Chips are integral to the 21st century economy, from connected vehicles and data centers to mobile devices, AI, and streaming platforms. Booming demand will drive a projected $2.3 trillion investment in wafer fabrication capacity alone in 2024–2032. Fab capacity growth is exerting a “pull effect” on the rest of the semiconductor supply chain in design; materials; equipment; assembly, test, and packaging (ATP); and other segments.

Historically, the semiconductor supply chain has been concentrated in a few regions: East Asia, Western Europe, and the United States. But the industry’s expansion across borders is increasing as semiconductor companies invest outside their HQ regions to build resilience while taking advantage of incentives and new market opportunities. This trend presents an exciting opportunity for countries and localities to deepen their footprint in the semiconductor supply chain.

For this new report, Attracting Chips Investment: Industry Recommendations for Policymakers, BCG and the Semiconductor Industry Association (SIA) interviewed SIA member companies, as well as industry and regional experts, to understand how semiconductor companies choose where and how to invest. We outline the following five primary factors that impact investment decisions, and provide actionable recommendations for governments seeking to grow their semiconductor industry:

1. Investment and Operational Costs. Semiconductor development, in both design and manufacturing, is expensive. In 2023, R&D and capital expenditures alone represented over 40% of global semiconductor sales. Semiconductor companies incur large outlays on state-of-the-art facilities and increasingly complex equipment. They must also optimize for operational costs, in particular utilities and materials. Government incentives—such as grants for equipment purchases—can help offset these costs. The best incentive programs are simple, with only a few easy-to-execute conditions attached.
2. Workforce and Talent. Semiconductor companies require access to a large technical workforce—from technicians and skilled trades to PhD-level engineers and scientists. As the industry expands, companies are finding it difficult to secure talent. Too few students enter STEM fields, and many STEM graduates choose to work in other industries. When evaluating new sites, companies not only analyze the local labor pool, but also assess the education system and seek public-private partnerships to foster talent. In addition, they seek locations that offer high quality of life and workable immigration and visa policies. They also valuable labor policies that allow for flexible working arrangements, such as hiring two workers for 12-hour shifts instead of three workers for 8-hour shifts.
3. Infrastructure. Semiconductor design and manufacturing operations need to run continuously—24 hours a day, 365 days a year—so that companies can recoup large capital investments, maintain complex equipment and facilities, and fulfill a dynamic pipeline of customer orders. Safe, reliable, and cost-efficient water, utilities, communications, and transportation infrastructure are critical for semiconductor operations. Small interruptions in operations—such as “micro outages” in the power grid—can incur significant costs. Companies value locations where governments invest in electricity grids that are able to maintain day-to-day stability, provide a portion of energy from green sources, and ensure communications and transportation networks are sufficient to support semiconductor industry needs.
4. Regulatory Environment. Semiconductor investments concentrate in countries with market-friendly trade policies and low border costs. Barriers to the flow of goods, data, and people, as well as possible delays in permitting and customs clearance, impact operational efficiency and place multi-billion-dollar long-term investments at risk. IP protection is also critical in countries where semiconductor companies invest. Policymakers can facilitate semiconductor investments by implementing policies that minimize trade and permitting costs, protect IP, streamline administrative processes, and facilitate the movement of semiconductor products and data.
5. Integrated Ecosystems. Semiconductor companies thrive on vibrant ecosystems that cluster suppliers, customers, R&D partners, innovation hubs, and, ideally, downstream industries such as electronics and automotive. The formation of integrated ecosystems can be facilitated through special economic zones or industrial parks, as well as an initial focus on activities in the electronics supply chain, as a precursor to more advanced semiconductor manufacturing.

Semiconductor companies are poised to make ambitious investments across the world over the next decade. This BCG-SIA report provides deep insight into how semiconductor companies make investment decisions and compiles a set of practical recommendations for policymakers and governments to both position their countries to attract chip ecosystem investments that complement industry operations in the United States and drive greater security, resilience, and diversification in global semiconductor supply chains.