The United States is facing an “alarming” shortage of semiconductors, a government survey of more than 150 companies that make and buy chips found; the situation is threatening American factory production and helping to fuel inflation according to the commerce secretary. She said the findings showed a critical need to support domestic manufacturing and called on Congress to pass legislation aimed at bolstering U.S. competitiveness with China by enabling more American production.
While demand for semiconductors increased 17 percent from 2019 to 2021, there was no commensurate increase in supply. A vast majority of semiconductor fabrication plants are using about 90 percent of their capacity to manufacture chips, meaning they have little immediate ability to increase their output, according to the data that the Commerce Department compiled. The need for chips is expected to increase, as technologies that use vast amounts of semiconductors, like 5G and electric vehicles, become more widespread. The combination of surging demand for consumer products that contain chips and pandemic-related disruptions in production has led to shortages and skyrocketing prices for semiconductors over the past two years. Chip shortages have forced some factories that rely on the components to make their products, like those of American carmakers, to slow or suspend production which has dented U.S. economic growth and led to higher car prices, a big factor in the soaring inflation in the United States. The price of a used car grew 37 percent last year, helping to push inflation to a 40-year high in December.
The Biden administration has set up an early alert system to notify government and industry of impending chip shortages and convened company leaders to try to address the issue, among other actions. It has also welcomed industry investment while acknowledging that any new construction of chip manufacturing facilities in the United States will take several years and will not provide an immediate remedy to the shortages. Last week, Intel announced that it would invest $20 billion in a facility in Ohio, which would contain two chip factories and directly employ 3,000 people.
https://www.nytimes.com/2022/01/25/business/economy/chips-semiconductors-shortage.html
Ana Swanson and
I like how you described the chip shortage here. The shortage in them has caused a lot of problems for our domestic manufacturing. I also like how you mentioned the Biden administrations plan to solve this problem. What is your intake on the problem and what would be your solution to it?
ReplyDeleteI think this is an interesting topic especially because the US isn't used to having to build these chips themselves and may have to start doing so. Additionally, Intel is actually building a chip production plant in Patascala, Ohio pretty soon. This should be a huge boost for at least the Ohio economy and is supposed to produce 3000 new jobs in the process.
ReplyDeleteI think one of the most interesting aspects of the chip shortage is how it's affected car manufacturers. Particularly in the electric vehicle subsector. While Ford and most other companies saw a sharp decrease in production as a result of the shortage, one company in particular saw an increase in production. Tesla was able to redirect some production efforts towards the repurposing of chips in order to sell over 936,000 cars in 2021, nearly double their 2020 output. This goes to show that Tesla's modern business model seemingly has a leg up on other car manufacturers whether electric oriented or not.
ReplyDeleteI think it is interesting to look at the car market as chip shortages continue to be an issue. When you combine this with the high inflation we are currently seeing, it is easy to see why prices of vehicles have significantly increased. Also when we look at consumer demand for vehicles we can easily see the issue that chip shortages are causing. It will be interesting to see if more firms shift to producing chips in the US to help ease the shortage.
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