By Matt Egan, CNN Business
The shortage of computer chips increases the new and used car prices, delaying shipments of electronic products and slowing economic recovery after the Covid-19 pandemic.
“It’s a huge problem,” Commerce Secretary Gina Raimondo told CNN before leading a White House meeting with chip makers and users. âAnything in your life that has an on-off switch requires semiconductors. Your phone, your car, all the electronic devices around you.
The chip shortage, along with other supply chain headaches, will likely be cost the global automotive industry only one 210 billion dollars in lost sales this year, according to consulting firm AlixPartners. That’s almost twice as expensive as the company predicted in May, when many auto executives hoped the worst of the chip shortage would be over by the middle of the year.
Although the global shortage of computer chips is mainly due to Covid, extreme weather conditions and other factors, this absence of a critical component also exposes a glaring vulnerability in America’s complex supply chain which has escalated for many years.
âThe reason we’re really in this mess is because for a long time we haven’t invested,â said Raimondo, a former venture capitalist and governor of Rhode Island. âWe took our eyes off the ball. We used to be the world leader in semiconductor manufacturing and now we are no longer. We have just divested.
Indeed, the share of the United States in global semiconductor manufacturing fell to just 12% last year, according to the Semiconductor Industry Association. This is down from 37% in 1990. The trade group blamed the “substantial” subsidies offered by foreign governments that put the United States at a “competitive disadvantage.”
The Biden administration pushed Congress to enact a $ 52 billion bill that would push for more semiconductor production and research in the United States. This bill, called the CHIPS for America Act, passed the US Senate in June but was not voted on in the House.
âIt’s quite simple. We need to make more chips in America, âRaimondo said.
Chip Shortage Means “Higher Prices, Fewer Options”
Yet passing this legislation would have little immediate effect on the current chip shortage, which is contributing to high inflation in America and shock sticker for consumers.
Raimondo acknowledged that semiconductor issues will be a challenge this holiday shopping season, when demand for smartphones, tablets, video game consoles, personal speakers and other gadgets increases.
âI hope it doesn’t feel horribly,â she said, adding that electronics companies have mostly been able to keep up with the demand. “But that will be more of what we’re seeing: essentially higher prices and fewer options.”
“We have never seen this”
The auto industry is being hit hard by the chip shortage.
In early September, General Motors shut down production at most of its factories in North America for a week or two. due to the shortage of chips. A spike in Covid cases, especially in Southeast Asia where semiconductor factories are located, has exacerbated supply problems.
Hit by production shutdowns, car dealerships have few vehicles in stock and consumers are paying more for cars than they can find.
Take for example a Ford dealership in Mahwah, New Jersey, which normally has 300 new cars on its lot. Today, it only has ten because of production stoppages.
âWe have never seen this. This is definitely a first for all of us, âAaron Ringus, Mahwah Ford sales manager, told CNN earlier this month.
The lack of new cars has also contributed to a surge in used car prices, as well as the fact that car rental companies hold onto their fleets rather than sell them.
Raimondo: chip shortages will last at least until end of 2022
Federal Reserve Chairman Jerome Powell cited the chip shortage as one of the many challenges facing the U.S. economy as the pandemic reopens.
“In some industries, short-term supply constraints restrict activity”, Powell said at Wednesday’s press conference. âThese constraints are particularly acute in the automotive industry, where the global semiconductor shortage has severely reduced production. “
Unfortunately, the semiconductor supply issues are not going to go away anytime soon.
âHonestly, I think we’re going to have a hard time with that next year until we can really iron out some of these bottlenecks,â Raimondo said. “It won’t be that bad, but I don’t think it’ll be back to normal until much of 2022.”
Intel CEO Pat Gelsinger warned the shortage could last even longer, potentially extending until 2023.
Raimondo conceded that the timeline was “not out of the question”, adding that officials “will work hard to do better than that”.
“We ask nicely”
In order to resolve the supply concerns, the Commerce Department and the White House summoned chipmakers and chip buyers like Apple, Microsoft and GM on Thursday.
In a declaration, the Semiconductor Industry Association commended the Biden administration for taking a “series of decisive steps to strengthen chip production and innovation in the United States,” including speaking with industry leaders and championing the CHIPS for America Act. âWe appreciate their continued efforts. “
Biden officials are also launching a rapid response hotline that will allow businesses to immediately alert the government of disruptions caused by Covid outbreaks, extreme weather or wildfires.
During the virtual White House summit, Raimondo also called on the industry to give the federal government more information on their complex supply chains. The purpose of the voluntary survey is to ensure that computer chips get where they’re needed and have greater visibility into potential bottlenecks. White House officials say the data can also attract other private investment to build new factories by providing demand information.
âWe need more information on what’s going on, where the chips are going, where the bottlenecks are, so that we can predict problems before they happen,â Raimondo said.
During the summit, the Commerce Department said Raimondo warned industry executives that she could invoke the Cold War-era Defense Production Act to force them to share information. they don’t do it on purpose.
âNow at this point it’s voluntary. We kindly ask and hope they comply, âsaid Raimondo. “If they don’t, we’ll have to take a tougher stance.”
– Chris Isidore of CNN Business contributed to this report.
The-CNN-Wireâ¢ & Â© 2021 Cable News Network, Inc., a WarnerMedia Company. All rights reserved.