December 3, 2023

For more than 50 years, designers of computer chips have primarily used one strategy to increase performance: They have shrunk the size of electronic components to pack more power on each silicon chip.

More than a decade ago, engineers at chipmaker Advanced Micro Devices began working on a radical idea. Instead of designing a massive microprocessor with lots of tiny transistors, they imagined building one out of smaller chips that would be tightly packed together and work like an electronic brain.

The concept, sometimes called a chiplet, has exploded in popularity, with products from AMD, Apple, Amazon, Tesla, IBM, and Intel. Chiplets quickly gained traction because smaller chips are cheaper to manufacture, and their bundles can exceed the performance of any single silicon chip.

The strategy is based on advanced packaging technology, which has become an important tool in driving semiconductor progress. It represents one of the biggest shifts in years for an industry driving innovation in areas like artificial intelligence, self-driving cars and military hardware.

“Packaging is where the action is,” said Subramanian Iyer, a UCLA professor of electrical and computer engineering who helped pioneer the chiplet concept. “It’s happening because there’s really no other way.”

The problem is that this packaging is like making your own chips, overwhelmingly dominated by Asian companies. While the U.S. accounts for about 12 percent of global semiconductor production, U.S. companies provide just 3 percent of chip packaging, according to trade association IPC.

Now, the issue has placed chiplets in the middle of U.S. industrial policymaking. The CHIPS Act, a $52 billion subsidy program passed last summer, was seen as President Biden’s move to revive domestic chip manufacturing by providing funds to build more advanced factories, known as “fabs.” But part of it is also aimed at driving the fundamental process of getting more of America’s advanced packaging fabs.

“As chips get smaller and smaller, the way they are arranged, or packaged, becomes more and more important,” Commerce Secretary Gina Raimondo said in a speech at Georgetown University in February. We need to get it done in America.”

The Department of Commerce is now accepting applications for CHIPS Act manufacturing grants, including chip packaging plants. It also allocates funding for research projects specifically focused on advanced packaging.

Some chip packaging companies are moving quickly to raise capital. One of them is Integra Technologies in Wichita, Kansas, which announced plans for a $1.8 billion expansion there but said it was contingent on receiving federal subsidies. Arizona-based packaging services company Amkor Technology, which does most of its business in Asia, also said it was in discussions with customers and government officials about manufacturing in the United States.

Packing chips together is not a new concept, and chiplets are just the latest iteration of the idea, using technological advances to help cram chips closer together — side by side or stacked — and faster electrical connections between them .

“What’s unique about chiplets is how they’re electrically connected,” said Richard Ott, chief executive of Promex Industries, a Santa Clara, Calif.-based chip packaging services company.

Chips can’t do anything without a way to connect them to other components, which means they need to be placed in some kind of package that can carry electrical signals. The process begins after the factory completes the initial stages of fabrication, which can create hundreds of chips on a silicon wafer. Once that wafer is diced, the individual chips are usually bonded to a critical base layer called the substrate, which conducts electrical signals.

The combination is then coated with protective plastic to form a package that can be plugged into a circuit board critical for connecting to other components in the system.

The processes initially required a lot of manual labor, leading Silicon Valley companies to move packaging to lower-wage countries in Asia more than 50 years ago. Most of the chips are usually airfreighted to packaging services in countries such as Taiwan, Malaysia, South Korea, and China.

Since then, advances in packaging technology have become increasingly important because of diminishing returns from Moore’s Law, shorthand for the miniaturization of chips that has driven progress in Silicon Valley for decades. It is named for Intel co-founder Gordon Moore, whose 1965 paper described how the company quickly doubled the number of transistors on a typical chip, boosting performance at lower cost.

But today, smaller transistors aren’t necessarily cheaper, in part because building factories for cutting-edge chips can cost $10 billion to $20 billion. Large, complex chips are also expensive to design and tend to have more manufacturing defects, even as companies in areas such as generative artificial intelligence want more transistors than the largest chip-making machines currently allow.

“The natural reaction to this is to put more things in one package,” said Anirudh Devgan, chief executive officer of Cadence Design Systems, whose software is used to design traditional chips as well as chiplet-style products.

Rival Synopsys says it is tracking more than 140 customer projects based on packaging multiple chips together. According to market research firm Yole Group, by 2027 as many as 80 percent of microprocessors will use chiplet-style designs.

Today, companies typically design all chiplets in one package with their own connectivity technology. But industry groups are developing technical standards so companies can more easily assemble products from chiplets from different manufacturers.

This new technology is now mainly used to achieve extreme performance. Intel recently unveiled a processor called the Ponte Vecchio, which has 47 chiplets and will be used in a powerful supercomputer at Argonne National Laboratory near Chicago.

In January, AMD revealed plans for an unusual product, the MI300, that would combine chiplets for standard computing with other chiplets designed for computer graphics, as well as lots of memory chips. The processor, designed to power another advanced supercomputer at Lawrence Livermore National Laboratory, has 146 billion transistors, compared to the tens of billions in most advanced conventional chips.

AMD’s senior vice president, Sam Naffziger, said the company wasn’t a slam dunk betting its server computer chip business on chiplets. Packaging complexity was a major hurdle, which was eventually overcome with the help of an undisclosed partner, he said.

But chiplets are already paying 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 networks.

Packaging services still need someone else to provide the substrates needed for the chiplets to connect to the circuit board and interconnect. One of the companies driving the chiplet craze is TSMC, which already makes chips for AMD and hundreds of other companies, supplying an advanced silicon-based substrate called an interposer.

Intel has been developing similar technology, enhancing cheaper traditional plastic substrates in an approach favored by Silicon Valley startup Eliyan and others. Intel has also been developing new packaging prototypes under the Pentagon program and hopes to win CHIPs Act support for a new pilot packaging plant.

But the U.S. has no major manufacturers of these substrates, which are mostly produced in Asia and evolved from the technology used to make circuit boards. Many U.S. companies have also left the business, another concern that industry groups want to spur federal funding to help circuit board suppliers start making substrates.

In March, Mr. Biden declared advanced packaging and domestic circuit board production critical to national security and announced $50 million in Defense Production Act funding for US and Canadian companies in these areas.

Even with such subsidies, assembling all the necessary elements to reduce America’s reliance on Asian companies “is a huge challenge,” said Andreas Olofsson, who is starting a company called Zero The ASIC-packaging startup was previously responsible for DoD research in this area. “You don’t have suppliers. You don’t have labor. You don’t have equipment. You have to start from scratch.”

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