Thursday, January 27, 2022
Jan. 27, 2022

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In Our View: Consumers could feel chip crunch for years

The Columbian

A tiny piece of our vehicles, refrigerators, phones, game consoles and even electric toothbrushes promises to have a huge impact on American consumers. A global shortage of microchips – the brains behind devices that power our everyday lives – is expected to drive up prices for the foreseeable future.

“Right now we have a global supply chain in crisis,” Patrick Penfield, a professor of supply chain practice at Syracuse University, told “We’ve just never ever seen anything of this magnitude impact us before. It’s gonna be a tough holiday season. One thing I would caution consumers on is you probably won’t see the variety that you’re accustomed to.”

That is the result of an unprecedented sequence of events.

When COVID-19 hit the global economy, chip manufacturers temporarily shut down. Extreme weather events have since hampered several large plants, further slowing production. With people stuck at home, demand for consumer electronics soared beyond what supply could accommodate. That supply was further handicapped by slowdowns in global shipping caused by the demand for products.

On top of that, auto manufacturers canceled orders for computer chips while expecting a long economic shutdown. A new vehicle can have hundreds of semiconductors to run its various components. With auto companies canceling orders, consumer electronics firms filled the void, leaving car manufacturers with a shortage.

“Bad decisions, bad luck, and then increased demand. Put those three together and you got a shortage,” James Lewis of the Center for Strategic and International Studies told Popular Science.

The situation highlights several longstanding issues in the United States, including the Northwest. In 1990, about 37 percent of the world’s computer chips were made in this country; with a decline in American manufacturing, that has dropped to 12 percent, with Japan, Taiwan and South Korea dominating the industry.

President Donald Trump began a push to reverse that trend, and President Joe Biden and Congress have recently added to the efforts. The Endless Frontier Act received broad support in the Senate and has been sent to the House of Representatives; other efforts to boost semiconductor production also are under consideration.

Beyond the role the chips play in powering our cars and phones and microwaves, they also are a security issue. As a report from the National Security Commission said this year: “If a potential adversary bests the United States in semiconductors over the long term or suddenly cuts off U.S. access to cutting-edge chips entirely, it could gain the upper hand in every domain of warfare.”

That resonates in the Northwest, where the once-ballyhooed Silicon Forest has grown stagnant. In Clark County, where Sharp, WaferTech and Analog Devices have set up shop in recent decades, along with industry vendor SEH America, growth has been slow.

With abundant and inexpensive water and electricity, an educated workforce and a tradition of high-tech innovation, the Northwest should be a prime location for rejuvenating America’s semiconductor industry. But as The Columbian wrote editorially in May, land-use laws and government bureaucracy play a role in preventing industry investment in the region.

Even if changes are made, expansion is years or decades away. Constructing or expanding manufacturing plants takes time and billions of dollars.

In the meantime, consumers will feel the pinch and the rising costs created by a global shortage of semiconductors.