After months of debate, Congress is still slow-walking a bill that would spend over $50 billion on semiconductor manufacturing.
Commerce Secretary Gina Raimondo has been frustrated by the slow pace for months and upped the stakes in a new interview by saying the economic damage could soon become permanent. She says companies that may want to be in the U.S. could shift manufacturing overseas in “months [because] they have to make decisions.” During the conversation Wednesday with Yahoo Finance Editor-in-Chief Andy Serwer from the World Economic forum in Davos, Raimondo said the U.S. could lose that business unless the bill passes soon.
The comments come amid a prolonged global chip shortage that has aggravated supply chain problems and battered the semiconductor industry. On Wednesday, chip giant Nvidia’s shares were down as much as 9% after it reported a disappointing forecast for the next quarter. “I’ve talked to maybe four CEOs of chip companies here, they’ve all said, ‘We want to be in the U.S., but we can’t wait any longer,’” she says, noting that companies are weighing inducements from countries like Singapore, Germany, Spain and others to build plants there.
Comment: Yahoo!Finance has done a good job of covering this story since at least January. Seems everybody recognizes the problem and knows what has to be done. Yet the House and the Senate have been mired in philosophical debate over trade issues between their two competing bills. More than anything else, I see this as a major failure of the Biden administration. The all or nothing approach to these massive policy initiatives more often than not, lead to nothing. Raimondo hoped for a final bill to be on Biden’s desk by Memorial Day. Now the Senate and House hope to have an agreement by the end of this summer. Congressional staffers think even that will be a Herculean lift.
For God’s sake, stop screwing around. Break out the semiconductor incentives, twist arms, break arms, do whatever is necessary to get this done.
https://finance.yahoo.com/video/u-commerce-secretary-chip-shortage-155858968.html
A major supplier of aircraft avionics has had to stop new product development in order to concentrate on re-engineering its existing hardware to use what components are available right now. This has also slowed associated software development because the latest releases now have to contain work – arounds that cater for the substitute chips.
They are now having to deliver product on a “hand to mouth” basis as components become available ……and this is just for their non-certified aviation products! The certified products can’ t even be built because no chip substitutions are legal without very expensive recertification testing.
Guess what this is doing to profitability……..
TTG,
I’m a bit skeptical about these initiatives because they seem to me to be more for show than to make an actual difference. How many chips are in an iPhone … more than 50. As long as any of those ICs are fabed offshore the US is still vulnerable in that particular supply chain.
If the US really wants to address this issue I think it needs to go big or go home. Intel’s latest strategy is to become a foundry and go head to head with TSMC. Pretty ambitious. I know the US doesn’t like to pursue the “picking winners” approach to industrial policy but if you really want to be serious about bringing IC fabing back onshore I don’t see any alternative but to throw the full weight of the US govt behind Intel’s quest to be a foundry on par with TSMC. Otherwise you will just open one or two small fabs and say “see – we are doing something about it” … while economies of scale continue to concentrate the rest of IC manufacturing in Taiwan and China.
James,
There’s up to six chips in a smartphone, 3,000 in a car. There’s 200 chips in a Javelin. This is not for show. It’s a matter of national security, as well as economic security. The goal is to be as self-sufficient as possible. It’ll take years, but we have to start going at it hard now. The fate of Russia should be a wake up call. Putin wisely wanted self-sufficiency. His crooked oligarch buddies took the cheap road of quietly importing critical components, lied about it, pocketed the profits and now the entire country is screwed.
TTG,
The oligarchs might have quietly imported critical components but were they supposed to manufacture their own ARM CPUs domestically? License them or pirate them? Say they got a license somehow – even then there is no way they would be able to manufacture them – manufacturing something like an A12 processor can only be done by Intel, TSMC, and maybe Samsung. Nobody else in the world has any hope of being able to do it in the foreseeable future.
How about wide passenger airliners – Russia should manufacture all of those domestically? Russia and China have both been talking about it but the economies of scale of the business make it extremely difficult.
James,
The USSR was far more self-sufficient that Russia is today. Their weapons, their cars, their aircraft, their computers and everything else was designed and made in the USSR. Some of it was crude and not as glitzy as the West, but it worked and was often ingenious. The Russians are smart, capable people and can do quite well for themselves, especially if they aren’t preyed upon by their kleptocratic leaders and oligarchs.
Taiwan just raided a bunch of CCP operations that were stealing trade secrets and luring in their engineers.
As for this situation not good for the US military. Do our birds even have iron site capability? They better start looking into it.
Bail me out, bail me out! Sorry, that was so Solyndra-esque. I’m sure none of that kind of crap will happen with a bill that’s $10 billion bigger than we gave our ‘ally’ Ukraine. I’m sure that will work wonders; but what about the EPA and all the rest of the left’s regulatory compliance apparatus? If they don’t get rid of a lot of onerous, and completely unneeded, regulations it will be years before a plant is permitted regardless of how much money is thrown the company’s way.
Fred,
Chip fabs are being planned and built all over the country. Regulatory compliance can’t be that onerous. The chip fab in Saratoga, NY is doubling in size and output without depleting the water supply or pumping it full of PCBs like GE did in the pre-EPA days. I do question the wisdom of two chip fabs in Arizona. Where’s the water going to come from?
TTG,
You mean more that 50 years ago. “Regulatory compliance can’t be that onerous.” Have you had much experience with building a greenfield industrial facility or the various environmental groups who make it their mission to oppose such things?
Fred,
Ah, you long for the days when industries could create toxic waste sites willy-nilly. We memorialize those good old days with superfund sites like Love Canal and the Upper Hudson where GE dumped PCBs for decades. Given the history of GE’s PCBs, the chip fab in Saratoga was approved without massive resistance from eco-protestors, local communities or government interference. They broke ground in 2009 and have been producing chips for a decade. They are now expanding that fab and plan to build a second fab on the same campus. Since SWMBO’s family was there, I followed that closely. I’ve seen more stink raised with our Culpeper solar farm and the attempted expansion of a quarry a few miles from my place.
TTG,
Thanks for yet another personal insult. Is the plant there still owned by the government of Abu Dhabi? What financial “incentives” did they get to build the first one in 2009?
“ATIC is a company created by the government of Abu Dhabi. ATIC will own 56.6% and AMD will own 44.4% of the new company.”
http://www.teddersrandomnotes.com/blog/tag/globalfoundries/
“I’ve seen more stink raised with our Culpeper solar farm and the attempted expansion of a quarry a few miles from my place.”
Oh look, you both proved my point, people can slow things down by making demands on their government, local, state, federal.
Fred,
Sorry. You left me with the impression that you don’t approve of local groups using existing laws and regulations to stop/shape industrial expansion. That’s exactly what local groups are using to stop solar farm and data center development in Culpeper. The local land owners, largely local farmers, want that development. The local quarry tried to get a change in their previously approved business plan through the county zoning and planning board. Local community resistance and local government action stopped that.
The people of Saratoga did the same thing with the chip fab. NYS and Saratoga ponied up over a billion dollars in incentives fro the first chip fab and they’re glad they did. The locals voted for those incentives. That new chip incentive bill will do at least that much for the second Saratoga chip fab. The Abu Dhabi investors in Global Foundries put many billions more in the first plant. NYS, Saratoga County and the locals were more than happy to have that foreign investment in their community. Global foundries is now a public company headquartered in Saratoga County.
House and Senate won’t reach consensus because IC chips are not being pushed by the pastors of the evangelicals.
Biden is about to drop the Trump tariff’s on Chinese goods, this will be a waste of money.
The Corporations that make the chips are all going to be dependent on Chinese manufacturing.
Hell, we can’t even make baby formula anymore.
China still imports the bulk of her microchips from the West. China is not yet a leader in chip production, but is working like hell to become self-sufficient.
Intel is building $20B chip factory in Ohio which will create 3,000 jobs, more than half will go to H1B Visas.
China will win by simply stealing our technology, sending intel officers to get PhDs, and simply buy trade secrets.
Biden ended the Trump era of tracking Chinese spying.
China will win.
Jose,
Buying and stealing trade secrets won’t produce one Chip for China. What do you suggest we do? Roll over and give up?
If anything, Biden has become tougher on China that Trump. He hasn’t even lifted the Trump tariffs.
Is this really a “philosophical debate over trade issues”?
Really?
Or are there vested interests who have too much of an investment in offshore fabrication plants to allow a domestic competitor to get itself up and running?
After all, there was a reason why all the made-in-the-USA capability was off-shored in the first place. Have the oligarchs and the industrialists who made that decision all suddenly found enlightenment? Or imprisonment? Or whatever?
Or are they still clinging to the selfish reasons why they off-shored in the first place, and national security be damned?
WPO,
The trade issues being debated are not the chip incentive bill. That part of the bill has bipartisan support. The chip incentive bill is meant to encourage chip fabs being built in the US by US and foreign companies like TSMC.
BabylonBee* captures the moment, as Democrats exploit this tragic school shooting using Biden-Obama porn that pushes their own anti-2nd Amendment agenda:
https://babylonbee.com/news/guns-should-not-be-in-the-hands-of-the-mentally-unstable-says-senile-man-with-nukes
(*Satire website)
Russian cruise missiles, air defense systems, and attack helo targeting system apparently have had no problem getting American made or American designed chips:
Intel,
Micrel,
Micron Technology,
Atmel Corp,
AMD,
Rochester Electronics,
Texas Instruments,
Linear Technology,
Cypress Semiconductor,
Maxim Integrated,
XILINX,
Infineon Technologies,
and Onsemi.
All were found in captured Russian weapons by Ukraine’s TechINT gurus. No telling when or where they got them. Were they sold direct or recycled in the huge unregulated market for chips.
https://www.thedrive.com/the-war-zone/captured-russian-weapons-are-packed-with-foreign-microchips
Leith,
The article leaves out the important detail about just what kind of chips these are. Further they hint that they may have been made years ago. To quote one of the manufacturers:
“A spokeswoman from Onsemi, for instance, pointed out that her company’s chips are not military-grade, thus easily obtainable. Stefanie Cuene, head of public relations for onsemi, said that her company’s chip
“is a commodity, not military grade and available anywhere on the open market.””
So they went to the upstream equivelant of Radio Shack to buy off the shelf components. It certainly explains a lot of system failures they’ve been experiencing.