White House to discuss chip shortage with major auto industry officials

Posted on

President Joe Biden holds up a silicon wafer Monday at the CEO Summit on Semiconductor and Supply Chain Resilience at the White House. (AP)

WASHINGTON – President Joe Biden used a virtual meeting with business leaders about a global semiconductor shortage to push for his $ 2.3 trillion infrastructure plan on Monday, telling them that the US should be the world’s computer chip leader.

“We need to build today’s infrastructure, not fix yesterday’s,” he told the group of 19 technology, chip and automotive executives. “China and the rest of the world are not waiting and there is no reason Americans should wait.”

He said the country has not made major investments to stay ahead of global competitors and needs to step up its game.

“Today I received a letter from 23 senators, bipartisans and 42 House members, Republican and Democrat, who support the chips for America program,” Biden said at the start of the session. The program, which is part of the overall infrastructure proposal, will spend $ 50 billion building the US microchip manufacturing sector.

Biden appeared at the meeting between government officials and business leaders to discuss the development of a stronger US computer chip supply chain. The meeting came as the global shortage of chips continued to plague many industries.

CEOs from AT&T, Dell, Ford, General Motors, Stellantis, Intel, Northrop Grumman and others were scheduled to attend.

But industry experts say there is little they can do to address the shortage, which has slowed a new iPhone and forced automakers to temporarily close factories because they lack the computers needed to run engines, transmissions, brakes and other essentials. functions.

Intel CEO Pat Gelsinger warned that a future chip shortage “could have a devastating economic impact, or worse, jeopardize our national defense.” He told Reuters that the company wanted to start producing chips at its factories within six to nine months to address a shortage that has stalled the assembly line in some U.S. auto factories.

The stock crisis could lead to a potential 1.3 million shortage in US car and light truck production this year.

“We hope that some of these things can be alleviated, without requiring a three or four year factory build, but that maybe six months of new products will be certified based on some of our existing processes,” said Gelsinger. “We’ve already started those deals with some of the major component suppliers.”

Intel last month announced plans to massively scale up chip production for outsiders as it builds new factories in the United States and Europe. The talks with automotive suppliers announced on Monday represent an acceleration of those plans.

Biden began developing a US chip supply chain as most are made in Asia and shipped to the US. In February, he ordered a supply chain review and pledged to work with international partners to ensure a stable supply.

Wedbush analyst Daniel Ives said there was little that could be done to immediately end the current problem. “This could change things in the next three to five years, but at the moment there are no structural changes that can alleviate the deficit,” he said.

The shortage has already made it more difficult for schools to buy enough laptops for students forced to learn from home, delayed the release of popular products, and created crazy struggles to find the latest video game consoles.

But things have deteriorated in recent weeks, especially in the auto industry, where factories are closing because there aren’t enough chips to complete building vehicles that become rolling computers.

The coronavirus pandemic set off a cascade of events that led to the problems. Chip factories had to close early last year, especially abroad, where most processors are made. By the time they reopened, they had a backlog that was exacerbated by unforeseen demand. For example, the demand for personal computers increased when the government lockdown forced millions of office workers and students to work remotely or attend classes.

The high demand for consumer electronics put pressure on the automotive industry. Chip manufacturers increased the pressure by overhauling factory lines to better serve the consumer electronics market, bringing in far more revenue for them than cars.

After eight weeks of pandemic shutdown in the spring, automakers started reopening factories earlier than expected. But they found that chip makers couldn’t quickly flip a switch and make the more robust processors needed for cars. Industry executives say the deficit should end by the third quarter of this year.

It’s just a symptom of a bigger problem where the US relies too much on Asia for critical components like semiconductors, said Ives, calling the meeting long ago. “I think it just exposes the structural issues now, as well as some of the potential national security issues facing the US, given our dependence on Asia,” he said.

According to the Semiconductor Industry Association, the US has only 12% of the world’s semiconductor plant capacity, up from 37% in 1990.

Not surprisingly, the major players in the chip industry welcomed the opportunity to gain even more support from the Biden administration to help subsidize efforts to expand the range and distribution of processors likely to play an integral role in the coming decades will play in the economy.

“We appreciate the White House meeting with industry leaders about the importance of ensuring a strong and resilient semiconductor supply chain,” said the Semiconductor Association, a trade group whose board of directors includes three CEOs who participated in Monday’s discussions.

Other members of the association include three major chip players outside the US, Samsung, Taiwan Semiconductor Manufacturing Co. and NXP, who sent executives to the meeting.

The trade group representing Ford, General Motors, and Stellantis thanked the administration for pressuring chip makers to fulfill automakers’ orders. “It is imperative that every effort is made to ensure that our automotive industry remains indispensable to the US economy and US jobs,” Matt Blunt, president of the American Automotive Policy Council said in a statement.

The shortage comes as the auto industry is accelerating plans to move away from internal combustion vehicles and shift more to battery-powered vehicles.

As part of his $ 2.3 trillion infrastructure plan, Biden plans to spend $ 174 billion on electric vehicles over eight years. That figure includes incentives for consumers, grants to build 500,000 charging stations, and money to develop U.S. supply chains for parts and minerals needed to make batteries. Biden also wants Congress to invest $ 50 billion in semiconductor manufacturing and research.

Material from Reuters has been used in this report.