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For every dollar that is invested in semiconductors, around $3 of economic activity is thought to be generated downstream – and in this case, downstream means absolutely anything technology-related. Just about piece of tech equipment you can buy today will rely in some way on a semi-conductor.
My guest today is Sanjay Kumar, who was recently senior director in the US department of commerce, where he was very closely involved in deploying part of the $52bn that was legislated as part of the CHIPS Act, aimed at spurring domestic production of semiconductors.
He tells me that he used to be sceptical of people who said the industry would one day be a trillion-dollar one, but that has now changed. The sector has been buoyed by high performance computing, automotive and other applications, but with the advent of AI we are experiencing another “Cambrian explosion” of demand, as Kumar calls it, reminiscent of the advent of the smartphone, when all of a sudden everyone needed a chip in their pocket at all times.
According to Kumar, the CHIPS Act is set to contribute off $400bn of FDI by the end of the decade for the US, which is trying to claw its way back to the top of a geopolitically crucial chip manufacturing market that has been completely dominated by Asia.
Along this value chain, there is plenty of space for startups and investors to innovate, everything from networking, to storage, to memory, the chip architecture itself, and even the capability of AI itself to help design the chips that make it possible.