Securing Supply Chains At SEMICON West 2024

Jose Fernandez, U.S. Under Secretary of State for Economic Growth, Energy, and the Environment, sat down with Joe Stockunas, President of SEMI Americas, for a fireside chat on the CEO Summit keynote stage at SEMICON West 2024. In the Securing Critical Supply Chains for the 21st Century discussion, Fernandez emphasized the need to form partnerships to address vulnerabilities as the key to creating stable supply chains. It’s important to band together, he said, to protect our standards, values, and democracy.

Diversifying the global mineral supply chain

Because chip fabricators depend on minerals like germanium, gallium, arsenic, indium, and rare earth elements, he highlighted how imperative it is for the industry to access them sustainably. To accomplish this, he stressed the importance of protection against supply chain bottlenecks in the mineral market.

“According to a number of experts, we’re going to need 42x the amount of lithium by 2050, 25x the amount of manganese, and 25x the amount of cobalt,” he said. “Those minerals are basically controlled by one country, and that’s a vulnerability.”

To address these concerns, he shared that the State Department is working to strengthen the upstream and downstream portions of the semiconductor value chain, with the goal of supporting economic security across the globe. Foreign export controls, he said, have led to supply chain disruptions of key minerals, and bans on rare earth elements, processing equipment, and other technologies.

As evidence of the State Department’s efforts to diversify, he highlighted the Minerals Security Partnership (MSP) and its work to seek mineral alternatives. Led by the U.S., it currently includes 13 other countries plus the European Union.

Partnership and investment opportunities

To further secure the industry’s supply chain, Fernandez discussed the State Department’s efforts to partner with mining countries with untapped semiconductor resources. These countries, he said, also want alternate options for securing critical minerals.

Fernandez highlighted Latin America as a key nearshoring focus area, pointing to the Americas Partnership for Economic Prosperity (APEP) as a solution for addressing obstacles to investment in the region. Obstacles, he said, include education levels, insecurity, and rule of law.

To overcome such hurdles, he stressed the importance of fostering economic conditions that will attract investments, emphasizing the importance of workforce development initiatives and private sector involvement.

“We don’t have enough trained workers in the U.S., and we certainly don’t have enough trained workers abroad,” he said.

Fernandez shared that workforce development programs are being established through the U.S. Department of State International Technology Security and Innovation (ITSI) Fund, as well as private sector efforts and university partnerships. Currently, seven countries have been selected for ITSI funding, he said.

“We’ve partnered with a number of universities to address the workforce gaps we see in our ITSI partners,” he said. “We’ve created workforce seminars, and we’re going to spend more time training the labor force.”

These efforts supplement the work of the SEMI Foundation to develop a holistic workforce development program for the global semiconductor industry.

Preventing chips from entering Russia

With U.S. chips crossing into Russia through third parties, Stockunas asked Fernandez how the semiconductor industry could help address this. Despite existing sanctions against Russia, Fernandez shared that Russia still managed to import $1.7 billion worth of microchips from both the U.S. and Europe in 2023.

To help slow this down, he highlighted additional due diligence for companies whose products often make their way into the country. The federal government, he said, speaks with these companies about complying beyond what the law requires.

Fernandez shared that private sector cooperation with more stringent standards has been positive, noting that some companies have cut hundreds of distributors to further aid in prevention. In addition, he mentioned that sanctions have made a promising impact overall.

“[Russia] has had to use outdated equipment, they’re engaging in counterfeiting, and they’re getting help from other countries,” he said.