As Semiconductor Shortages Continue, Auto State Governors Urge Biden to Act

By Elizabeth Brotherton-Bunch
Mar 01 2021 |
Semiconductor chips are needed to make countless products. Some modern cars require thousands of them. Getty Images

The bipartisan group wants the president to work with foreign governments and industry officials to increase chip production and keep the auto industry moving.

Eight governors from states with a big auto manufacturing presence wrote to President Joe Biden on Friday to urge him to “redouble” efforts to engage with “relevant government and industry officials” around the world to increase production of auto-grade semiconductor chips.

The letter – signed by Michigan Gov. Gretchen Whitmer, Alabama Gov. Kay Ivey, Indiana Gov. Eric Holcomb, Kansas Gov. Laura Kelly, Kentucky Gov. Andy Beshear, Missouri Gov. Mike Parson, Ohio Gov. Mike DeWine, and South Carolina Gov. Henry McCaster – is the latest sign that the semiconductor shortage isn’t likely to abate anytime soon.

In fact, the worsening crisis is expected to continue to hinder U.S. production of an eclectic range of products, including automobiles, which require semiconductors to power everything from air bags to automatic windows to dashboard displays. Already, Ford, General Motors, Chrysler, Tesla, and other auto brands have announced a number of temporary factory shutdowns since the start of the year, citing the shortage.

There is some good news: There appears to be growing bipartisan agreement that something needs to be done to address this crisis.

Biden signed an executive order last week to examine vulnerable supply chains like semiconductor chips and announced he’s seeking $37 billion to supercharge U.S. production of semiconductors. Members of Congress from both sides of the aisle also are pushing for funding to increase domestic production.

Even if the White House and Congress manage to get something in the works quickly (which probably isn’t likely, considering the glacial pace in which it takes to get stuff done in Washington these days) this is an incredibly difficult crisis to solve. Getting a new semiconductor plant online in enormously complicated and can take up to five years.

And because the United States only accounts for about 12% of total global chip manufacturing, for the time being we are going to remain largely dependent on foreign manufacturers in places like Taiwan to meet our needs. That’s why governors from auto states are asking Biden to keep up the pressure abroad.

“As you know, automakers, suppliers, dealers, and others in the production chain support hundreds of thousands of jobs and contribute billions to our economy,” the governors told Biden. “It is our hope that we can again count on your leadership and support to ensure this vital industry has what it needs to be successful.”

This is yet another lesson learned the hard way. The United States was once the global leader in semiconductor manufacturing, but we gave up this advantage. Now we are at the mercy of foreign competitors to keep a critical industry afloat, putting hundreds of thousands of good jobs at risk, and at a time when the economy remains in rough shape.

In the short term, Biden will need to keep the pressure on foreign leaders and manufacturers abroad to ensure the auto and other U.S. industries can get the semiconductors they need to get factories back up and running at full strength. There’s no way around it, really.

But in the long term, Biden and Congress must make the investments needed to grow and strengthen domestic semiconductor production. We are only going to need more of those little chips in the future, especially as the auto industry moves into more electric vehicle manufacturing.

After all, if the United States doesn’t learn from this mistake and ramp up production, someone else will.