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Source: Detroit Economics Club (cued to remarks at minute 16:00 through 26:23)
The Department of Commerce is implementing policies that could lead the U.S. firmly towards one of the best case scenario quadrants discussed in our recent OODA Loop Stratigame: “Scenario Planning for Global Computer Chip Supply Chain Disruption.”
On November 29th, Gina M. Raimondo, U.S. Department of Commerce Secretary, addressing the Detroit Economic Club, urged Congress to pass the CHIPs Act, which she argues will enhance U.S. competitiveness, strengthen national defense and create high wage, high skilled jobs. Secretary Raimonda also pointed out that workforce development is crucial, as the semiconductor industry (like many high-skilled industries) faces labor shortages due to an aging workforce.
Days earlier, the Secretary released a statement lauding Samsung for the company’s commitment to build a $17 Billion chip fab in Taylor, Texas: “Increasing domestic production of semiconductor chips is critical for our national and economic security, and we look forward to continued partnership with Samsung and other semiconductor manufacturing companies looking to build out their capabilities in the U.S.”, said Raimondo. In her speech at the Econ Club, she also praised the Ford Motor Company’s commitment to chip collaboration with GlobalFoundries, including the expansion of manufacturing.
“The global auto industry will produce 7.7 million fewer vehicles this year with a loss of $210 billion for the year.”
The presentation in Detroit by the Commerce Secretary, “Investing in American Manufacturing and Closing the Innovation Divide,” was designed for auto industry executives hit hard by the semiconductor shortage that, according to the Washington Post, is only getting worse: “The global semiconductor shortage that has paralyzed automakers for nearly a year shows signs of worsening, as new coronavirus infections halt chip assembly lines in Southeast Asia, forcing more car companies and electronics manufacturers to suspend production. A wave of delta-variant cases in Malaysia, Vietnam and the Philippines is causing production delays at factories that cut and package semiconductors, creating new bottlenecks on top of those caused by soaring demand for chips.”
In April, Ford announced it expects to produce 1.1 million fewer vehicles this year than it had planned, as the auto company along with General Motors halted production at various auto plants over the chip shortage. In September, Toyota slashed production at 14 factories in Japan over a lack of semiconductors and a lack of components from Southeast Asia Toyota has said. The global auto industry will produce 7.7 million fewer vehicles this year, up significantly from the May forecast of 3.9 million vehicles, according to updated forecasts from consulting firm AlixPartners – which also puts the total automotive industry revenue lost due to the chip shortage at $210 billion for the year.
“Pass the CHIPs Act immediately so we can get to the business of doing this. Because the stakes are just that high.”
Prior to her speech, Raimonda told journalists that “demand for computer chips is already far outstripping supply, a problem that will intensify with the widespread adoption of electric cars, which require more chips per vehicle. We will not hit those goals if Congress does not quickly pass the CHIPs Act,” Raimondo said. “We are wasting time, precious time, every day that the CHIPs Act isn’t passed and appropriated in Congress.”
Addressing the auto executives, the Commerce Secretary went on to say that “probably the car you drive now has hundreds of chips. The [electric vehicle] that we want you to buy over time has two thousand chips. China, Taiwan, the E.U., other countries all around the world, they are not waiting. They are incentivizing and subsidizing the production of chips right now, and they have been for a long time.” According to a report from the European Commission, European nations have set up a 145 billion euro digital fund – approx. $175 billion – to finance chip investments and double their share of worldwide chip manufacturing by 2030, to 20 percent of the $540 billion global market.
The Secretary’s closing remarks in Detroit were refreshing and resolute: “If you take nothing else away from my comments today, we need the House to pass the CHIPs Act immediately so we can get to the business of doing this. Because the stakes are just that high. We have a choice right now, if we going to be globally competitive we need to make choices that enable us to be competitive. We have the best entrepreneurs, the best scientists, the best innovators in the world. If we invest in R&D, pass the CHIPs Act, implement it successfully: we will shore up our economic security and our national security and outcompete the rest of the world. So I say let’s do it. Let’s pass the CHIPs Act. Let’s get the money over to Commerce. I am bullish on the American economy, bullish on our manufacturing, and bullish on our workers.”
Recent policies are further positive signs that the chip shortage and the need to strategically increase domestic chip production are being taken seriously by the Commerce Secretary and her org chart over at the agency:
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About the Author
Daniel Pereira is research director at OODA. He is a foresight strategist, creative technologist, and an information communication technology (ICT) and digital media researcher with 20+ years of experience directing public/private partnerships and strategic innovation initiatives.
Informing your decisions with actionable intelligence
Informing your decisions with actionable intelligence