Domestic Manufacturing Desired, but Materials and Labor Are in Short Supply
By Mary Shacklett
To bring chip manufacturing home, the U.S. has a drive underway to build new plants. Breakbulk talks to Bechtel and DHL about project requirements that raise the bar on planning and construction. A must-read if your company is planning to get involved in the sector!
From Issue 5, 2024 of Breakbulk Magazine.
(6-minute read)
As geopolitical tensions mount, the U.S. is placing increasing importance on the domestic manufacturing of critical commodities such as computer chips. Prior years saw massive chip imports from China, Taiwan and Korea, but many believe this practice is no longer sustainable, and that supply chains, manufacturing locations and logistics operations must change.
To address the dearth of U.S. chip manufacturing, the CHIPS and Science Act was passed by Congress and signed into law by President Joe Biden in August 2022, with the goal of reducing reliance on Chinese chips by incentivizing the construction of onshore semiconductor fabrication plants in the United States.
Construction is being backed by federal investments of $280 billion for the funding of domestic research and manufacturing of semiconductors in the U.S. A further $39 billion in subsidies are also committed to the manufacturing of chips in the U.S., accompanied with a 25% investment tax credit for manufacturing equipment purchases, and another $13 billion for worker training that includes strengthening and building resilience in the U.S. semiconductor manufacturing supply chain.
“The CHIPS Act has already initiated the construction of new fabs in the U.S., with major players like Intel, Micron, GlobalFoundries, TSMC AZ and Amkor leading the charge alongside their engineering, procurement and construction (EPC) and general contractor (GC) partners,” said John Lu, global sector head, semiconductor fabrications at DHL Industrial Projects.
Lu references Intel information which states that each chip fabrication cleanroom will require at least 250,000 square feet, 5,000 on-site tradespeople, and 11 million hours to construct.
“This construction necessitates 600,000 cubic meters of concrete, 75,000 tons of steel reinforcement, and nine million meters of cable,” the executive said. “Additionally, each fab will need 1,500- 2,000 process tools and 1,500 pieces of utility equipment, requiring a timeline of 3-4 years per fab.”
Strategic Decisions
This is a tall order, so in many cases, there is a strategic direction to locate much of this new semiconductor manufacturing capability near existing pockets of high-tech industry in locations like Boise, Idaho; Nampa, Idaho; Durham, North Carolina; Conshohocken, Pennsylvania; and Dallas, Texas.
“The advanced manufacturing projects we undertake bring specific demands driven by our customers’ desired outcomes, often related to speed to market and/or schedule and cost predictability,” said Kristin Homsi, manager of supply chain, manufacturing and technology at Bechtel. “This creates challenges not seen in the industry in the past.”
The cost to build a new chip fabrication facility in the U.S. was $31 million in 1970. It is $25 billion today. Constructing a fab is as much as 30% more expensive in the U.S. than it is in other parts of the world, while the build period in the U.S. is 900 days, compared with 600-700 days in Asia.
Part of this longer U.S. build is due to more stringent construction regulations, but there are also significant challenges in materials acquisition, logistics adjustments and finding skilled labor.
Lumber, steel, concrete, water supplies, nickel, lithium and other key raw materials are in high demand. “Consequently many companies are competing for the same materials and equipment that go into these projects,” said Homsi. “There is a very real risk that demands on suppliers exceed their capacity to deliver. When this happens, lead times and cost may increase, and project outcomes are put at risk.”
With supply chain management systems, it’s often easy to gain visibility into the first-tier level of suppliers, but this visibility gets murkier when companies try to probe into deeper supply chain tiers, such as understanding the risks around subcontractors.
“To prepare for the impact of CHIPS on logistics, we recommend that companies diversify their supply chains to reduce dependence on single sources of critical components or materials by identifying alternative suppliers both domestically and internationally,” said Lu. “They must maintain adequate inventory levels and safety stock to buffer against disruptions, analyzing historical demand patterns, lead times and supplier reliability to determine optimal levels.”
Construction Challenges
Engineering and manufacturing the facilities for semiconductor fabrication requires a level of precision in construction that doesn’t exist in other types of building. This starts with the fab facility cleanroom. There are thousands of square feet in cleanrooms for chip processing in chip fabrication buildings that require tens of thousands of tons of structural steel, and hundreds of thousands of yards of concrete to build - but the construction challenges don’t end there.
Cleanrooms must have air cleaning and filtration systems that purify air to a Class 10 particulate level, which means 10 particles of 0.5um size per cubic foot of air. This compares to the Class 100,000 rating that is needed for a hospital room. Equipment that “eats” welding dust must be used to achieve this level of cleanliness, while epoxy paint to color the edges of anything that is cut on site so emissions can be prevented must also be deployed.
Piping and other mechanical work must be done offsite to avoid onsite contamination, and workers must follow “clean construction” protocols to keep materials clean, minimize particle intrusion and ensure the cleanroom can operate successfully when it’s completed.
What fab construction supply chain managers are already learning is that offsite construction activities should be conducted as close to the fab construction site as possible and specially-trained labor, if it can’t be found locally, must be brought in from other areas to avoid delays.
Addressing Supply Chain Issues
Chip fabrication plant construction supply chains face challenges, but there are also opportunities for creatively addressing them. These opportunities range from new ways to modularize and distribute manufacturing, to the use of artificial intelligence (AI) for logistics and risk management assessment and planning, to new approaches for sourcing goods and finding labor.
Modular building for chip fabrication plant construction is being considered as a way to near-source manufacturing activities so they are closer to the sites of new fabrication builds. A second motivation is a desire to manufacture products simultaneously and in parallel across multiple remote sites so that delivery timelines can be performed in tandem and accelerated.
“The idea of modularization has been growing for many years,” said Bechtel’s Homsi. “Originally, it was motivated by cost considerations. Today, virtually every project is working on plans for moving more and more construction offsite. In one recent project, we built over 250 modules at four offsite module yards. Offsite manufacturing allows us to work at many different sites in parallel. These sites could be in the vicinity of the project or spread out across the world.”
Because fab construction engineering and project execution require degrees of precision and know-how that exceed what is needed for other types of construction, it’s essential to perform upfront planning so knowledge and skills gaps can be identified. ”We can address these issues because we integrate the engineering of facilities through a global workforce,” said Homsi. “This allows us to ease the pressures of talent in a singular geography and, at the same time, take advantage of cost differences in economies. However, taking this approach also increases the need and intensity of integrating engineering.”
Skills Gap
Homsi said that a skills gap also exists. “The current craft workforce in both the U.S. and Europe is insufficient to handle the increase in demand coming from advanced manufacturing industries,” she said.
“It’s not all bad news though. This is a great opportunity to broaden the workforce by encouraging more women and the younger generations to enter a non-traditional career path. This makes it critical to put in place very specific training programs that can allow this workforce to apply those skills and redefine them for the specifics of the semiconductor industry.”
To adapt the chip fabrication supply chain to the fulfillment of materials and labor requirements, logistics will also need to change. At the least, this will require more routes from modular manufacturing facilities to the final site.
“Customers must be flexible and share their forecasts early on, collaborating as true partners with freight forwarders,” said Lu. “Suppliers of materials used in building fabs will be impacted. These suppliers may need to scale up their production by expanding current facilities or constructing new ones, often near the fab sites.
“This presents additional logistic challenges, especially when building in unfamiliar locations or countries - add to this a potential one million worker shortfall in the broader U.S. economy by 2030. Participating in workforce programs to ensure a steady supply of engineers and workers for the semiconductor industry is vital.”
Managing Risk
With materials and labor in short supply, supply chain execution and risks for chip fabrication facility construction must be managed like never before. This involves the use of technologies such as AI and analytics for the optimization of supply chain routes, as well as canny assessment of supply chain risks.
“In this environment, a unique offsite manufacturing plan can be created based on craft availability, cost/schedule objectives, road and waterway access, etc.,” said Homsi. More offsite manufacturing with modular factories can mitigate situations including jobsite hazards such as weather or visibility that can’t be predicted, and this can help the standardization and manageability of logistics schedules, although logistics must be rendered more flexible in order to respond to a broader range of possibilities for materials sourcing and transport.
“From a transportation perspective, substantial volumes of construction materials must be moved via air, ocean and land to the job sites,” said Lu. “These challenges are compounded by the Red Sea situation, water shortages at the Panama Canal, and conflicts like the Israel-Hamas and Russia-Ukraine wars, which disrupt normal shipping routes and extend transit times.”
Bechtel’s Homsi additionally emphasizes the importance of optimized logistics and the integration of the design, engineering, procurement and construction activities in semiconductor fabrication facility construction.
“This is an industry that continues to advance in scale, complexity and, at the same time, looks for faster schedules and lower costs,” she said. “The intense level of integration is a significant challenge to delivering semiconductor facilities and can only be achieved through platforms and tools that have taken decades to perfect, and that are refined to adapt specifically to the unique challenges of the semiconductor industry.”
The buildout of semiconductor plants will be one of the topics discussed during a main stage panel session at Breakbulk Americas. “Big Tech, Chips and SMRs: A new Ecosystem of Project Opportunity”, moderated by Fluor’s Cyril Varghese, will take place on Wednesday, Oct. 16 from 3:10pm-3.55pm.
TOP PHOTO: Concrete pour at chip fabrication facility. CREDIT: Bechtel
