Chips Is The New Oil And America Is Spending Billions To Secure Its Supply

 

• Fears of recent shortages and China's ambitions to dominate the industry have led to a frantic effort to increase US production

Only in the last two years has America fully understood that semiconductors are now as central to modern economies as oil.

In a world of digitization, power tools usually come with Bluetooth chips that track their location. Chips have been added to devices to manage power usage. In 2021, the average car will have about 1,200 chips worth $600, twice as many as in 2010.

The supply-chain crisis that created the chip shortage brought the lesson home. Auto makers lost $210 billion in sales last year, according to consulting firm AlixPartners. Competition with China has raised concerns that it could dominate key chip sectors, either for civilian or military uses, or even block US access to components.

Now the government and companies are spending billions of rupees to increase domestic manufacturing and secure the supply of chips. According to the Semiconductor Industry Association, since 2020, semiconductor companies have proposed more than 40 projects worth about $200 billion across the country, which will create 40,000 jobs.

It's a big bet on an industry that is defining the contours of international economic competition and determining countries' political, technological and military advantage.

“Where oil reserves are located has defined geopolitics for the past five decades,” Intel Corp. Chief Executive Pat Gelsinger announced at a Wall Street Journal conference in October.

As oil became the linchpin of industrial economies in the 1900s, the U.S. Became one of the world's largest producers. Securing a semiconductor supply is more complicated. While one barrel of oil is like another, semiconductors come in a bewildering range of types, capabilities and costs and depend on thousands of inputs and a multilevel supply chain spanning multiple countries. Given the economies of scale, the U.S. It cannot produce all these by itself.

"There is zero lead production in America," said Mike Schmidt, the head of the Commerce Department who oversees implementation of the Chips and Science Act signed into law by President Biden in August. Manufacturing and Research. "We're talking about making America a global leader in lead production and creating self-sustaining mobility going forward. There's no doubt that's a very ambitious set of objectives."

The recent shortages that hurt the most don't necessarily involve the most expensive chips.

Jim Farley, chief executive officer of Ford Motor Co., told a gathering of chip executives in San Jose, California, in November that factory workers, meaning workers in North America, had been out only three times a week since the beginning of that year. has worked. years due to chip shortages. Shortages of simple chips, including the 40-percent parts needed for the windshield-wiper motors in F-150 pickup trucks, fell 40,000 vehicles short of the production target.

As of 2014, San Diego-based ResMed Inc. The machines used to treat sleep apnea had only a chip to handle air pressure and humidity. Then ResMed began putting cellular chips in devices that broadcast nightly report cards on users' smartphones and sleep patterns to their doctors.

As a result, regular usage by users increased by more than half to around 87%. Because the death rate is low for sleep apnea sufferers who consistently use their devices, the relatively simple chip could help save lives.

ResMed could not obtain enough cellular chips during a chip shortage, when demand for its machines increased because a competitor's equipment was recalled. Some suppliers reneged on supply agreements. Patients faced a wait of months.