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Bi-partisan legislation designed to give the U.S. semiconductor industry a $52 billion lift to ease America’s dependence on foreign-made chips is being hailed by automakers, which have struggled through crippling shutdowns during the past two years and left dealer lots barren.
Ford Motor Co. CEO Jim Farley this week lauded passage of the CHIPS and Science Act and hosted a meeting in Washington D.C. with key executives from Global Foundries and Applied Materials and other representatives from the semiconductor industry.
“It was exciting to finally have a chance to meet with them,” Farley told TheDetroitBureau.com. Farley said he met several of the executives via Zoom, but the meetings were transactional. The meeting in Washington on the eve of official bill signing at the White House gave him a better perspective on the semiconductor industry’s complex eco-system, which includes everything from the makers of the equipment used to make semiconductors to the suppliers of critical materials used in the chip-making process to foundries and packagers.
The shortages of semiconductors, which cropped up after the COVID-19 pandemic swept around the globe, crippled production at Ford and other global automakers. The shortages are still hurting production and only this week Honda reported its earnings fell sharply because semiconductor shortages undercut its production plans. BMW and General Motors also cut production in the second quarter.
“We don’t even make the machines in the U.S. anymore,” Farley noted. The U.S. share of chip making globally has steadily fallen since the 1990s, according to Senator Gary Peters (D-Michigan), who was one of the sponsors of the bill.
Semiconductors critical to cars
The semiconductors are critical to the operation of engines, pollution controls, chassis controls, driver assistance features and entertainment systems. Electric vehicles, which account for a rapidly growing share of new vehicle sales, also use more semiconductors than conventional vehicles equipped with internal combustion engines.
Automakers worldwide have been forced to cancel production of more than 2 million vehicles since the shortages began in the summer of 2020. “The shortages never seem to end,” noted Jeff Schuster, president of LMC Forecasting. “The predictions are always, ‘It will be better in the second half,’” he noted during a presentation during the annual Center for Automotive Research Management Briefing seminar.
The shortages and shutdown of automotive production underscored the importance of semiconductor sector and the need to create additional chip capacity in the U.S.
Not just needed for cars
Not only did executives from chipmakers as well as Ford Motor and General Motors Co. attend, but so did representatives from the Biden administration such as Brian Deese, the chairman of the President’s Council of Economic Advisers as well as U.S. Secretary of Commerce Gina Raimondo, who will have a major role in shaping the implementation of the bill.
The Pentagon also has a keen interest in the bill, which is considered vital to U.S. National Security.
Biden signed the bill to subsidize the U.S. semiconductor industry and boost efforts to make the United States more competitive with China. The bill provides $52 billion in subsidies for chip manufacturing and research. It also includes an investment tax credit for chip plants estimated to be worth $24 billion, according to Reuters.
Farley, however, predicted it will take several years for the new legislation to bear fruit since it represents a long-term investment in the semiconductor industry. “It’s going to take five or 10 years,” he said.
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