Even after its fastest annual growth in 37 years, the US economy still grapples with a persistent shortage of the computer chips needed for the technology that connects, transports and entertains us.
The problem has been mounting since pandemic-related lockdowns closed major Asian chip factories more than two years ago. It now threatens to expand in an uncertain future, despite efforts to meet demand from the semiconductor industry.
the house of Representatives passed a bill February 4 that could pump $52 billion (about Rs 3,91,215 crore) in grants and subsidies to the semiconductor industry to help boost US production – a top Biden The administration’s priority that must now be settled with the Senate version passed eight months ago. The European Union on Tuesday unveiled its $48 billion (about Rs 3,61,120 crore) plan to boost microchip production within the 27-nation bloc.
The shortage has plagued consumers, who are unable to find the new vehicles they want at auto dealerships, forcing some to settle for vehicles sold at unusually high prices. Unable to secure all the microprocessors needed for today’s cars, according to U.S. Commerce Secretary Gina Raimondo, the auto industry closed some plants and made about 8 million fewer vehicles than last year, driving up prices and Inflation was rising.
Inadequate supplies of processors have delayed production of life-saving medical devices, smartphones, video game consoles, laptops and other once widely available modern features that have become scarce over the past year.
“a covid An outbreak, a natural disaster, political instability, anywhere, at any factory, anywhere in the world, disrupts our American supply chain and has ripple effects throughout the economy,” Raimondo told reporters on Friday.
Is the pandemic to blame?
Yes, but it’s not the only culprit. The pandemic caused chip factories to begin shutting down in early 2020, particularly overseas, where most processors are made. By the time they began to reopen, they had a backlog of orders to fill.
Chipmakers were then hit by unexpected demand from people who, while being forced to stay at home, became even more dependent on electronics.
For example, no one entered 2020 expecting to see personal computer sales rise after nearly a decade of steady decline. But the lockdown forced lakhs of office workers to do their work from home, while students mostly attended classes remotely.
Were there other factors?
Even before the pandemic, chip makers were having trouble balancing production of the older types of microprocessors that are still used in electronic assembly lines and in some automobiles to pump chips for electric cars and ultrafast 5G wireless networks. It requires remodeling its factories. ,
Chip makers have also been affected at times by fires, winter storms and energy shortages.
The decades-long shift to low-cost chip plants in Asia also worsened the situation in the US and prompted recent efforts to boost local production. The industry is particularly dependent on Taiwan, which China has long claimed.
“We are far behind,” Raimondo told reporters on Friday. “We are in such a dangerous place in terms of national security because of our dependence on Taiwan for our most sophisticated, leading-edge chips.”
According to the Semiconductor Industry Association, a trade group, the US share of the worldwide chip manufacturing market has declined from 37 percent in 1990 to 12 percent today. Main reason: The group estimates that it costs 30 percent more to operate a chip factory in the US over the course of 10 years than in Taiwan, South Korea or Singapore.
European countries account for only 9 percent of the global market share of semiconductors, but EU officials aim to increase this to 20 percent by 2030.
How severe is the deficiency?
The US Commerce Department estimates that demand for chips in 2021 was up 17 percent from pre-pandemic levels in 2019 — compared to factories currently able to produce even at about 90 percent capacity. Chip buyer lists are down from an average of about five days before the pandemic, 40 days ago.
The department’s report predicts that shortages will continue into the summer.
The squeeze has pushed up prices on chips and the products that depend on them, especially automobiles. Prices of used cars rose 37 percent last year, a major factor in today’s uncomfortably high inflation rate. The goal of the Federal Reserve is to raise interest rates — and reduce borrowing costs.
Do you see any relief?
There are some ray of hope, especially in the auto industry. When General Motors released its most recent quarterly results, CEO Mary Barra Chip supplies in the US and China are looking better than a year ago, forcing the automaker to forecast record operating profit this year.
Skyrocketing used car prices also seems a little too easy, based on data compiled by auto-shopping app CoPilot. After peaking during the holiday shopping season, prices for 2015-2021 models have fallen 1 percent to 4 percent. CoPilot CEO Pat Ryan said, “The car market is finally starting its long journey back to normal.”
Can we avoid future scarcity?
The chip industry is passing through a period of unprecedented expansion. According to SIA, after spending a similar amount last year, chip makers are expected to invest $150 billion (about Rs 11,28,480 crore) in new factories this year and other efforts to meet the increased demand. Before the start of the current spree, the annual capital expenditure of the industry did not exceed $115 billion (approximately Rs.865175 crore).
Projects involving commitment of $40 billion (approximately Rs 3,00,930 crore) Intel It plans to build microprocessors for firms other than its own, for the first time, to build new chip factories in Arizona and Ohio. samsungGlobalFoundries, and micron US expansion plans have also been disclosed. Those are positive moves as the US tries to reduce its reliance on foreign factories where most of the chips are made, although it will still take years for more of that production to be cranked out.
Meanwhile, major automakers like Wade And General Motors is trying to bridge its shortfall by partnering with chip makers.
The $52 billion (about Rs 3,91,190 crore) in government funding to help expand chip production is part of a broader bill aimed at boosting US competitiveness. While there is bipartisan support to boost domestic chip production, lawmakers in the Senate and the House still need to negotiate differences. The bill also includes $45 billion (about Rs 3,38,530 crore) to strengthen supply chains for high-tech products and other priorities that have raised Republican concerns about its cost and scope.
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