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Wednesday, 24 February 2021 19:05

As Chip Shortage Cripples Auto Production, Biden Prepares to Step In

Written by Jamie L. LaReau, Detroit Free Press
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The auto industry might get federal relief from the shortage of semiconductor chips that has crippled vehicle production over the past several weeks. 

President Joe Biden is preparing to sign an executive order Feb. 24 to review the U.S. supply chains of products in key industries, including semiconductor chips that are used in various electrical components for cars, personal electronics, military equipment and other items.

It is a proactive step to mitigate further production disruptions to the auto industry, which has been hit hard by the chips shortage. 

 

Demand for the chips is up in part because of the COVID-19 pandemic and an increased use of laptop computers, 5G phones, gaming systems and other IT equipment that use the chips. Cars use them in a variety of parts and infotainment systems. 

 

The major manufacturers of the semiconductor chips used in cars are overseas, namely Taiwan-based Taiwan Semiconductor Manufacturing Company (TSMC) and United Microelectronics Corporation (UMC). The strain on making and delivering the chips comes down to supply versus demand. 

 

Data company IHS Markit has tracked the chip problem since April 2020 and it estimates the deficit will result in 672,000 fewer light-duty vehicles built globally in this first quarter. As part of that total estimate, North America will see about 100,000 fewer vehicles made.

 

While many automakers welcome Biden's help, some industry experts say this will do little to resolve the squeeze on production and slim new-vehicle inventory levels in the short-term.

 

"It is a reasonable goal to want to secure and protect the supply chain for U.S. manufacturing and parts, given the issues the auto industry is currently facing, but this will do little to address the near-term shortage of semiconductors," said Jeff Schuster, LMC Automotive's president of Americas Operations and Global Vehicle Forecasts. "It will be challenging to make changes to a global supply chain in the medium-term without significant investment and incentives."

 

Biden is scheduled to meet with a bipartisan group of House and Senate members on U.S. supply chains at 2 p.m. ET in the Oval Office and sign an executive order after that meeting, according to a White House briefing schedule. The order is also expected to examine supply chain issues with large-capacity batteries, pharmaceuticals and critical minerals.

 

Part of Biden's concern lies in the fact that...


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