Industries call for legislative help on chip shortage

The microprocessor chip shortage seen around the world has grabbed plenty of headlines and ground numerous supply chains to a halt for months now — and it's expected to continue well into 2022. Of course, the countless companies that rely on the easy flow of these chips through global supply lines can't wait around for the better part of another year for things to get back to pre-pandemic norms. For that reason, industry groups are now urging federal lawmakers to lend a hand.

Earlier this year, Congress passed a bill known as the Chips Act, built into the annual defense funding bill, that would incentivize manufacturers to build factories that produce chips within the U.S., according to Bloomberg News. Crucially, however, the funding for those incentives and grants was never pushed through along with the bill itself, so officials from the Semiconductor Industry Association and 19 other organizations recently sent a letter to top lawmakers urging them to find the funding necessary (some $52 billion) to underwrite the bill.

Microchips are likely to remain hard to come by for some time.

"To be competitive and strengthen the resilience of critical supply chains, we believe the U.S. needs to incentivize the construction of new and modernized semiconductor manufacturing facilities and invest in research capabilities," group leaders said in the letter. "The need is urgent and now is the time to act. We look forward to working with you on this national priority."

What's the issue?
Over the past few decades, the U.S. standing in the microchip manufacturing sector has certainly faltered, according to Richard Howells of the tech giant SAP's supply chain management department, writing for Forbes. In the early 1990s, the U.S. was responsible for making more than 1 in every 3 microchips in the world, but today, that number is closer to 1 in every 8.

With more chips being imported to the U.S. these days, that leaves supply chains highly vulnerable to any number of risks, and the work stoppages and backlog engendered by the COVID-19 pandemic showed just how much of an issue this would be, the report said. With no end to the shortage in sight, at least for the near term, it's not that lawmakers speeding up funding will lessen the impact anytime soon — but rather that investment now would insulate the U.S. from future risk.

The short-term impact
As mentioned, the global chip shortage arose not because of COVID shutdowns directly, but due to those relatively brief shutdowns created huge, pent-up demand that would take well over a year to unwind. Indeed, the Taiwan Semiconductor Manufacturing Company recently announced that its production of chips in the first half of 2021 had increased 30% on an annual basis, with plans to double that number by year's end, according to Supply Chain Dive. But even that extra effort isn't likely to be enough to meet global needs until at least the start of next year, if not longer, because since demand continues to grow.

With all this in mind, it's vital for those in the supply chain to continually assess risk and generate whatever fallback plans may be feasible at any given time. With contingencies in place, the impact of disruptions may be reduced.