The intense global competition over microchips is often discussed as a battle of size, with companies squaring off to cram ever more transistors onto ever-shrinking pieces of silicon. Right now, that race is among TSMC, Intel and Samsung, all of which are trying to mass-produce the first “two nanometer” chip — a marketing term for the next generation of semiconductors that could deliver faster processing speeds while using less energy. But there’s another race afoot as well: All three chipmakers have been innovating in an area arguably just as important to improving future computing power. Known as “advanced packaging,” it’s a set of techniques that combines multiple chips with different functions to operate as one — allowing computers and devices to boost their performance with existing technology. Advanced packaging isn’t just a business story: It has become part of the Washington discussion on the future of microchips, particularly the global debate about where it’s likely to happen. The Biden administration considers advanced packaging an emerging field in which any country could still turn out to be dominant, unlike traditional packaging methods — a labor-intensive afterthought that has been offshored to Asia for decades. To give the U.S. a strong foothold, it has committed at least $3 billion to innovations that will advance American leadership in these techniques. Last week, the Commerce Department made advanced packaging the focus of its first funding contest for the CHIPS Act’s $11 billion for semiconductor R&D — an effort dedicated to tackling the industry’s biggest opportunities five to fifteen years from now. Advanced packaging is of “equal or more importance” than the U.S. effort to reclaim production of the world’s leading-edge chips, said Melissa Grupen-Shemansky, chief technology officer of the microelectronics trade group SEMI. “It's not only about getting to two-nanometer transistors. We already know people who can do that in the world, and it's not the United States,” she told DFD. “The advancements are going to be really done in advanced packaging technologies largely, so it’s very critical for us to know how to do it.” “Packaging” itself isn’t a new idea. Chips always needed some sort of casing to protect them, and enable communication with the rest of the system they’re built into. In the past, a device would have, say, a memory chip (which stores data) and a logic chip (which processes it), both in their own packages placed apart on a circuit board. Advanced packaging techniques can merge these within a single package, reducing the time and power required to send signals in between and saving room inside the device. As with much of the chip industry, AI is the latest driver in demand. TSMC Chairman Mark Liu said last fall that his company’s struggle to keep up with the recent AI boom is not from demand for the chips themselves, but rather “the shortage of our CoWoS capacity” — the company’s “chip-on-wafer-on-substrate” advanced packaging technology. Better packaging has become hugely important to devices like smartphones, in which miniaturized power is key. Futuristic ideas like health monitoring patches and smart clothing are also expected to drive demand. To the U.S., seeking to regain its claim over the outer edge of computing, this looks like an opportunity. It’s hard to say who is a clear leader in the advanced packaging sector and by what metric. The American giant Intel has ambitions to lead in advanced packaging. Earlier this year, Intel opened a $3.5 billion factory in Rio Rancho, New Mexico, that it touted as the only one in the U.S. producing the world’s most advanced packaging solutions at scale. TSMC has developed the most patents surrounding advanced chip packaging, with Samsung trailing close behind. In terms of sheer volume, third-party suppliers known as OSATS dominate the packaging realm. For countries, the stakes for leadership are high. Some analysts and lawmakers have warned that the U.S.’s quest for tech dominance could fail if leading-edge American-made chips still need to be shipped overseas for packaging. That’s a risk the Biden administration has acknowledged. The U.S. is trying: the CHIPS program’s ambitions are that by the end of the decade, it can be home to multiple high-volume advanced packaging facilities and be a global leader in the techniques for leading-edge chips.
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