U.S. Needs More Space to Meet Semiconductor Chip Demand

Technology’s capabilities seem endless, and along with them, there comes nearly an equal demand for commercial real estate, specifically to deliver semiconductor chips.

An additional 200 million square feet could be required in the U.S. over the next decade as rapid technological advancements increase demand, and the country vies to regain global market share to support electric vehicles, artificial intelligence and the like, according to Savills. 

Currently, there are 94.9 million square feet of commercial real estate dedicated to the chip industry supporting functions ranging from design and fabrication to research and development.

In its report, Savills makes the case for more space in part because the U.S. has lost its dominance in domestic semiconductor production.

In 1990, the US held a 37% global market share, but that declined to 10% as of 2022. If the U.S. wants to increase its share to 20%, 200 million square feet of real estate will be needed, Savills said. 

Savills noted that COVID-19 lockdown disruptions prompted a global chip shortage while the demand for telehealth, remote work, and virtual learning soared.

“This brought to light the need for the domestic production of semiconductors for national security purposes,” according to the report.

The CHIPS and Science Act was enacted in 2022 to provide funding to boost U.S. research and manufacturing of semiconductors, which are in greater demand than ever, thanks to the rising popularity of electric vehicles and the burgeoning market for artificial intelligence.

John Leddy, Managing Director, Technology Division, Work Dynamics, JLL, tells GlobeSt.com that US-based manufacturing announcements have dominated news headlines in recent months. 

“The semiconductor industry is poised for growth in the coming years, which will impact their real estate portfolios and the capital they will be investing,” Leddy said.

At the same time, when planning for this growth, manufacturers are focused on enhancing their facility operations to meet ESG goals, he said.

“The urgency to address sustainability concerns stems in part from the AI boom, which is expected to boost the production of chips that deliver enhanced processing power,” according to Leddy.

“There’s also heightened scrutiny on semiconductor companies to meet ESG targets, including from governments with net-zero legislation.”

He said among the most common measures companies are implementing focus on driving energy efficiency in day-to-day facility operations. 

“Everything is on the table, from reusing wastewater generated during chip manufacturing for other facility needs or using smart sensors in their spaces to provide maintenance services using data more efficiently. 

“Real estate and facility initiatives like these are going to be key in this growth phase for the industry.”

Savills said Texas and Arizona are dominating recent growth trends whereas once Silicon Valley was considered the historic hub.

“These large-scale investments have the potential to move and shake markets with economies developing around new facilities creating demand for both industrial and office space in places such as Phoenix, Austin, and Columbus, Ohio, among others,” Savills writes.