Chevy and Ford chip shortage

A Chevy truck is half assembled and sitting in front of an American flag in Flint, Michigan.Even a year after the pandemic started wreaking havoc on global supply chains, a chip shortage is still disrupting entire industries.

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This year, some of GM’s newest cars won’t have a critical feature — an advanced fuel management system that saves gas — because the company couldn’t get enough chips, the transistor-filled semiconductors that keep so many of the devices we use today running. After announcing in March that customers who buy the new Chevrolet Silverado and GMC Sierra pickups between now and the end of the summer will have a lower fuel economy, GM said Thursday that worsening supply chain issues have led to temporary closures of eight of its assembly plants, affecting about 10,000 workers.

GM isn’t the only automaker facing setbacks and even layoffs due to the shortage. In March, Ford said the chip shortage, along with weather conditions, left the company canceling shifts and building some vehicles without all their parts. HondaVolkswagen, and Toyota have similarly warned of supply issues or reduced production in recent months.

Meanwhile, the United States has struggled to bring in enough of everything — from much-needed N95 respirators and other personal protective equipment to bicycles to game consoles and laptops — since Covid-19 first arrived. The chip shortage has continued to hurt device makers, too. Samsung recently warned that it might skip the introduction of its popular Galaxy Note phone this year. It doesn’t help that other shortages, including a shortage of shipping containers, are also causing ripple effects in the supply chain.

But the chip shortage, specifically, points to particular weaknesses in the US high-tech manufacturing industry. In response to growing concerns about the chip shortage and its consequences, President Joe Biden signed an executive order in February starting a 100-day review of supply chains for critical products, with a particular focus on advanced technology components, also fulfilling one of his campaign promises.

Biden’s review won’t just look at the US supply of semiconductors. In the coming weeks, the administration will continue to review America’s manufacturing abilities for pharmaceuticals, high-capacity batteries, and rare-earth elements that are found in everything from lasers to electric vehicles. There’s also a broader, yearlong review of sectors ranging from food and energy to transportation. The ultimate goal, the president said in February, is “making sure the United States can meet every challenge we face in the new era.”

The review could be essential to helping the US economy recover and could better prepare the country for a future crisis. Even as millions of people get vaccinated against Covid-19 and the economy picks back up, supply chain disruptions linked to the chip shortage are proving particularly persistent. The impact of the chip shortage on US autoworkers alone prompted governors from eight states to urge Biden to take action in late February, and Sens. Marco Rubio and Chris Coons have asked Biden to invoke the Defense Production Act to boost semiconductor supply.

“More than a warning, [the pandemic] was a data point for us that this can happen — and if it happens, look what it can do,” explains Seckin Ozkul, the founder and director of the Supply Chain Innovation Lab at the University of South Florida. “[When] a big disruption happens, how can you make sure that your supply chain is going to recover and not have major impacts as soon as possible?” Monday alone demonstrated how fragile the chip situation is. A fire at one automotive chipmaker’s factory in Japan sent stocks in Toyota, Nissan, and Honda down more than 3 percent.

But boosting US supplies of chips, or any other high-tech product, can’t happen overnight. Building new manufacturing facilities can be tricky, time-intensive, and expensive, and some previous government efforts to boost high-tech jobs in the US have failed. At the same time, recent decades have seen more and more of this manufacturing taking place outside the US, in part because it can be cheaper, easier, and more efficient to make these high-tech products abroad.

Now that the Biden administration has started down the difficult path of analyzing just how insecure America’s supply chain for these hard-to-manufacture components is, the companies affected by the shortage are trying to figure out what to do until a solution appears on the horizon. While this review alone won’t boost US high-tech manufacturing, the hope is to set the groundwork to secure US supply chains before another crisis hits.

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