Ongoing supply chain issues have created a persistent need around the globe for more semiconductor chips. The worldwide chip shortage has led to the cancellations of more than three million vehicles from automakers’ production schedules.
Yet some experts are predicting a rebound could be on the horizon. According to J.P. Morgan Research, “More chips will become available in the second half of 2022” and “the shortage is nearing the end.” The turnaround has been attributed in part to foundries in Taiwan transitioning back to producing semiconductor chips that are compatible with automobiles rather than consumer electronics.
Consumer habits during the COVID-19 pandemic brought on a shift away from the production of vehicles, as foundries focused on creating parts for smartphones and computers. As chip production in Taiwan continues to be reallocated to include the auto industry’s needs, analysts are expecting the shortage to begin dissipating.
However, an over reliance on the foreign production of semiconductor chips has become a potentially harmful trend for the United States. Domestic production of chips has fallen 25% since 1990, and America’s inability to produce semiconductors while they were at their most scare likely took a full percentage point off U.S. economic output in 2021, according to the White House.
As tensions over Taiwan between the U.S. and China continue to build, possibly cutting off American access to Taiwanese chip production should the situation escalate further, lawmakers have taken steps to reinvigorate manufacturing in America.
The Chips and Science Act, signed into law by President Joe Biden earlier this month, has directed nearly $53 billion to spur development of America’s semiconductor industry. The White House believes this new legislation will bring the U.S. market share of chip production up eight percentage points over the next decade.
Intel is currently leading the charge, entering a joint agreement with Brookfield Asset Management to pump $30 billion into chip factories in Arizona, as part of a deal that some industry insiders said could become the template for similar future agreements.
