A Dire Economic and National Security Risk!
According to a U.S. Commerce Department assessment, the United States now confronts another severe danger to its economic and national security. Supply chains and the possibility of a Russian invasion of Ukraine would continue to drive up energy costs and inflation, causing interest rates to rise. By the end of the year, the Covid Pandemic might have claimed the lives of over a million Americans.
Computer microchips have become an essential component in the vast majority of manufactured products produced in the United States. They are included in trucks, cars, farm and manufacturing machinery, mobile phones, computers, Ipads, T.V.'s, refrigerators, Video games, Airplanes and in every crucial civil and defense system.
According to the latest Commerce Department request for information report, manufacturers' median supply of chips has dropped from 40 days' worth in 2019 to less than five days' worth last year. The supply for "key industries" is even tighter.
In fact, according to the Commerce Department…
"The semiconductor supply chain remains fragile. Demand continues to outstrip supply far. And the supply of those tiny little computer chips has never been tighter."
This incredibly limited supply of these micro-computer chips means that U.S. companies face disruptions to production domestically and overseas. At the core of this supply crisis has been shutdowns in production from horrific whether and the series of Covid-19 outbreaks, i.e., waves in especially Taiwan, which makes 92% of the World's Most Sophisticated Chips which include "legacy logic chips,"
When interviewed, Commerce Department Secretary Gina Raimondo about the recent request for the information report.
"We aren't even close to being out of the woods as it relates to the supply problems with semiconductors. The semiconductor supply chain is very fragile, and it is going to remain that way until we can increase chip production."
The Commerce Departments warn that any disruption in chip production could again lead to factory shutdowns and furloughed workers in the U.S. A survey of U.S. firms indicated that respondents "…did not see the problem going away in the next six months."
In fact, in 2021, General Motors (G.M.) was forced by the lack of computer chips to temporarily shutter production at most of its North American plants. The chip shortage also forced other automakers to slash their production and production plans for 2022.
The Biden administration recognizes the crises and danger to national security. It has been increasing the U.S. chip-making industry to reduce America's dependence on foreign production of the crucial components going forward.
According to Boston Consulting Group… Even though the United States continues to dominate the world in chip design and intellectual property with domestic giants such as Intel, Nvidia, and Qualcomm, it currently accounts for just 12 percent of global semiconductor production, down from 37 percent in 1990.
The reality is there is little that can be done in the short term because manufacturing facilities in the United States will take 24-48 months to build.
Several chipmakers have announced intentions to spend billions of dollars in new factories due to incentives offered by Congress under the CHIPS for America Act, which contains $52 billion in subsidies to boost domestic semiconductor production. Intel has announced it will invest $30 billion to build a chip manufacturing complex outside Columbus, Ohio. Samsung (SSNLF) is now set to build a semiconductor plant in Taylor, Texas.
The extended time needed to build ship manufacturing facilities is aggravated because the $52 allocated for the construction of computer chip manufacturing plants has yet to be allocated.
Keep in mind another danger to the U.S. supply chain for micro-computer chips would be an invasion by the Chinese of Taiwan. A war between China and, as they call it, their "breakaway province" could cripple the U.S. economy and the country's military. So, calling this chip shortage a threat to national security is putting it mildly.
U.S. Commerce Secretary on chip shortage: 'We have no room for error'