The global pandemic has exposed the vulnerability of global supply chains, with the latest problem being a global shortage of computer chips that has forced some automakers to cut or shut down production.
Western governments are learning hard lessons from these production disruptions and pushing for a more resilient and diverse supply chain. Biden pledged to take “immediate action” and may provide preferences for domestic production of chips in the United States.
Demand for consumer electronics rose sharply during the Epidemic, leading to a shortage of semiconductor chips. Automakers have been hit particularly hard by this supply shock. General Motors and Ford have temporarily closed some of their plants as a response.
Building new semiconductor plants is an extremely complex and expensive process, which makes it difficult for chipmakers to scale up new capacity quickly.
“The chaos of the new coronavirus (CCP virus) pandemic has disrupted supply and demand patterns in many industries, and we’re starting to see the results of it.” According to Stephen Ezell, vice president of the Information Technology and Innovation Foundation (ITIF).
“With demand for cars rebounding faster than expected, automakers not placing enough chip orders last summer, and a lag Time of up to 26 weeks between orders and delivery of chips, automakers now find themselves in a bind.” Iser told.
Iser explained that the heart of the problem is that the automotive industry needs chips made from 200 mm wafers, which are a generation older than chip technology made from 300 mm wafers. Automakers prefer mature and slightly lower-cost chips. However, many semiconductor companies are focused on producing more profitable cutting-edge chips, which has created a supply shortage for automakers.
White House press secretary Jen Psaki said the Biden Administration announced it would take “immediate action” to address the problem, however, it will first conduct a “comprehensive review” of key supply industries.
“The administration is currently in the process of identifying potential choke points in the supply chain.” Psaki told reporters on Feb. 11.
Biden is expected to sign an executive order in the next few weeks requiring the government to review vulnerabilities in the U.S. supply chain.
Following the review, the administration may consider various policy options, including boosting domestic production and working with allies to develop coordinated programs to deal with similar supply shocks in the future, Psaki added.
Some media reports speculate that Trump (Trump) era policies have exacerbated the U.S. chip shortage. The Trump Administration blacklisted Chinese chipmaker SMIC for export in December 2020.
However, Isreal explained, “The U.S. sanctions against SMIC have little to do with the U.S. chip shortage.”
“If you get to the bottom of it, rampant CCP mercantilism in innovation has disrupted the chip industry’s incentive to innovate and undermined the industry’s ability to continue to innovate at a high rate. It is a complete fallacy to say that U.S. sanctions against SMIC are part of the problem.”
Industry executives and experts have called for the implementation and full funding of the Chip Act (CHIPS Act), which was included in the 2021 Defense Bill signed into law in January, rather than revoking sanctions against SMIC. The act authorizes the federal government to give preferential measures to U.S. domestic chip makers.
The chief executives of major U.S. semiconductor companies sent a collective letter to Biden on Feb. 11 urging him to provide substantial incentives for domestic chip production and basic and applied semiconductor research “in the form of federal grants and/or tax credits.
“We believe that bold action is needed to meet the challenges we face. The price of inaction is high.” The group warned.
According to the letter, the U.S. share of global semiconductor manufacturing has fallen to 12 percent from 37 percent in 1990, largely because of the large number of concessions and subsidies offered by other governments that have reduced U.S. competitiveness.
Chip power Taiwan
The global shortage of automotive chips has raised the strategic importance of Taiwan to Western governments. Taiwan’s semiconductor industry is the second largest in the world after the United States in terms of turnover. The world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC, TSMC), and other Taiwanese companies have begun ramping up production of critical chips to address the global shortage.
Despite its diplomatic isolation from the Chinese Communist Party, Taiwan has “established itself brilliantly as a concentration of expertise, intellectual property and the importance of the global semiconductor industry,” said U.S.-Taiwan Business Council President Hammond Chambers. Rupert Hammond-Chambers, chairman of the U.S.-Taiwan Business Council, told the conference.
He said the U.S. could see the results of the new economic initiatives and active dialogue with Taiwan that began in the final year of the Trump administration.
In May 2020, TSMC announced it would build the world’s most advanced 5-nanometer chip manufacturing plant in Arizona, a major step toward bringing production and jobs to the United States.
“It’s small, but still relatively large relative to TSMC, and other Taiwanese chipmakers have announced they’re coming to the U.S. to build plants. So there’s a domino effect.” Hammond Chambers said.
The chip shortage has already affected many other car brands, including Volkswagen, Toyota and Nissan. According to experts, the timing of the supply shortage couldn’t have come at a worse time. The auto industry is struggling to make up for all the losses in production last year, while global consumer demand for cars has been rebounding.
Paul Eisenstein, publisher of automotive online magazine TheDetroitBureau.com, said the chip shortage could last until the end of September.
“Everyone (within the industry) is crazy right now, and there are bidding wars between manufacturers around the world and within each market.” He told.
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