When the chips are down | News

Only the size of a quarter, semiconductors, otherwise known as “chips,” are the brains of modern electronics.

They are responsible for enabling the components for digital consumer products, such as planes, military systems, smartphones, medical devices, digital cameras, gaming devices, television, home appliances and LED bulbs.

Made of silicon, the tiny little chips are considered a commodity and have opened up global conversations about shortages that have spurred the government to create a bill appropriating $39 billion for domestic manufacturing. It’s relevant to know why this technology is worth all the fuss … because they’re in almost every part of everyday life.

The silicon chips feed a $500 billion dollar industry and one of the biggest industries that use the circuitry is automotive. Cars today are more complex than ever before, needing anywhere from 1,400 up to 3,000 semiconductors each.

In the early 2020s there was already a shortage with the Covid-19 pandemic an initial catalyst, but structural factors also are part of the picture.

The auto industry is changing with major shifts toward automation and electric vehicles, which require more chips, causing further strain on the already stretched industry. China trade tariffs in natural disasters also exacerbated the problem. With people stuck in their homes, the demand for 5-G products, electronics and recreational products grew.

The auto industry was hit the hardest and cars suspended production and many dealerships closed. Some car dealers are now dropping features and downsizing their fleets.

“There are 100,000 trucks at Ford now not complete, they’re taking stuff out like the rear air conditioners and navigation systems,” said Billy Stamboulides, who works for Ford. “Cars that have a lot less options or regular options are becoming extras that were once the basic model.”

The anomalies in the chip market when it comes to cars not only stems from buying and selling but trickles down into just plain repair.

“I had to bring in my car for an electronic problem and it was 3 to 4 weeks out and instead of $42, it was $180, that is four times higher,” said Ashley Rain of Ormond Beach. “They ended up canceling and letting me know that their vendor just couldn’t get the item needed and ship from that country to country, it was too costly.“

On a trip to South Korea Sept. 21, US Commerce Secretary Gina Raimondo convened leaders in the chipmaking industry and repeated her call for Congress to act to provide funding for legislation to stimulate domestic manufacturing of the computer chips.

“We are on borrowed time,” Commerce Secretary Raimondo said. “Every other country has subsidies on the table now and, if Congress doesn’t act very quickly, key producers like Samsung, Intel and Micron are going to build in another country.”

CHIPS and Science Act was enacted in July and a $280 billion package was created. It is meant to reestablish American leadership in the technology. Semiconductors were invented in the US and have been around since the 1870s, but the world didn’t realize its potential for more than 100 years. Since the 1990s the US has taken the lead and ensured the growth and advancement of chips, but competition from Asia has waned production domestically.

“In 1990 we were 37% of the market and now we are 12 percent,” Mr. Stamboulides said. “Providing money isn’t enough, the money needs to be spent the right way.”

Intel announced in March it plans to spend $20 billion on two new chip factories in Arizona.

“The decisions semiconductor companies make could have an enormous significance, both for their industry and the economy as a whole,” John Johns of Port Orange said. “No matter the tactics they implement, the decisions will reverberate far beyond their industry to touch high-tech, consumer goods and automotive companies that depend upon them.”

Earlier this year Gov. Ron DeSantis awarded $6 million to Osceola County to build infrastructure connecting resources to NewCity Technologies and $3.7 million to Valencia College to create new programs for workspace training meant to bolster chip productions.

“Expanding domestic manufacturing capability is important for Florida and our nation,” Gov. DeSantis said in an interview in January with the DEO. “The strategic investments we are making today will help bring microchip and semiconductor manufacturing back to our state at a time when the supply chains are more fragile than ever.”

Some areas of the chip industry are leveling out, but automotive remain robust. Several automakers pointed out the chip crunch in the industry is here to stay. According to a study from NASDAQ semiconductors gets half of its revenue from selling chips used in the automotive industry.

Volkswagen, for instance, estimated the auto industry will continue witnessing a chip crunch into 2023 and beyond and General Motors CEO Mary Barra also pointed out the automotive industry could continue grappling with a chip shortage next year.

“It’s time for them to hire people back to the chip-making industry … problem with the bill is there’s no disclosures in there or specifics, so the CEOs can make huge chunks of money,” Mr. Stamboulides said. “They need to spend it wisely.”