American-Made Semiconductors
We all know that the U.S. has been dealing with some significant supply chain issues. While there have been some initiatives to try to alleviate the inconvenience of these supply chain issues, there are still a lot of looming problems.
The chip shortage has caused General Motors to stop its pickup truck production for two weeks next month at its factory in Indiana. Semiconductors are crucial to new vehicles. To produce new vehicles, automakers need chip supplies to be ramped up significantly.
The Biden administration has been working hard to try to fix these types of problems, but these issues have been occurring for over a year and it’s been hard to play catch-up when there continue to be waves of COVID-19 infections throughout the world. The entire world has been slowly making its way back to normalcy, but disruptions have made it harder to do so. And now Russia’s ongoing invasion of Ukraine has added to the current problems.
You might remember that in President Biden’s State of the Union address earlier this month, he spoke about how supply chain problems are an important issue to him and his administration and that they’ve been focused on alleviating those bottlenecks. Going forward, he believes it is vital to bring manufacturing back to the U.S. to prevent these types of hiccups and to continue to boost the U.S. economy.
President Biden recently announced that his administration has finalized a new Buy American rule that will be aimed at helping boost U.S. domestic manufacturing to create more resilient domestic supply chains and compete with China. This rule essentially incentivizes companies to conduct business in the U.S. and not overseas so the supply chain disruptions we’ve experienced won’t be as detrimental to the U.S. economy. Any product from a company that’s being paid for by taxpayer dollars will need to be 60% made in America by October and 75% by 2029 — right now the requirement is 55%.
Also at the State of Union, you might have noticed that President Biden gave a shout-out to Intel’s CEO, Pat Gelsinger, who was also in attendance. Biden called on Congress to pass an innovation act to stimulate chip manufacturing domestically because major companies like Intel are ready to invest in America. Biden says that Intel’s CEO is ready to increase investment from $20 billion to $100 billion with federal government support.
General Motors said in a statement on Friday about its pause on production:
Overall, we have seen better consistency in semiconductor supply through the first quarter compared to last year as a whole. This has translated into improvement in our production and deliveries during the first three months of the year. However, there is still uncertainty and unpredictability in the semiconductor supply base, and we are actively working with our supplies to mitigate potential issues moving forward.
Moving semiconductor manufacturing and production to America would help prevent these kinds of shortages and supply chain disruptions from happening again — or at least, not to such an extent that we’d have to endure it for over a year. This is a top priority for the Biden administration.
According to Reuters, White House press secretary Jen Psaki said the Senate vote was another step “to strengthen our supply chains, make more in America, and outcompete with China and the rest of the world for decades to come. We look forward to the House of Representatives moving quickly to start the formal conference process as well.”
Bringing semiconductors to America will not only benefit supply chains, but could also bring jobs to towns and cities, improving the quality of life for some towns and cities. Not to mention, it would reduce the time it takes for these semiconductors to become available to American companies. Businesses won’t have to wait for the chips to be made and then shipped to the U.S. from Asia.
Only about 11%–12% of chip manufacturing is done in the U.S, while 8%–9% of manufacturing takes place in Europe and the rest is in Asia. Earlier this week, the U.S. Senate passed the $52 billion bill that will help boost American microchip manufacturing.
Now, the bill is back at the House of Representatives to launch a formal process known as a “conference.” A conference is when lawmakers from both chambers will aim for common ground and agreements to form a compromised version of the bill. The chip shortage has caused disruptions not only in the auto industry, but also in the technology industry, since most electronics require chips.
This is going to be important legislation that will most likely have semiconductor companies soaring when the news come through that there will be more incentives to bring manufacturing of their products back to the U.S. from overseas. However, it could take some time for this legislation to be finalized. Let’s hope it doesn’t take us into 2023 to get it done. America needs this.
Until next time,
