What measures Russia needs in the development of chip production

The main articles are:

• Semiconductors (Global Market)
• Semiconductors (Russian market)
• Microelectronics (Global Market)

Current Challenges and Crises

By the beginning of 2023, the global microelectronic industry faced a triple crisis: a drop in demand for advanced technologies, an increasing shortage of highly qualified specialists and a shortage of microelectronic consumer products.

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After the rapid growth of the global semiconductor industry by 25% in 2021, the growth forecast in 2022 by 13-14% by the fourth quarter slowed to 4%. Rising interest rates, high inflation, a decline in consumer confidence and a decline in the stock market led to a decrease in the market capitalization of the 10 largest global chip companies by 34% from $2.9 trillion in November 2021 to $1.9 trillion in November 2022^[1]). From January to October 2022, the Philadelphia^[2] decreased by 45% and at the end^[3] the year showed a decrease of 37%.

Advanced production went beyond profitability, which caused both a drop in supply and a lack of proper demand. In parallel, the need for microelectronics on 50-100 nm standards has increased. There is a shortage of chips for household goods and the automotive industry (power management systems, microcontrollers, modular displays).

According to experts, in KPMG 2023, due to the growing share electric vehicles and intensive introduction of chips, the contribution of the microelectronic segment to the growth of the automotive industry^[4] will increase^[5] Century Capital Research Institute believes that demand for auto electronics such as IGBT, SiC and automotive sensors will drive further growth for manufacturers of related products^[6]

According to Qualcomm management, the slow growth of most segments of the electronics market is directly related to external factors such as inflation^[7]. In response to rising production costs, a reduced supply chain component reserve, lower profits, many chip manufacturers are cutting costs, optimizing headcount and capital expenditures on additional capacity. If we talk about prospects, then experts from IDC and SMIC are guided by a turning point in the second half of 2023 and the segment's recovery in 2024.

National and regional projects and initiatives in the industry

People's Republic of China

Ensuring the continuous supply of chips is PEOPLE'S REPUBLIC OF CHINA a matter of national priority. Back in 2014 China , the Made in China 2025 initiative was launched in 2025. Within its framework, the Integrated Circuit Fund was created to support the development of the local electronics industry^[8]The fund acts as a legal entity under the Ministry of Industry information technology and the Ministry, the Development finance Bank is the key shareholder of the management company of the Sino IC Capital fund. In China the first round of funding, ICF raised $21.8 billion. In 2019, as part of the second phase, the fund received funding in the amount of $29.08 billion^[9]

The issue of providing microelectronics has an impact on all digital development areas, including the priority for Beijing the development of networks 5G and 6G. According to to data the Ministry of Industry and Information Technology, 5G is used in 200 mines, 1,000 factories, 180 electricity networks, 89 ports and 600 hospitals throughout China. China has made impressive strides in quantum, to computer science creating machines competing with. supercomputers USA

Against this background, China invests more than $100 billion in the construction of factories and organizes local production of equipment for working with plates and EDA^[10]. According to Reuters, in 2023, the Chinese authorities can allocate up to $143^[11] for the development of the national semiconductor industry^[12], including for subsidizing purchases of production equipment by Chinese companies.

Taiwan

Taiwan-based TSMC (Taiwan Semiconductor Manufacturing Company) is the world leader in semiconductors; in 2021, it produced up to 92% of the world's high-tech chips^[13]. The company has established a complete supply chain for the closed-loop production of semiconductors. TSMC's net profit for the 12 months at the end of September 2022 increased by 45% compared to the previous same period^[14], and in 2023, analysts from the Institute for Information Industry predict the growth of the Taiwanese chip industry by 1,^[15]

Nevertheless, to maintain profitability, Taiwanese manufacturers are forced to support the trend of transit of innovative production in the United States. So, at the opening ceremony of the TSMC plant in Phoenix, Arizona, in December 2022, the founder of the company M. Chang announced the growth of investments to $40 billion and the launch in 2026 of the second factory for the production of chips 5-nm and 3-nm.

Taiwan is counting on US funding for its "friendship" projects. However, there is a great risk that large manufacturers such as Intel will impose on the Chinese the struggle to diversify production and at the same time attempt to lure TSMC personnel. In addition, the company's management admits that the transit of capacity will entail an increase in the cost of products by 55%^[16]. Thus, the issue of maintaining profitability for Taiwanese chipmakers not only persists, but will also worsen as large projects are implemented by global competitors.

Republic of India

In May 2022 Government of India , it announced the launch of a roadmap for design and production semiconductors on an architecture RISC-V that is positioned as basic for COMPUTER reduced command set (RISC), has a modular design and is distributed over free to licenses with open, unlike the source code more famous architecture. ARM

Attempts to develop RISC-V India have been demonstrated since 2020, when an engineering competition was first held in the country to promote development on this platform. At the same time, already in 2021, startup SiFive announced the development of a kernel on RISC-V, which caught up with the performance Intel of the Rocket Lake family ARM Cortex-A78^[17]As part of Digital India's RISC-V (DIR-V) microprocessor program, Indian industry and science will develop on-chip (SoC) systems for, servers mobile devices, automotive applications, IoT devices and microcontrollers India^[18]

R. Chandrasekar, a former Intel chip developer, currently India's Minister for Entrepreneurship, Skills Development, Electronics and Technology, argues that the DIR-V envisions "achieving industry standards in silicon and crystal design by December 2023." The program will be based on experience gained in the development of Indian processors based on RISC-V - Shakti and Vega. Shakti projects for servers and high-performance applications are still in the process of being developed^[19]. Vega technologies are more promising and are already used in a number of SoC systems.

Indian authorities call these efforts "early steps in the development of processors." However, even in the Concept of National Electronics Policy for 2019^[20] the goal was formulated to gradually turn India into a global center for the design and production of electronic systems (ESDM) by encouraging and stimulating opportunities to develop core components and create a competitive environment at the global level^[21] on^[22]. The country regularly hosts three-day semiconductor "festivals" with the participation of Intel, TSMC, Qualcomm, Micron. In 2022, India as a member of the Council of Prime Ministers joined RISC-V International, a non-profit organization that oversees this architecture.

The coordination of the work of Indian executive authorities and industry stakeholders deserves special attention. As part of the roadmap for "sustainable production and export of $300 billion worth of electronics by 2026^[23] expert community, together with representatives of business circles, invited the country's leadership to take the following measures to support the industry: reducing the cost of doing business; active provision of incentives related to production; reduction of import tariffs; encouraging foreign producers to create an ecosystem of components in the country; clarification of FDI legislation, accelerated development of R&D; Infrastructure support for independent production clusters simplifying the issuance of permits and applications in the field of AI. Comprehensive implementation of the recommendations should help India qualitatively expand its presence in the global chip market.

Republic of Korea

In the preceding decades, Korean microelectronics focused on advancing semiconductor memory based on a strategy of choice and focus. As a result, Samsung and SK Hynix have become leading players in the global memory market, with the country already building 3nm chips and planning to produce 2nm by 2025 and 1.4nm by 2027^[24].

However, in light of fourth technological transition the country, it became important to develop non-memory sectors, competing the Taiwan TSMC with other companies. In addition, the ecosystem of the Korean semiconductor industry has significant vulnerabilities in the labor force, materials components and equipment. According to the relevant ministry, in the next 10 years, the industry will need approximately 150 thousand new personnel^[25]

In this regard, guided by the need to develop system semiconductors, the Korean government adopted the strategies "System Semiconductor Vision and Strategy" (2019) and "K-Semiconductor (Belt) Strategy" (2021). Both documents are aimed at increasing competitiveness and expanding domestic production by strengthening the industry ecosystem^[26]. Subsidies in the amount of 1.5 trillion won and soft loans in the amount of 1 trillion won will be allocated for the development of the next generation chips.

With the help of a set of support measures, the Republic of Korea intends to more than double the annual supply of chips abroad and reach $200 billion in 2030 from $99.2 billion in 2020. The investment plan for the decade amounted to 510 trillion won (~ $453 billion^[27]

In March 2023, the Ministry of Trade and Industry announced a project to attract 150 companies and $234 billion in investments to create by 2042 in the capital region the world's largest microelectronic cluster^[28]. Plans to build five high-tech chip factories were also reported.

European Union

Back in 2020, in order to prevent a shortage of personnel in the engineering and technical industry, the EU invited stakeholders to conclude a "Pact for Skills." The implementation is designed until 2025 and involves the involvement of up to 250 thousand people with total funding of €2 billion^[29].

In continuation of the course set by the Pact in July 2021, the European Commission established the European Alliance for Processors and Semiconductor Technologies, uniting key participants in the development and production of chips^[30]. A large-scale step to develop the industry was the 2021 pan-European Digital Compass plan to create its own microelectronic ecosystem. Within the framework of the EU semiconductor strategy, five main goals have been set:

• Strengthening Europe's R&D leadership;
• strengthening its own capacity to introduce innovations into the production of advanced chips and turn them into commercial products;
• creating the basis for a significant increase in production capacity by 2030;
• eliminating the shortage of personnel, attracting new talents and supporting the skilled workforce;
• developing a deep understanding of the 2022/0032 (COD) global chip supply chains^[31].

According to the plans, by 2030, the EU should account for about 20% of global semiconductor production (with initial indicators - less than 10%).

In the fall of 2022, the EU adopted The European Chips Act. For its implementation, countries European Union are ready to allocate €43 billion^[32]

The EU budget should support the initiative by €1.65 billion (under the Horizon Europe^[33] program^[34]) and €1.65 billion (under the Digital Europe^[35]). Of the total amount of €3.3 billion in the framework of the joint development of semiconductors, €2.875 billion^[36] will be sold^[37].

The implementation of the new plan will test the EU's ability to pursue industrial policies of this magnitude. However, an obstacle to a technological breakthrough may be the absence in continental Europe of a large microelectronic cluster^[38]. Back in 2021, the EU expressed opinions that one of the three largest global chip manufacturers (TSMC, Samsung and Intel) will build a modern microelectronics plant in Europe, but so far no agreement has been reached with any of these corporations.

Against the backdrop of crisis trends, European institutions are actively redistributing the burden between EU members. In June 2023, the European Commission approved a large-scale program to support the IPCEI ME/CT (Important Project of Common European Interest MicroElectronics and Communication Technologies^[39]), which will unite the efforts of 14 European countries. Grants in the amount of more than €8 billion will be allocated for the development of microelectronics and communications. Eurochinovniki expect to attract private investment in the amount of about €13.7 billion.

United States of America

At the end of July 2022, the US Congress passed the CHIPS and Science Act, aimed at supporting its own electronics manufacturers. According to the document, the total expenses for the development of the industry will amount to $280 billion^[40]. Within the framework of the Law, $52,7 billion, of which $39 billion to stimulate production, including $2 billion for previous generation chips, used in automobiles and defense systems, $13.2 billion for research and development and workforce development and $500 million to ensure the international security of information and communication technologies and chip supply chain activities. The law also provides a 25% investment tax credit for capital expenditures on the production of semiconductors and related equipment^[41]. In September 2022, as part of the implementation of the law, an interdepartmental expert working group was created on the implementation of projects for high-tech production.

To effectively implement the Law, a Steering Council for the implementation of CHIPS (Steering Council) was created from among federal ministers, presidential assistants and heads of relevant departments within the framework of the executive branch. The PCAST USA ^[42] joins^[43] work.]

Another large-scale "Law on the Promotion of Semiconductor Production in the United States" (FABS Act^[44]) provides for the allocation of another $52 billion from the federal budget for the construction of "chip factories^[45] of^[46]. At the same time, companies that have received over $150 million in direct funding are required to share with the US government part of the additional profit^[47]. Among such companies, several main ones should be distinguished: # Intel. In 2021, she began building Fab 52 and Fab 62 in Arizona^[48]). The facilities will be used to produce chips using Intel 20A technology, which should correspond to the 5nm process technology. The project cost is $40^[49]. # GlobalFoundries. Announced the allocation of about $1 billion to expand the existing Fab 8 industrial facility. It is also planned to build a new plant in Malta, NY^[50]. # Samsung Foundry. Now produces products for American consumers in Austin, Texas. We are talking about chips made according to the process technology 32 nm, 28 nm, and 14 nm. Plans to build another plant near Taylor, Texas. The project is estimated at $17 billion^[51].

1. Texas Instruments. Builds a new factory in Texas worth about $30 billion^[52]. TSMC also participates in the program.

The AI R&D ^[53] Artificial^[54]The document, in particular, provides for the development of research in the field of neuromorphic processors^[55]Thus, we can expect an intensification of US efforts to develop an architecture of this type, which will give impetus to innovative solutions in terms of the element base.

Great Britain

The country is implementing, albeit with great delays, a long-term strategy to develop the semiconductor industry. The problems, according to experts, are associated with new appointments and personnel reshuffles in the government. In May 2023, the country's authorities announced the allocation of £1 billion for the development of chips in the next 10 years. It is planned that the first tranche of £200 million will be distributed until 2025. The strategy of the British, unlike the United States and the EU, is focused on the development of the so-called. "Faceless" companies and the sale of technology.

General Conclusions and Recommendations

1. USA, EU, China, India, Republic of Korea actively allocate significant financial resources for ambitious long-term projects and are searching for effective industry management policies. The focus is on three main areas: localization of production in the national territory; access to the latest technologies and strengthening positions in production chains; qualified personnel.
2. In light of the aggravation of global competition, Russia needs to take measures to ensure stable access to microelectronics from leading production centers, launch a comprehensive program to create its own production facilities.
   The lack of availability of chips of the domestic economic complex can lead to the disruption of infrastructure projects, industry and specialized programs (especially in the field of communications, industrial electronics, transport, medicine, mechanical engineering), undermine mega-scientific initiatives and developments (quantum computing, artificial intelligence, experimental work in the field of nuclear physics). This will inevitably affect the overall development of the economy, the speed of implementation of technological innovations and, in general, the geostrategic positions of the country.
3. To optimize the development of domestic microelectronics, it is advisable to focus the efforts of all national bodies within a single, well-thought-out and feasible program. It is important to take into account the experience of implementing such programs in countries with a similar state of the national semiconductor segment, in particular, the long-term plan for the development of the industry in India (the above recommendations to the Indian government as part of the roadmap for "sustainable production and export of electronics worth $300 billion by 2026" can be of interest^[56]
4. When developing a domestic strategy to create its own microelectronic capacities, it is necessary to consider policies and phased steps for all components: raw materials and components; research and design; Technologies/Processes production base and equipment, qualified personnel.
5. It would be rational to carry out an inventory and forecasting: based on the needs of the domestic national economic and military-industrial complex (current and promising projects), conduct a thorough calculation of the necessary volumes of semiconductor products by key segments (four main product groups):
   1. microprocessors and logical devices for computers, communication equipment, consumer electronics, etc.;
   2. information storage devices, DRAM (dynamic random access memory using semiconductor materials), NAND flash memory (saves data when power is turned off) and others;
   3. apparatus for converting analog signals into digital signals;
   4. optoelectronics, sensors/drives and discrete semiconductor components (O-S-D) for generating or sensing light.
6. In the context of sanctions and limited opportunities for international cooperation, it is important to make efforts to build production chains within the EAEU, CIS, BRICS, bilateral and multilateral alliances with friendly and neutral countries.

When choosing the directions of dialogue with partners, it is necessary, in particular, to optimize the negotiation policy based on the presence in the Russian Federation of individual components and raw materials for the production of chips. In a number of positions, our export opportunities are unique, which can contribute to the conclusion of contracts for the purchase of finished products and the transfer of technologies.

Notes