Analysis

US semiconductor industry needs public-private partnerships for an innovation ecosystem

We need consortia and public-private partnerships to overcome barriers, encourage mutually beneficial collaboration, and maximize investment returns

Authors: Mark LaViolette, David Kotok, Joniel Cha

Organizations looking to successfully unlock federal semiconductor incentives and research and development (R&D) funding should consider aligning with consortia and public-private partnerships (PPPs). There is some urgency to this: In late September, the US Department of Commerce announced that the Notice of Funding Opportunities will be released in February 2023.

According to the Department of Commerce document, A Strategy for the CHIPS for America Fund, PPPs and consortia are critical to “enable and sustain a vibrant industry that supports quality jobs, a diverse workforce, and a robust supplier base.” The CHIPS Act legislative requirements driving implementation are quite prescriptive as outlined in the CHIPS.gov website, but an underlying theme is no single entity can achieve the intended national objectives on its own. An ecosystem effort is needed, especially one that is regionally/locally focused, innovation-centric, economically sustainable, and resilient. Applicants for CHIPS funding must consider how their applications serve underrepresented populations with unions and workforce development organizations, partner with local communities, and provide benefits to small businesses and startups. This is not an easy task.

To meet these requirements, CHIPS Act applicants will spawn multiple consortia and PPPs aligned to incentive and R&D programs, including the following:

  • National Semiconductor Technology Center
  • National Advanced Packaging Manufacturing Program
  • Up to three new Manufacturing USA institutes
  • Multiple consortia spearheaded by leading semiconductor manufacturers seeking access to the $39 billion in incentive grants, cooperative agreements, loans, or loan guarantees
  • Over $4 billion for related programs at the Department of State, the National Science Foundation, the Department of Defense, and Commerce’s National Telecommunications and Information Administration (NTIA)

There are many reasons why consortia and PPPs are effective; most importantly, they help solve collective action problems, helping enable members to tap into critically valuable and synergistic stockpiles of intellectual property, and providing access to shared assets. They can enable innovation and market action to occur more efficiently. In addition, these partnerships have formal mechanisms to incentivize cost-sharing, especially for R&D projects, and an ability to attract public and private funding beyond Federal investments.

Successful initiation of a consortium and/or PPP should start with developing and deploying a strategic development framework focused on creating and incubating the organization.

A reproducible process helps create new partnerships by bringing together key stakeholders aligned on essential requirements, especially the development and identification of actionable, fundable, and sustainable road maps and programs. This usually occurs in five steps.

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This usually starts by leveraging a key existing organization in the ecosystem that identifies and organizes the various stakeholders. This lead partner is usually well-connected to all key stakeholders including state and local governments, industry (large and small), academic institutions, national laboratories, and other economic & workforce development organizations. Industry associations and established industry consortiums often have leg up in this step as they have established connections to the relevant ecosystem.

This is needed to understand the strengths, weaknesses, and needs of key stakeholders likely to participate in CHIPS Act programs. It includes detailing industrial composition, its supporting supplier base, key regional players, and the associated strengths and weaknesses of those stakeholders. Examples of stakeholder actively tracking the CHIPS Act include fabless leaders, OSAT packaging and testing companies, smaller design firms, Foundries, and state and local governments actively involved in growing the local semiconductor ecosystem. It answers the question, “what makes this region a worthy investment and what are the key capability gaps needing addressal by CHIPS funding?”

This drives project partners into mutually-beneficial and shared interest areas. This uncovers CHIPS Act program investments’ focus areas (‘swim lanes’) such as supplier gaps, workforce development needs, infrastructure and technologies requirements. The end-state of this phase is a refined list of actionable goals the partners can champion in the CHIPS funding proposal. The more specific these goals are the better. Examples include economic growth targets, timelines on rapid expansion of existing fabs, and pledged investments into local education institutions.

These should be impactful, feasible, and effective in addressing relevant CHIPS objectives to improve U.S. semiconductor manufacturing competitiveness. Key CHIPS implementation themes center around ecosystem creation and collaboration, financial incentives building industrial clusters, supply chain resiliency, workforce development, and under-represented businesses.

These stitch together detailed programs and projects in a time-phased or piecemeal fashion, and outline roles and responsibilities to operationalize roadmap implementation. The resulting roadmap will guide new organization start-up and connect programs around focus areas such as governance, IP sharing and protection, management of joint teams, investment and use of shared assets, and education and workforce development.

Deloitte developed a demonstrated methodology supporting this process and has deployed it in multiple regions across the U.S. The results of those projects were the development of impactful programs tailored to the specific region for consortium and partnership action. Please reach out to the author to discuss further.

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