Geopolitics drives ‘re-shoring’ trend in the west

As the industry gathered for this year’s SPIE Photonics West we were closing in on a year since Russia’s invasion of Ukraine. Just how that conflict can be resolved remains impossible to call at the time of writing, but its economic impact in terms of energy prices alone has been dramatic. And although this year’s event will — hopefully — be one that sees the specter of Covid-19 finally disappearing in the rear-view mirror, China’s ongoing struggles with its post-zero-Covid strategy threaten to cause lingering disruption to supply chains.

That’s not all. Alongside what is undoubtedly a hot war in eastern Europe, we see increasingly chilly relations between the US and China — something that has a more obvious impact on photonics. Taiwan’s key role in semiconductor chip manufacturing — and at the giant TSMC foundry in particular — is a significant part of a complex situation: on one hand the US wants to stop China gaining access to bleeding-edge chip manufacturing equipment and know-how; but on the other hand, the wider global economy cannot function properly without easy access to the more basic chips and electronic devices produced in China en masse. Since all chip production relies on photonics technology to some extent, this is a major issue for the industry.

But look at what TSMC (Taiwan Semiconductor Manufacturing Co.) is doing in the US. In December the company said it would now be investing some $40 billion across two enormous new fabs in Arizona. The announcement of a second fab was made at TSMC’s ceremony also marking the arrival of an initial batch of state of-the-art semiconductor manufacturing equipment — provided by longtime suppliers Applied Materials, ASM, ASML, Lam Research, KLA, and Tokyo Electron — at what will be the firm’s “Fab 21.” President Biden’s attendance at the event served to underline the significance of the investment, and the move to “re-shore” critical technologies.

Fears over the supply of cutting-edge chips fabricated by the likes of TSMC is driving the current “re-shoring” trend in the US and Europe. Credit: TSMC

Speaking at that ceremony, Biden pointed out that the US’ share of global chip production had shrunk from 30% in the early 1990s to only 10% today. TSMC’s Taiwan operation has of course taken a chunk of that share — much of it to provide Apple with processor chips. The perceived threat posed by China is evident, and the new fabs in Phoenix will serve to mitigate that threat. It isn’t just TSMC of course, with Biden pointing to similarly massive investments by Micron in New York, and Intel in Ohio.

“Some of the companies here today are customers that are going to buy these chips made here,” Biden said at the Phoenix ceremony. “Some are suppliers that are going to help make these chips. And they all depend on a strong supply chain. That’s why what we’re doing here in Arizona matters across the country and around the world.”

Notice the “we:” in 2022, the Chips and Science Act and Inflation Reduction Act (IRA) legislation in the US has spurred that re-shoring effort. And there are similar efforts around the world — notably the European Commission’s own version of the Chips Act, key to Intel planning a new fab in Germany.

Supply chain anxiety

In essence, nobody wants to run the risk of losing their supply of critical semiconductors, something that will inevitably lead to some degree of overcapacity — but also more fabs, and more equipment. The Semiconductor Equipment and Materials International (SEMI) industry group made this observation in December:

“In the Americas, the US Chips and Science Act has vaulted the region into the lead worldwide in new capital spending as the government investment spawns new chipmaking facilities and supporting supplier ecosystems.” For the 2021-2023 period, SEMI’s analysts say construction will have started on 18 new facilities in the Americas.

What about the rest of the world? “China is expected to outnumber all other regions in new chip manufacturing facilities, with 20 supporting mature technologies planned,” states SEMI. “Propelled by the European Chips Act, Europe/ Mideast investment in new semiconductor facilities is expected to reach a historic high for the region, with 17 new fabs starting construction between 2021 and 2023. Taiwan is expected to start construction on 14 new facilities, while Japan and Southeast Asia are each projected to begin building six new facilities over the forecast period. Korea is forecast to start construction on three large facilities.”

As strategically significant as the semiconductor industry is, the “re-shoring” theme is hardly limited to it. In 2022 we also saw the likes of First Solar and Corning make major commitments to optics and photonics technology production in the US. First Solar explicitly referenced the IRA legislation as it committed billions of dollars to new US manufacturing scale, while Corning’s optical fiber cable production will create yet more optics industry jobs in Arizona.

High numerical aperture (high-NA) reflective optics under development at key supplier Zeiss. Extreme ultraviolet lithography with high-NA capability is expected to be rolled out by ASML from 2025. Credit: Zeiss

Russia’s aggression and the impact on energy prices in Europe has altered the political calculus when it comes to alternatives to gas fuel, and investment in photovoltaics deployment and manufacturing now looks a lot more attractive. In December Solar Power Europe said 2022 would represent a record-breaking year for PV installations on the continent — smashing its forecast from a year earlier. The same report also warned of the over-reliance on Chinese solar manufacturers, with the likes of Swiss company Meyer Burger moving into high-end cell and module production alongside a major development effort focused on perovskite-silicon tandem cells promising a game-changing increase in cell efficiencies.

“The political context for re-shoring solar manufacturing to Europe changed dramatically in 2022,” wrote Solar Power Europe’s analysts in their December report. “There is now a strong political awareness around the need for cleantech industrial strategies.”

More open discussions are now taking place on Europe’s competition rules and policies on state aid, suggesting central support for that re-shoring effort. “The US Inflation Reduction Act, which was signed into law in August, has been the catalyst for this changed approach,” added the report, describing the US legislation as “probably most impactful” in a series of assertive industrial strategies on solar manufacturing around the world.

“Today, Europe does not have a strong manufacturing industry along the supply chain for solar modules and is highly dependent on Chinese imports, especially for ingots and wafers, but also cells,” the same report warned, suggesting that the newly launched European Solar PV Industry Alliance should look to mobilize public and private finance for PV manufacturing projects to scale up in Europe as soon as possible.

Investor sentiment towards photovoltaics looks to have changed markedly. In a year that saw the stock prices of many technology firms tank, First Solar bucked the trend completely — in 2022 it gained 77% while the Nasdaq and S&P 500 indices dropped 34% and 20% respectively. Russia’s invasion, and its impact on energy prices and the supply of gas itself has shown the value of energy independence, with a fresh focus on how renewable and nuclear energy sources can help achieve that. A year ago the prospect of nuclear power being back in favor in Germany and Japan was unthinkable, but here we are.

Another potential game-changer has emerged from the National Ignition Facility (NIF), in a flurry of press coverage that put lasers on front pages globally. That was, of course, the first step on a journey towards viable fusion energy that may still take decades to achieve, if it ever happens. However, it would simply not be possible without that first step. Inertial confinement fusion (ICF) with lasers is by no means the only fusion option, with other approaches tipped by many to be more commercially feasible.

The fusion age emerges

But we should not discount the possibility of commercial laser fusion energy, perhaps with “direct drive” approaches that directly couple the laser to the target material — instead of driving X-rays to collapse the target, which is the approach taken at NIF. Commenting on the recent result, Constantin Häfner, the Fraunhofer commissioner for fusion research in Germany, said: “Fusion is a high-risk, high-return investment and — if successful — the holy grail for achieving energy sovereignty and meeting the world’s energy needs in the long term. Now is the time to set sail to bring fusion energy to the grid, a journey that is clearly a multi-decadal effort, assuming the world will commit and sustain investment.”

We will have to wait and see whether more government support is forthcoming for fusion efforts. But in the private sector a growing number of start-up companies around the world are seeking to address aspects of technology development that are still needed. More than 30 companies are already active in magnetic fusion energy and magneto-inertial technologies, with another six looking at inertial fusion energy (IFE) that more closely resembles the NIF approach. According to the Fusion Industry Association total investment has increased from $1.8 billion to more than $4.7 billion within the past two years.

Four of those startups are based in Germany, among them Focused Energy, the company started by University of Texas professor Todd Ditmire that attracted investment from Major League Baseball star Alex Rodriguez, among others. Another is Marvel Fusion, whose co-founders include ELI Beamlines deputy director Georg Korn. If IFE can be made to work, what might the implications be for the photonics industry?

“Let’s say in 2050 we will have to commission several fusion power plants per year for IFE to contribute to our power grid,” thinks Häfner. “This will require the production of many hundreds of powerful lasers the size of [shipping] containers. We [would] need to completely rethink laser and optics production and set up automated production lines like those in the automotive industry.”

There would be much more to consider beyond the lasers. Amplifier gain media, optics, coatings, crystals — all would demand mass production at low cost. Yes, there are a great many more complex problems that would need to be solved on the journey to fusion energy. But such a challenge can only spur innovation, says Haefner: “Fusion energy is a high-stakes endeavor, and as such, getting started and pursuing the most promising approaches is a good strategy. The race is on.”

Thales and Marvel Fusion are cooperating on upgrading the laser system of the Extreme Light Infrastructure for Nuclear Physics (ELI-NP) in Magurele, Romania. With the upgraded laser, Marvel Fusion aims to validate key aspects of its technology for fusion energy. This will make Marvel Fusion the first private company to establish a scientific collaboration at the world’s most powerful laser facility ELI- NP. For Thales, this will strengthen its leadership position in the design, development, and manufacturing of solid-state lasers for science, industry, and space. Credit: Thales/Marvel Fusion

Perhaps the nascent fusion industry can take inspiration from the semiconductor sector. What has been achieved by ASML in the development of extreme ultraviolet (EUV) lithography equipment is nothing short of extraordinary. And as with fusion, EUV was once dismissed by the majority as simply too complex and costly an engineering challenge to solve, likened (with some justification) to using a nuclear power station to power a small village. For a long time laser-powered plasma EUV sources were thought unlikely to out-compete electrical discharge approaches. But ASML persevered where its rivals stepped back — and now, thanks in part to Zeiss optics and Trumpf lasers, the Dutch firm has established a lucrative monopoly in EUV.

One of the most challenging elements of EUV development was to come up with a source design that had just the right combination of laser power and target materials (liquid tin, in EUV’s case) to generate useful EUV emissions. In principle at least, fusion faces a similar problem: how to couple powerful lasers with a target material at a rapid repetition rate and with high precision.

Yes, we are certainly a long way from realizing it. But perhaps it is just about possible to glimpse a future where we generate baseload energy from laser-driven fusion, augmented by intermittent solar photovoltaics, to provide grid power for the lasers that pattern semiconductor wafers, weld electric vehicle batteries, generate quantum states, and help to steer autonomous vehicles. A future built around photonics.

A version of this article appeared in the 2023 Photonics West Show Daily.