Biden holds summit on semiconductor shortage

The White House will host a virtual summit this afternoon to discuss the $2 trillion jobs plan and steps to tackle the global chip shortage that is hampering automotive production.

A growing list of large carmakers have been forced to temporarily suspend production at some plants because of a global chip shortage that is now entering its fifth month.

The shortage is the result of rapid swings in demand. The onset of the pandemic led to mass shutdowns of automotive plans around the world in March and April last year, followed by an unexpectedly strong automotive recovery in the third and fourth quarters. Automotive applications consume around 10pc of global chip supply, a figure that is expected to rise. The difficulty now faced by consumers and producers is the length of time it takes to restart semiconductor production. Depending on the complexity of the chip, it can involve over 1,400 processing steps with a 20-week lead time to ramp up wafer production and six weeks for final stage, assembly, testing and packaging. Chip capacity was also put under pressure by rising demand to enable remote healthcare and office working. Another challenge faced by the industry is the high cost of developing the next generation of chips to enable 5G networks and the internet of things, high performance computing, machine learning and other leading edge technologies, with investment switching away from older platforms.

"The chip shortage represents a near-term crisis, but it can only be dealt with by longer-term solutions, such as dramatically increasing investment in US chip manufacturing capacity, as the Chips Act (creating helpful incentives to produce semiconductors for America) seeks to do," Washington-based think-tank ITIF vice president Stephen Ezell said.

Leading manufacturers have announced large investment programmes in recent weeks. Taiwan's TSMC — the world's largest contract chipmaker — plans to invest $100bn in new manufacturing capacity, South Korea plans to spend just over $106bn on four new fabrication plans and US firm Intel announced plans to invest $20bn on two new plants.

President Biden's proposed $2 trillion jobs plan, which is heavily focused on infrastructure, includes a $50bn investment in semiconductor manufacturing and research. Biden signed an executive order on 24 February for a 100-day review of supply chain issues for a range of critical goods including semiconductors, rare earths and other critical minerals, and pharmaceuticals.

By Caroline Messecar