up in a place where we are even more dependent on TSMC.”

The bottleneck underlines how U.S. dependence on Taiwan has not eased despite efforts by the Biden and Trump administrations. The Biden administration allocated more than $50 billion to jump-start domestic chip production under the 2022 CHIPS and Science Act. President Trump, objecting to grants to chip makers, has instead pressed for deals with U.S. companies that include equity stakes and threatened foreign companies with tariffs to essentially accomplish the same thing.

After the making of chips, “packaging is the most important thing,” said Patrick Gelsinger, Intel’s former chief executive, who lobbied for the CHIPS Act. “And our packaging supply chains may be even more precarious.”

A Trump administration official disputed that packaging was not a top priority. Nine packaging manufacturing projects have received CHIPS Act funding, and the Commerce Department is evaluating some important research projects in the field, the official said, speaking on the condition of anonymity.

To break through the logjam, some big U.S. companies are trying to step up. Intel, a longtime leader in the technology, has picked up packaging customers and said last week that it had recruited a new executive to lead advanced packaging. Applied Materials, the biggest maker of chip manufacturing tools, is building a $5 billion research facility in Silicon Valley with partners, with packaging as a key sideline.

Amkor Technology, a packaging specialist, is building its first U.S. factory site in Arizona and is expected to take on some packaging work for TSMC under a 10-year deal. Amkor, which the Biden administration awarded a $407 million grant, boosted its own potential investment on the site to $7 billion after talks with Trump administration officials and signs of purchasing interest from Nvidia and Apple.

Such customers are showing “very strong demand, wanting to build a U.S. ecosystem,” said Kevin Engel, Amkor’s president and chief executive.

Packaging was long considered an afterthought that U.S. chip makers farmed out to countries in Asia with low wages. The U.S. share of chip packaging is around 3 percent, according to the Global Electronics Association.

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Source:https://www.nytimes.com