Semiconductor Shortage shows its impact on the US economy

Global semiconductor shortages have disrupted auto production in the United States and elsewhere and will most likely continue for another two years. Last year, the pandemic caused automakers to cease operations, with each predicting a slowdown in auto sales that will continue. Based on these assessments, the global semiconductor industry has agreed to sell more computer chips to other industries. At the same time, however, new car sales rose at lightning speed, leading to a growing shortage of semiconductors, a key component of many computer electronics. Dan Ives, a tech analyst at Wedbush Securities, recently said that current "demand is likely 25% higher than anyone would have expected," Bloomberg reported. Semiconductor shortages hit almost every industry, but US automakers were particularly hard hit, with some being forced to slow or stop production at the plants. General Motors, Ford and Honda have all temporarily closed their plants to await further shipments of parts needed for increasingly computerized cars, NPR reported. GM and Ford alone have warned that they will have to accept a collective drop in profits of $ 4.5 billion this year due to the shortage of parts. In response, automakers are now in the unfortunate position of having to forego some luxury items from their consumer offerings. According to Bloomberg, some automakers are foregoing features such as navigation, rearview mirrors that monitor blind spots, digital screens ... And that lack of features doesn't mean the cars will get any less expensive. In fact, the opposite is emerging. New vehicle prices are likely to continue to rise as chip shortages intensify. Edmunds said 13% of those who bought a new car in the US last month paid more than the sticker price, compared with 8% last April. The increased demand and the interruption of the stable supply chains have now renewed the demands of the Biden administration to build up domestic semiconductor production. "These chips, these wafers - batteries, broadband - that's all infrastructure. That's infrastructure," President Biden said in a sales pitch for his $ 2 trillion infrastructure plan. The remark came during a virtual meeting at the White House in April with 19 CEOs discussing the critical supply crisis that is slowing U.S. auto production and threatening other sectors, including national security. Back in February, President Biden said domestic semiconductor manufacturing was a priority for his government. He also signed an executive order aimed at addressing the global shortage of chips. "The point is to make sure that the United States can meet every challenge in this new era of pandemics, but also defense cybersecurity, climate change and so much more ... The best way to do this is America Protect and sharpen our competitive advantage by investing here at home, "President Biden said at a press conference In 1990, the US produced about 37% of the world's semiconductors. Today they only produce around 12%. During the same period, Europe's share fell from 35% to just 9%. An additional problem is that the most advanced semiconductors are produced in Asia and a large portion of the market is held by a single company, Taiwan Semiconductor Manufacturing Company (TSMC). In late March, Intel announced it would be spending $ 20 billion to build two separate chip factories at its Chandler, Arizona facility to challenge Asian dominance.  However, TSMC, the world's largest contract chip maker, also announced plans to build a $ 12 billion factory in Arizona. The company also said it will invest $ 100 billion over the next three years to increase manufacturing capacity European officials also said it was naive to outsource such a large portion of semiconductor design and manufacturing and that they now want to double chip production by 2030.