May 24, 2021 Blog

From the Desk of John Bozzella: Addressing the Semiconductor Shortage

As the semiconductor supply chain shortage continues with no end in sight, Commerce Secretary Raimondo and a bipartisan Senate delegation went to a semiconductor fabrication facility in Virginia today to discuss the need for additional manufacturing capacity. This follows recent workshops and meetings with automakers and other stakeholders on the pressing issue. The auto industry is the U.S. economy’s driving force, and we appreciate Secretary Raimondo’s continued commitment to addressing this critical shortage of a fundamental component to modern vehicles. 

Across the country, the automotive industry is helping to fuel our nation’s economic growth and is leading the way to an even cleaner, safer and smarter automotive future. But innovation is only as good as the supply chains necessary to make it a reality. We are seeing that prove true as the semiconductor shortage slows production of new vehicles.

Semiconductors are used in a wide and growing variety of automotive electronic components that perform vehicle control, safety, emissions, driver information, and other functions. Many innovations that are underway in the automotive space and that will define the future of mobility – including electrification, automation, and connectivity – are highly dependent on semiconductors.

Our immediate priority is reducing the severity and longevity of the microchip shortage. The chip shortage has forced automakers and suppliers to hit the brakes on some production and cancel shifts in the United States, with serious consequences for their workers and the communities in which they operate. The latest jobs report revealed that the auto industry shed 27,000 jobs in April. 

Those who develop and build the vehicles of the future will set the rules of the road and secure global markets. Innovation in cutting-edge automotive technologies in the U.S. will help secure our economic future. But the current semiconductor supply chain crisis has exposed overall chip capacity problems and revealed significant longer-term risks.

We must expand semiconductor capacity to meet the growing demand for semiconductors in the auto industry and across the economy. Policies that can incentivize this additional capacity in the United States, such as the programs authorized under the CHIPS for America Act, are essential.

That being said, it is critical that this additional capacity benefit all impacted industries, including the auto industry, and their workers. Given the importance of chips to current auto production and future automotive innovation, and the contribution of the auto industry to the U.S. economy, some of the funding under the CHIPS for America Act should be used to increase the resiliency of automotive supply chains through the construction of new facilities that produce, or have the ability to produce, auto grade chips.

New foundries take years to build, so policies should be implemented that support increased chip capacity in the mid-term. This includes incentives to help companies offset the cost of creating new lines within existing facilities or reallocating current production to meet evolving needs.

The automotive industry is working toward a cleaner, safer and smarter transportation future. And a sustained commitment to investing in and building additional domestic semiconductor capacity that meets the current and future needs of the auto industry in the United States is absolutely essential to get there.