The U.S. must address a continuing shortage of semiconductors by investing in its chip infrastructure, President Joe Biden said Monday afternoon during a virtual summit with car drivers and other business leaders.
“These chips, these waffles … batteries, broadband – they’re all infrastructure. We need to build today’s infrastructure and not repair yesterday’s,” Biden said. “The plan I propose will protect our supply chain and revive US manufacturing.”
The event was called to address an immediate crisis affecting key industries, including electronics, pharmaceuticals and automobile manufacturing. Few sectors have been affected as much as the automotive industry, which has had to slow down or stop production at US plants. In turn, this has exacerbated a shortage of new cars and trucks due to the shutdown ordered last year in light of the coronavirus. pandemic.
About 20 CEOs met with White House officials, including Mary Barra, CEO of General Motors, Jim Farley, CEO of Ford, and Carlos Tavares, CEO of Stellantis, along with Sundar Pichai, CEO of Alphabet, Pat Gelsinger, CEO of Intel, and representatives of Taiwan Semiconductor Manufacturing Company, Samsung, HP and other technology companies.
Biden wanted to “hear directly from companies about the consequences and what would help the most,” White House secretary Jen Psaki told a news conference on Monday. The summit was not intended to provoke an announcement or decision, Psaki said, pointing out that the intention was for the president to ‘be part of the discussion on how to overcome the problem’.
General Motors and Ford alone have warned that they could earn a combined price of $ 4.5 billion this year due to the shortage of parts.
“General Motors is grateful for the Biden administration’s support for this critical issue affecting the global automotive industry,” the automaker said in a statement after the conference, adding that he “looks forward to continuing with the administration and members to work together. Congress to address the global shortage. “
Consumers also feel the heat. Vehicle prices, which have already risen, have risen even sharper as carmakers and dealers are encouraged. It can be a challenge to choose a car or truck with the dealer stock of about 1 million vehicles compared to what is normally this time of year, the JD Power market research firm said.
Analysts warn that the crisis could increase the cost of the chips now used in every car, which according to IHS Markit could increase a rising vehicle price that reached a record level of about $ 40,000.
Biden insists that Congress invest billions of dollars in the semiconductor industry. In February, he conducted a 100-day review of semiconductor supply chain issues, as well as advanced batteries, pharmaceuticals and other critical goods.
Biden’s $ 2 trillion infrastructure proposal would set aside $ 50 billion for the semiconductor industry, with a focus on expanding US chip production, which today comes mainly from places such as Japan, South Korea, Taiwan and China.
Tax credits will “help companies (semiconductors) reimburse the cost of creating new lines within existing facilities or applying current production to meet evolving needs,” said John Bozzella, CEO of the Alliance for Automotive Innovation a trade group that operates both Detroit’s Big Three and most overseas car manufacturers in the United States
Since the beginning of the year, more and more manufacturers have been affected by the crisis. Virtually every automaker worldwide had to cut production and in many cases temporarily shut down some of their plants.
GM began a two-week shutdown at its Spring Hill, Tennessee plant on Monday. The closure of another facility in Lansing, Michigan, will be extended until April 26.
Ford plants in Chicago, Flat Rock, Michigan and Kansas City were also shut down this week, affecting the production of some of the carmaker’s most lucrative products, including the F-150 pickup.
According to research firm AlixPartners, global car revenue is likely to fall by more than $ 60 billion this year. During the first quarter alone, manufacturers around the world will lose about 1.4 million vehicles, the research firm predicted. Manufacturers hope to make up for this by increasing production later in the year, and AlixPartners believes the industry will reduce losses to around 811,000 vehicles for the whole of 2020. Ford, for example, has advised union staff to cancel its normal summer break this year. .
Since the president planned to dedicate billions of the U.S. Jobs Plan to the production of chips, industry officials have already made some suggestions on what they want.
Bozella of AAI said last week that some of the money “should be used to build new capacity that will support the automotive industry and reduce the risks to the supply chain in the car, showing the current shortage of chips.”
But how soon the crisis can be addressed is far from certain. Chip plants are expensive and challenging to set up. They must meet the clean room standards according to the pharmaceutical industry. So experts warn that the shortages are likely to continue for months and until 2022.