Then more than a decade ago, engineers at the chipmaker Advanced Micro Devices began toying with a radical idea. Instead of designing one big microprocessor with vast numbers of tiny transistors, they conceived of creating one from smaller chips that would be packaged tightly together to work like 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 rapidly gained traction because smaller chips are cheaper to make, while bundles of them can top the performance of any single slice of silicon.
The strategy, based on advanced packaging technology, has since become an essential tool to enabling progress in semiconductors. And it represents one of the biggest shifts in years for an industry that drives innovations in fields like 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 UCLA who helped pioneer the chiplet concept. “It’s happening because there is actually no other way.”
The catch is that such packaging, like making chips themselves, is overwhelmingly dominated by companies in Asia. Although the United States accounts for around 12% of global semiconductor production, American companies provide just 3% of chip packaging, according to IPC, a trade association.
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That issue has now landed chiplets in the middle of US industrial policymaking. The CHIPS Act, a $52 billion subsidy package that passed last summer, was seen as President Joe Biden’s move to reinvigorate domestic chipmaking by providing money to build more sophisticated factories called “fabs.” But part of it was also aimed at stoking advanced packaging factories in the United States to capture more of that 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 Commerce Department is now accepting applications for manufacturing grants from the CHIPS Act, including for chip packaging factories. It is also allocating funding to a research program specifically for advanced packaging.
Some chip packaging companies are moving quickly for the funding. One is Integra Technologies in Wichita, Kansas, which announced plans for a $1.8 billion expansion there but said that was contingent on receiving federal subsidies. Amkor Technology, an Arizona packaging service that has most of its operations in Asia, also said it was talking to customers and government officials about a US production presence.
These processes originally required lots of manual labor, leading Silicon Valley companies to shift packaging to lower-wage countries in Asia more than 50 years ago. Most chips are typically flown to packaging services in countries like Taiwan, Malaysia, South Korea and China.
Since then, packaging advances have gained importance because of the diminishing returns from Moore’s Law, the shorthand expression for chip miniaturization that for decades drove progress in Silicon Valley. It is named for Gordon Moore, a co-founder of Intel, whose 1965 paper described how rapidly companies had doubled the number of transistors on a typical chip, which improved performance at a lower cost.
But these days, smaller transistors are not necessarily cheaper, partly because building factories for leading-edge chips can cost $10 billion to $20 billion. Big, complex chips also are costly to design and tend to have more manufacturing defects, even as companies in fields like generative AI want more transistors than can currently be packed onto the biggest chips manufacturing machines allow.
“The natural response to that is putting more things in a package,” said Anirudh Devgan, CEO of Cadence Design Systems, whose software is used to design conventional chips as well as chiplet-style products.
Synopsys, a rival, said it was tracking more than 140 customer projects based on packaging multiple chips together. As much as 80% of microprocessors will use chiplet-style designs by 2027, according to the market research firm Yole Group.
Today, companies typically design all the chiplets in a package along with their own connection technology. But industry groups are working on technical standards so companies can more easily assemble products from chiplets that come from different makers.
In March, Biden issued a determination that advanced packaging and domestic circuit board production were essential for national security, and announced $50 million in Defense Production Act funding for American and Canadian companies in those fields.
Even with such subsidies, assembling all the elements required to reduce US dependence on Asian companies “is a huge 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 a workforce. You don’t have equipment. You have to sort of start from scratch.”
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