For more than 50 years, computer chip designers primarily used one performance-boosting tactic: they shrunk electronics to pack more energy into each piece of silicon.

Then, 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 small transistors, they envisioned creating one out of smaller chips that would be tightly packed to function as an 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 ground because the smaller chips are cheaper to make, while packages of them can outperform any chunk of silicon.

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

“The 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’s happening because there’s really no other way.”

The problem is that packaging, like chip manufacturing, is overwhelmingly dominated by companies in Asia. Although the United States accounts for about 12 percent of global semiconductor production, American companies provide only 3 percent of chip packaging, according to IPC, a trade association.

That issue has now put chiplets in the middle of US industrial policymaking. The CHIPS Act, a $52 billion subsidy package passed last summer, was seen as President Biden’s move to revitalize domestic chip manufacturing by providing money to build more sophisticated factories called “fabs.” But part of this was also aimed at stimulating advanced packaging factories in the United States to capture more of that essential process.

“As chips get smaller, the way the chips are organized, which is the packaging, is becoming more important and we need to get it done in the United States,” Commerce Secretary Gina Raimondo said in a statement. a speech at Georgetown University in February.

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

Some chip packaging companies are moving quickly to get financing. One 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. Amkor Technology, an Arizona packaging service that has most of its operations in Asia, also said it was speaking with customers and government officials about a US production presence.

Packaging chips together isn’t a new concept and chiplets are just the latest iteration of that idea, using technological advances that help pack chips together, either side by side or stacked on top of each other, along with faster electrical connections. among them. .

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

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

That combination is then encased 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, prompting Silicon Valley companies to move packaging to lower-wage Asian countries more than 50 years ago. Most of the chips are usually shipped to packaging services in countries like Taiwan, Malaysia, South Korea, and China.

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

But these days, smaller transistors aren’t necessarily cheaper, in part because factories for next-generation chips can cost $10 billion to $20 billion to build. Large, complex chips are also expensive 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 into the largest chip-making machines that allow .

“The natural response to that is to put more things in one package,” said Anirudh Devgan, chief executive of Cadence Design Systems, whose software is used to design conventional chips and chiplet-style products.

Synopsys, a rival, said it was tracking more than 140 customer projects based on bundling multiple chips together. Up to 80 percent of microprocessors will use chiplet-style designs by 2027, according to market research firm Yole Group.

Today, companies often design all chiplets in one package along with their own connection technology. But industry groups are working on technical standards so that companies can more easily assemble products from chips that come from different manufacturers.

The new technology is mainly used now for extreme performance. Intel recently unveiled a processor called the Ponte Vecchio with 47 chipsets that will be used in a powerful supercomputer at Argonne National Laboratory, which is near Chicago.

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

Sam Naffziger, AMD’s senior vice president, said it wasn’t easy for the company to stake its server chip business on chipsets. Packaging complexities were a major hurdle, he said, which were eventually overcome with the help of an undisclosed partner.

But the 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 chips that power the web.

Packaging services still need others to supply the substrates that chiplets require to connect to circuit boards and to each other. One company driving the chiplet 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 been developing similar technology, as well as improving on less-expensive conventional plastic substrates in an approach favored by some, like Silicon Valley start-up Eliyan. Intel has also been developing new packaging prototypes under a Pentagon program and hopes to win CHIP Act support for a new packaging pilot plant.

But the United States has no major manufacturers of these substrates, which are produced primarily in Asia and evolved from technologies used in circuit board manufacturing. Many US companies have also exited that business, another concern that industry groups hope will spur federal funding to help board suppliers get started making substrates.

In March, Mr. Biden issued a determination that advanced packaging and domestic circuit board production were essential to national security, and announced $50 million in Defense Production Act funding for US and Canadian companies in those fields.

Even with such subsidies, assembling all the necessary elements to reduce US dependence on Asian companies “is a huge challenge,” said Andreas Olofsson, who led a Defense Department research effort in the field before founding a new packaging company called Zero ASIC. “You have no suppliers. You don’t have manpower. You have no team. You have to start from scratch.”

ann swanson contributed reporting.

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