Commerce chief: U.S. will miss EV targets without chip funding
DETROIT — The United States won’t meet the Biden administration’s goal of widespread electricvehicle adoption without urgent investment in domestic semiconductor manufacturing, Commerce Secretary Gina Raimondo said.
Demand for computer chips is already far outstripping supply, a problem that will intensify with widespread adoption of electric cars, which require more chips per vehicle, Raimondo told journalists before meeting with automakers and delivering a speech about the chip shortage Monday in Detroit.
She urged Congress to pass the Chips Act, which would authorize $52 billion in subsidies for domestic semiconductor manufacturing and research. The Senate passed the bill in June, but the House has not yet cleared it.
The Biden administration is aiming to make half of all new vehicles sold in 2030 zero-emissions vehicles, including electric, plug-in hybrid or fuel cell electric vehicles.
“We will not hit those goals if Congress does not quickly pass the Chips Act,” Raimondo said. “We are wasting time, precious time, every day that the Chips Act isn’t passed and appropriated in Congress.”
“Probably the car you drive now has hundreds of chips. The (electric vehicle) that we want you to buy over time has two thousand chips,” Raimondo added in her speech to the Detroit Economic Club. Other countries have subsidized semiconductor manufacturing for years and the U.S. must, too, she added.
“China, Taiwan, the EU, other countries all around the world, they are not waiting. They are incentivizing and subsidizing the production of chips right now, and they have been for a long time,” Raimondo said.
A global shortage of semiconductors has hobbled the auto industry for the past year, forcing many automakers to suspend production for weeks at a time. Demand for the components is soaring as more consumer goods become computerized and as Americans ramp up spending on electronics of all kinds. But chip supply is scarce because semiconductor factories are extremely expensive and time consuming to build.
The costs to automakers have been huge: The global auto industry will produce 7.7 million fewer vehicles this year because of the chip shortage, costing it $210 billion in revenue, according to the consulting firm AlixPartners.
The related collapse in auto sales to consumers shaved more than 2 percentage points from U.S. gross domestic product growth in the third quarter.
Auto workers have also suffered, with thousands furloughed from their jobs during factory shutdowns, Raimondo said during a roundtable discussion with big car companies and the United Auto Workers on the outskirts of Detroit.
Auto executives at the roundtable expressed frustration about the intractability of the shortages.
“Are we seeing any improvements? The short answer is no. It’s still very hand to mouth,” said Ray Scott, chief executive of Lear Corp., an auto parts supplier.
Jonathan Jennings, Ford Motor Co.’s vice president of global commodity purchasing, called the roundtable discussion a “good step forward.”
“But as we’ve all said among ourselves, we need to get beyond the meetings and actually get additional chips,” Jennings said.
He called the Chips Act a promising fix for long-term supply problems, but stressed that the industry needs more semiconductors now.
Jennings said he hoped that an audit the Commerce Department is carrying out of chip supply and demand could help alleviate the short-term shortages. The agency recently asked semiconductor manufacturers and buyers all over the world to submit details of their production and purchases, and received more than 150 responses that it is analyzing to look for bottlenecks and ways to increase deliveries.
Shilpan Amin, vice president of global purchasing and supply chain at General Motors, said the auto industry’s need for chips will double in the next five years as electric cars and higher-tech vehicles come to market. Many other industries are also increasing their need for chips at a fast rate, he said — faster than chip manufacturers are expanding capacity.
“When people ask us about when this will end, no one really knows,” Amin said.
In an interview between her Detroit meetings, Raimondo said greater domestic chip production is vital in part because of rising tensions between China and Taiwan. Taiwan is the world’s biggest manufacturer of semiconductors, supplying much of the Western world’s most advanced chips.
“Yes, you see tensions rising. The problem is, we are overly reliant on other countries and particularly Taiwan — particularly one company in Taiwan, the Taiwan Semiconductor Manufacturing Co.,” Raimondo said. “So that puts our national security at risk and that’s why the Chips Act is a national security issue and an economic security issue. We need to make more chips in America.”
She added that securing chip supply had been a constant topic of conversation during her recent trip to Asia, where she met with officials and companies in Malaysia, Singapore and Japan. In their meetings, one constant was discussions of developing a joint map of global semiconductor supply to ensure that allied countries can purchase the chips they need from friendly nations, Raimondo said.
“I sat down in a roundtable with these huge Japanese companies, consumers (of chips), Sony, Canon, and they want to make sure they can get enough chips on their allied shores, whether that’s in America or their allies,” she said.