Today, the White House is talking virtually to the business community about the global chip shortages. In addition to the chip industry, automakers are also represented. They have been hit hard by the shortages. Several manufacturers have had to temporarily shut down production lines.
The problems started last spring, when the coronacrisis caused a sharp decline in demand for cars. Automakers decided to cancel orders. But the demand for chips in consumer electronics increased due to the many work at home and sitting at home. When the demand for cars increased again and production was restarted, the car manufacturers had to connect at the back of the line.
All in all, twenty companies are expected at the White House meeting – from chip manufacturers Intel and TSMC to car manufacturers Ford and General Motors. President Biden also participates briefly. According to Bloomberg news agency, irritation between automakers and electronics manufacturers, who consider that the automotive industry is demanding too high, could lead to tensions during the consultation.
Solution not yet in sight
The deficits have been going on for a few months now and a solution is not in sight in the short term. It is expected that it will not be found at the meeting either.
According to Rem Korteweg, trade specialist at the Clingendael Institute, there are two issues around this meeting. “The primary issue is the question of how the Biden government can help to get car production started again.”
But national security is also involved. “The White House has concerns about the vulnerability of the US economy towards China.” China plays an important role in the supply chain, the whole of companies that supply parts for the production process. According to Korteweg, the question of whether a chain should not be set up in which China is not involved. “This will not be explicitly on the agenda, but it will play along.”
Biden has already commissioned to look closely at the supply chain of the chip industry. According to Korteweg, the question is what steps the US is going to take in this area. Are they going to set up their own chain or, for example, cooperate with Europe in this area?
And the question is to what extent they get the chip industry into it. The interests do not necessarily run parallel. Business, for example, looks much more at where the cheapest and best production can be produced, while governments also consider the geopolitical consequences.
As part of the mega-investment in infrastructure of over 2000 billion, the Biden government has already announced that it earmarked $50 billion for the semiconductor industry. The money should act as an incentive for production, research and the design of chips. In addition, the National Semiconductor Technology Center is set up.
The Wall Street Journal reported at the end of March that Biden can count on the support of both Republicans and Democrats for the plan. People fear that China is making larger investments in its own chip sector. Although some don‘t think it’s a good idea to subsidize the industry
The European Commission also recently announced its intention to invest in the chip industry. The ambition is to have more than doubled the market share to 20 percent by 2030. In addition, the European sector should focus more on chips with high computing power. Sources in the chip industry have already said to DeccEit whether this is the right strategy; the European chip industry is using other computer chips.
Meanwhile, the global chip sector does not sit still. TSMC recently announced USD 100 billion in production capacity and research over the next three years. Intel had already pledged $20 billion before that.