March 29, 2022
Are We Getting Closer to “Locally Grown” Lighting?
It’s unlikely that complete light fixtures will soon be 100% sourced locally, but the U.S. is making a push to revive domestic semiconductor production
One of the many pandemic pivots that lighting manufacturers have made during the last two years is addressing the risk of how supply chain sourcing and just-in-time practices affect the ability to serve customers with high-performing products and short lead times.
To help curb global supply chain challenges, many U.S. lighting makers have decreased their sourcing exposure in Asia and Europe, but doing so for some key components can be difficult. According to the Semiconductor Industry Association, the U.S. share of global semiconductor production has shrunk from 37% in 1990 to 12% today.
Foreign government incentives, in part, cause the cost of building and operating semiconductor manufacturing facilities to be 20-40% higher in the U.S. than abroad. The federal government has been moving forward on two pieces of legislation that are aimed to reverse that trend and help curb future supply chain disruptions by bringing more semiconductor manufacturing back to the U.S.
Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act – Congress authorized federal incentives to promote semiconductor manufacturing and increased investments in semiconductor research. The Senate-passed USICA (S. 1260) and House-passed COMPETES Act (H.R. 4521) include $52B in funding for the CHIPS Act. The next step involves Congress developing compromise legislation with full CHIPS funding.
Facilitating American-Built Semiconductors Act (FABS Act) – the FABS Act would establish a tax credit for investments in constructing, expanding, and upgrading semiconductor manufacturing facilities and equipment in the U.S., and the House bill includes a credit for semiconductor design.
The FABS Act would provide a 25 percent refundable investment tax credit (RITC) to semiconductor companies for investments in manufacturing of the technology in the United States.
The RITC could cover building costs for a semiconductor manufacturing facility or the semiconductor manufacturing equipment that would produce the chips.
Additionally, the bill would provide a 25 percent RITC for companies investing in the research and design of next generation semiconductors. This incentive will help to ensure America continues to lead the world in semiconductor design.
In recent months:
Intel announced plans for an initial investment of more than $20 billion in the construction of two new leading-edge chip factories in Licking County, Ohio
Samsung announced plans for a $17 billion factory in Texas
Texas Instruments is investing up to $30 billion in Texas
While the global companies cited above serve computing, technology and consumer electronics sectors, it remains to be seen if the legislation-in-process and the recently announced factory plans will eventually have a noticeable impact on the lighting industry's manufacturing of lighting and controls products. If the U.S. does indeed revive semiconductor production, the lighting industry will look to source discrete LEDs, COBs (Chip On Board) and other printed circuit board components to help drive more domestic supply chain sourcing.