The US is focusing on refreshing ‘chiplets’ to stay on the cutting edge of technology

For more than 50 years, computer chip designers used mainly one tactic to boost performance: They shrunk electronic components to pack more power into each bit of silicon.

So more than a decade ago, engineers at chipmaker Advanced Micro Devices began toying with a radical idea. Instead of designing a large microprocessor with a large number of tiny transistors, they thought of making one from smaller chips that would be tightly packed together to act as one electronic brain.

The concept, sometimes called chiplets, caught on in a big way, with AMD, Apple, Amazon, Tesla, IBM and Intel introducing such products. Chiplets quickly gained traction because smaller chips are cheaper to make, while bundles of them can top the performance of a single slice of silicon.

The strategy, based on advanced packaging technology, has since become an important tool for enabling progress in semiconductors. And it represents one of the biggest changes in years for an industry that is driving innovations in fields such as artificial intelligence, self-driving cars and military hardware.

“Packaging is where the action is going to be,” said Subramanian Iyer, a professor of electrical and computer engineering at the University of California, Los Angeles, who helped pioneer the chiplet concept. “It happens because there is actually no other way.”

The catch is that such packaging, like making the chips themselves, is overwhelmingly dominated by companies in Asia. Although the United States accounts for about 12 percent of global semiconductor production, American companies supply only 3 percent of chip packaging, according to IPC, an industry association.

That problem has now landed in bits and pieces in the middle of American industrial policy. The CHIPS Act, a $52 billion subsidy package passed last summer, was seen as President Biden’s move to reinvigorate domestic chip manufacturing by providing money to build more sophisticated factories called “fabs.” But part of it was also aimed at firing up advanced packaging factories in the US to capture more of the essential process.

“As chips get smaller, the way you arrange the chips, which is packaging, is more and more important, and we need it done in America,” Commerce Secretary Gina Raimondo said in a speech at Georgetown University in February.

The Department of Commerce is now accepting applications for CHIPS Act production grants, including for chip packaging factories. It also allocates funds for a research program specifically on advanced packaging.

Some chip packaging companies are quick to pursue funding. One is Integra Technologies of Wichita, Kan., which announced plans for a $1.8 billion expansion there but said it was contingent on receiving federal subsidies. Amkor Technology, an Arizona-based packaging service that has most of its business in Asia, also said it was talking to customers and government officials about a U.S. manufacturing presence.

Packing chips together isn’t a new concept, and chips are just the latest iteration of that idea, using technological advances that help stuff the chips closer together — either side-by-side or stacked on top of each other — along with faster electrical connections between them .

“What’s unique about chips is the way they’re connected electrically,” said Richard Otte, CEO of Promex Industries, a chip packaging service in Santa Clara, California.

Chips can’t do anything without a way to connect them with other components, which means they have to be placed in some kind of package that can carry electrical signals. That process starts after factories complete the initial phase of production, which can create hundreds of chips on a silicon wafer. Once that wafer is cut apart, individual chips are typically bonded to a key base layer called a substrate, which can conduct electrical signals.

This combination is then coated in protective plastic, forming a package that can be plugged into a circuit board that is essential for connecting to other components in a system.

These processes originally required a lot of manual labor, which led Silicon Valley companies to move packaging to low-wage countries in Asia more than 50 years ago. Most chips are usually flown to parcel services in countries such as Taiwan, Malaysia, South Korea and China.

Since then, packaging advances have gained importance because of the diminishing returns from Moore’s Law, the shorthand term for chip miniaturization that for decades drove progress in Silicon Valley. It is named after Gordon Moore, a co-founder of Intel, whose 1965 paper described how quickly companies had doubled the number of transistors on a typical chip, improving performance at a lower cost.

But these days, smaller transistors aren’t necessarily cheaper, partly because building factories for conductive chips can cost $10 billion to $20 billion. Large, complex chips are also expensive to design and tend to have more manufacturing defects, although companies in fields like generative AI want more transistors than can currently be packed into the largest chip-making machines.

“The natural response to that is to put more things in a package,” said Anirudh Devgan, CEO of Cadence Design Systems, whose software is used to design conventional chips as well as chip-style products.

Synopsys, a rival, said it tracked more than 140 customer projects based on packaging multiple chips together. As much as 80 percent of microprocessors will use chiplet designs by 2027, according to market research firm Yole Group.

Today, companies typically design all the chips in a package together with their own connectivity technology. But industry groups are working on technical standards so that companies can more easily assemble products from chiplets that come from different manufacturers.

The new technology is now mostly used for extreme performance. Intel recently introduced a processor called Ponte Vecchio with 47 chips to be used in a powerful supercomputer at Argonne National Laboratory, located near Chicago.

In January, AMD revealed plans for an unusual product, the MI300, which combines chips for standard computing with others designed for computer graphics, along with a wide range of memory chips. This processor, intended to power another advanced supercomputer at Lawrence Livermore National Laboratory, has 146 billion transistors, compared to tens of billions for most advanced conventional chips.

Sam Naffziger, a senior vice president at AMD, said it wasn’t a slam dunk for the company to bet its server computer chip business on chiplets. Packaging complexities were a major hurdle, he said, which was eventually overcome with the help of an undisclosed partner.

But chiplets have paid off for AMD. The company has sold more than 12 million chips based on the idea since 2017, according to Mercury Research, and has become a major player in the microprocessors that power the web.

Packaging services still need others to supply the substrates that chiplets need to connect to circuit boards and each other. One company driving the chip boom is Taiwan Semiconductor Manufacturing Company, which already makes chips for AMD and hundreds of others and offers an advanced silicon-based substrate called an interposer.

Intel has developed similar technology, as well as improving on cheaper conventional plastic substrates in an approach favored by some such as Silicon Valley startup Eliyan. Intel has also developed new packaging prototypes under a Pentagon program and hopes to win CHIPs Act support for a new pilot packaging facility.

But the US has no major producers of these substrates, which are mainly produced in Asia and evolved from technologies used in circuit board manufacturing. Many U.S. companies have also exited that business, another concern that industry groups hope will spur federal funding to help tabletop suppliers begin making coasters.

In March, Mr. Biden issued a decision that advanced packaging and domestic circuit board manufacturing was critical to national security, and announced $50 million in Defense Production Act funding for American and Canadian companies in those fields.

Even with such subsidies, putting together all the elements required to reduce America’s reliance on Asian companies is “a big challenge,” said Andreas Olofsson, who ran a Defense Department research effort in the field before founding a packaging startup called Zero ASIC. “You don’t have suppliers. You don’t have labor. You have no equipment. You kind of have to start from scratch.”

Ana Swanson contributed reporting.

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