Top Biden administration officials will hold a second summit with industry leaders on Monday to discuss semiconductors, as a shortage of the chips continues to stall auto manufacturing and threaten jobs across the country.
The meeting follows an earlier summit the administration called in February to address the supply shortage, but the situation has since worsened, with GM and Ford announcing Thursday plans to temporarily idle more North American factories that can’t get enough semiconductors. The GM shutdowns, lasting a week or two per factory, affect 10,000 workers.
The chief executives of Ford and GM will attend the summit, along with the leaders of semiconductor companies Intel, Global Foundries and Taiwan Semiconductor Manufacturing Company, the White House said. Auto suppliers and various tech companies, including Alphabet and medical-device maker Medtronic, will also attend.
The White House has been leaning on chip makers for weeks to boost production of automotive semiconductors, but there are no easy fixes, industry sources say.
Many semiconductor factories around the world stopped producing chips for automotive use last year, when demand for cars dropped at the start of the coronavirus pandemic. Chip makers switched instead to making more semiconductors for computers and electronic devices, which were in high demand.
When auto demand recovered in late 2020, car companies and their suppliers found themselves unable to secure enough chips. And because semiconductors for automotive use tend to be older, lower-margin items than the high-tech chips used in electronics, some semiconductor companies may be loathe to shift gears, industry executives say.
“If you have two chips, and one gives you a lot more revenue and profit margin, you will choose that one,” said Pierre Lamond, a venture capitalist who invests in chip companies after spending decades working for and founding semiconductor companies.
The Biden administration response is also constrained by the fact that most semiconductor manufacturing happens overseas, he said.
“Unfortunately most of the manufacturing capacity is not in the United States. It’s elsewhere. So we don’t have much leverage,” Lamond said.
The head of the Semiconductor Industry Association said chip companies were working to fix the problem.
“In the short term, government should refrain from intervening as industry works to correct the current supply-demand imbalance causing the shortage. The chip industry is ramping up production, but that process takes time because making chips is highly complex and can take up to 26 weeks,” John Neuffer, chief executive of SIA, said in an emailed statement.
“The role we see for government is to ensure the long-term strength and resilience of America’s semiconductor supply chain by acting now to invest in domestic chip manufacturing and research,” he added.
Chip companies and the Biden administration are calling on Congress to provide $50 billion in funding to subsidize domestic semiconductor manufacturing, but any funds won’t be allocated in time to address the current shortage.
If the supply pinch drags on, the economic impact is likely to grow more severe. Idle auto factories will have ripple effects on auto suppliers, dealers and other sectors.
“We’re talking about U.S. manufacturing workers who are making these vehicles. Without the auto industry’s ability collectively to make cars and meet our margins, that’s going to result in a massive economic problem for everyone,” said one industry source who requested anonymity to address sensitive discussions.
Auto dealers are feeling the effects of the chip shortage, said Patrick Manzi, chief economist for the National Automobile Dealers Association. The factory shutdowns have reduced inventory for dealers and left consumers with fewer choices, despite high demand, he said.
“If you talk to anyone who sells trucks, they will say, ‘I need a lot more of them,’ ” Manzi said.
Because demand is so high, U.S. dealers had their best sales results in March since 2000, he said. But if the shutdowns continue, “sales might slow down because there aren’t enough vehicles,” Manzi said.
In a statement, the United Auto Workers said factory employees represented by the union have protections during shutdowns, “including supplemental pay and unemployment that pays almost 80 percent of salary and continued benefits.”
The union blamed the supply pinch on the lack of domestic manufacturing of chips and other parts.
“At its core, this is an issue that demonstrates the need not to offshore American jobs, and to bring back production of semiconductors and other auto supply parts to U.S. workers where as a nation we have more ability to respond to these demand issues,” the UAW said.
According to SIA, 12 percent of global chip manufacturing happens in the United States today, versus 37 percent in 1990. “This decline is largely due to substantial subsidies offered by the governments of our global competitors, placing the U.S. at a competitive disadvantage in attracting new construction of semiconductor manufacturing facilities,” the group said in a Friday statement.