Why the president can’t quickly solve the computer chip shortage

The Biden government had previously pledged to enlist the help of foreign allies that manufacture semiconductors, such as Taiwan and Japan. The White House has confirmed that Biden will raise the issue with Japanese Prime Minister Yoshihide Suga on Friday during his visit to Washington.

However, US relations with another leading chipmaker, China, remain very strained, and the Biden administration has lifted trade restrictions on Chinese tech companies, including Semiconductor Manufacturing International Corp., one of the country’s largest chipmakers, in the Trump- Maintain Era.

“In the short term, government should not intervene as the industry works to correct the current supply-demand imbalance that is causing the shortage,” said John Neuffer, president and CEO of the Semiconductor Industry Association. That could take many months, industry representatives have said.

“The role we see for the government is to ensure the long-term strength and resilience of America’s semiconductor supply chain by investing now in domestic chip manufacturing and research,” he added.

At the meeting on Monday, Biden read from a letter from 23 senators and 42 representatives who are helping to finance domestic semiconductor production. The dispute over the amount of money is likely to lie ahead, however, and bipartisan support for chips could be overridden by the more divisive provisions of the infrastructure plan.

“We talked about whether we should do something across parties or not. Well, we are, ”said Biden. “Both sides of the aisle strongly support what we are proposing and I think we can really do things for the American people.”

In the past few decades, the US has largely ceded its role as a manufacturer of computer chips to Taiwan, South Korea, Japan and China. American companies therefore rely on a global chain of suppliers, manufacturers and distributors who have faced unprecedented strain during the coronavirus pandemic.

This reliance on overseas corporations to sustain critical U.S. industries such as automobiles, telecommunications, consumer electronics, and defense poses a potential threat to national security and the economy.

And with thousands of auto workers partially idle while equipment awaits new semiconductor shipments, it also poses a political challenge to a White House that has positioned itself as a fierce ally of the unions since the election campaign.

Biden’s major infrastructure proposal includes $ 50 billion to fund the industry-backed CHIPS for America Act HR 6396 (116), a measure passed earlier this year that aims to advance U.S. semiconductor manufacturing. Another $ 50 billion would set up a Department of Commerce office aimed at strengthening supply chains in the United States.

“Today’s meeting shows that industry and government must continue to work together to ensure the US increases manufacturing capacity while maintaining leadership,” said Al Thompson, director of US government relations at Intel. “It’s another positive step forward to fund the CHIPS bill this year.”

However, the $ 2 trillion infrastructure plan is already being pushed back by Republicans who claim the package is too expensive and goes way beyond traditional infrastructure. Even semiconductor supply chain provisions that both parties have recognized to be an issue are likely to argue over price.

“I think people are still hoping that we can be ahead of China without spending any money and it just won’t work,” said James Lewis, director of the strategic technologies program at the Center for Strategic and International Studies.

If the US intends to compete with China and other countries on infrastructure and semiconductor research and production, Lewis continued, “You have money to spend, and Congress has not quite moved out of a peacetime mindset.”

The Alliance for Automotive Innovation, which represents the world’s automakers, told the trade division last week that it would be “unfortunate” if none of the CHIPS for America Act funds were used specifically to promote the US auto industry.

“This could be achieved, for example, by allocating a certain percentage – which is reasonably based on the projected needs of the auto industry – to facilities that support the manufacture of auto-quality chips in some way,” said John Bozzella. The group’s president and CEO wrote in public comments.

However, manufacturers of other goods that require chips, such as computers and cell phones, reject recommendations that favor one industry over another.

“Unprecedented demand skyrocketed in nearly all semiconductor-consuming industries at the start of the pandemic and continues to outpace global supply. This shows the importance of sustainable investment in this critical supply chain,” said Jason Oxman, President and CEO of the Information Technology Industry Council. said in a statement. “The government should ensure that this vital technology is available to all industries without picking winners and losers.”

Home-bound consumers have switched to electronics for school, work, and entertainment during the pandemic, causing a sudden surge in demand for computer chips for laptops, game consoles, and phones.

The resulting shortage has weighed on the wide range of industries that rely on them for high-tech products, particularly the automotive industry, which cut its semiconductor orders at the start of the pandemic in anticipation of a prolonged doldrums. Semiconductor manufacturing is a complex process that can take months to change. Therefore, overnight corrections are not an option.

And the demand won’t let up anytime soon.

“Chips are like the new steel industry. It’s at the heart of everything we do, ”said Lewis. “It will be the crucial industry for the rest of the century.”

Leave a Comment