US Administration Promises Action On Car Chip Shortage

The US presidential administration has said it is looking to take immediate action to address a global shortage of semiconductors that has forced US carmakers to temporarily slow or stop production.

White House press secretary Jen Psaki said the administration is “identifying potential chokepoints in the supply chain” after facing pressure from lawmakers, the semiconductor industry  and automobile manufacturers over the issue.

A rise in demand for consumer electronics during the Covid-19 pandemic has led contract chipmakers to shift production to consumer devices, to the detriment of the chips used in automobiles.

The semiconductor crisis has been exacerbated by US sanctions against Chinese chipmaker SMIC.

Chip bottlenecks

In the consumer tech industry, the shortages have affected everything from Apple iPhone parts to the PlayStation 5 to AMD’s latest CPUs and GPUs, while carmakers around the world, including Volkswagen, Renault, Fiat Chrysler and Toyota, have been forced to suspend vehicle production in recent months.

Last week General Motors said it would extend a temporary closure of three of its North American factories until mid-March due to the issue, while Ford said it would run fewer shifts at two factories that make its best-selling F-150 pick-up truck.

GM said the issues could cut up to $2 billion (£1.45bn) from its earnings before interest and taxes, while Ford said earnings could decrease by up to $2.5bn.

The US administration said it was in “active conversation” with carmakers, semiconductor firms and chip-producing countries over the issue.

US president Joe Biden is expected to imminently sign an executive order demanding a “comprehensive review of supply chains for critical goods” over the coming weeks, according to Psaki.

Supply chain review

“The review will be focused on identifying the immediate actions we can take, from improving the physical production of those items in the US to working with allies to develop a co-ordinated response to the weaknesses and bottlenecks that are hurting American workers,” Psaki said.

Last week 15 senators urged Biden to take action on the chip shortage, saying it threatens the US’ “post-pandemic economic recovery”.

They said the White House should use funding authorised in the CHIPS Act last year to boost domestic semiconductor manufacturing.

Semiconductor industry executives also called for a repatriation of chip manufacturing, noting in an open letter that the US’ share of worldwide semiconductor production has dropped to 12 percent from 37 percent in 1990.

The letter, signed by 21 chief executives of companies including Intel, Qualcomm and AMD, said the trend threatens the country’s “technology leadership”.

The companies, who are represented by the Semiconductor Industry Association, called for Biden to include “substantial funding” to increase domestic chip production in his recovery and infrastructure plans.