Semiconductor Shortages Have Hobbled the Auto Industry. Michigan Leaders Are Trying to Fix It.

By Isaac Constans

March 15, 2022

The semiconductor shortage has limited auto production and driven up prices for available cars.

Need to Know

  • Michigan auto manufacturers will sell vehicles without some nonessential features to conserve chips.
  • Each new car requires hundreds if not thousands of semiconductor chips, sp the shortage has caused delays.
  • The CHIPS Act would boost domestic production of semiconductors, which has largely been offshored. 

MICHIGAN—With a technological shortfall that has slowed auto manufacturing and even disabled heated seats, Gov. Gretchen Whitmer and other local lawmakers have urged Congress to ramp up domestic production of semiconductor chips, which are foundational energy circuits for cell phones, home appliances, and cars.

The CHIPS Act, which would boost semiconductor production and research in the United States, currently idles in Congress. It’s embedded in two separate funding packages—fully funded in both, which reside in the House and Senate, individually—but the two legislative chambers need to negotiate the final language before sending the bill to President Joe Biden’s desk. 

Whitmer, who’s established herself as a recognizable national leader on the manufacturing front, recently urged lawmakers to expedite the negotiations and reemphasized the urgency of the CHIPS Act.

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“This is game-changing, bipartisan legislation that will make a real difference in people’s lives if we get it done,” Whitmer said. “It’s the kind of bill that can set us up for decades of economic success.”

Because of pandemic-related supply and demand fluctuations, semiconductor production has been on the fritz since 2020, and that shortage has contributed to dramatic swings upward in the price of cars as auto manufacturers can’t push new models to market.

Earlier in the week, Ford executives finalized plans to ship vehicles missing noncritical chips to dealers to sell, Automotive News reported. Those vehicles would be sold at a discounted price, and customers could bring their cars in a year after purchasing them to have the chips installed and features enabled for free.

But already, the chip shortage has apparently created a backload at auto facilities in the past few years.

“This is a national security issue,” Whitmer said at The White House last week. “If we do not act, America’s future as the unparalleled center of innovation and advanced manufacturing is at risk. ”

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According to the UAW, the US currently only is responsible for producing 14% of the world’s semiconductors, as Taiwan, South Korea, and China have taken much of the market share.

Electric vehicles require 2,000 semiconductor chips each, and gas engine cars usually require 1,000 or more. 

The CHIPS Act fundamentally would create economic incentives and stimulus for chip manufacturing in the US, and it would establish a National Semiconductor Technology Center.

The United Auto Workers Union has signaled its support for the CHIPS Act as well, saying that it will create more jobs and protect others.

“At its core, it’s an issue for all of us that demonstrates not to offshore those jobs,” Ray Curry, UAW president, said at a November roundtable. “Bring those jobs and the production of semiconductors back to the United States.”

In the meantime, American auto manufacturers have tried to establish more direct connections with semiconductor producers so there’s no gap in supply. Whitmer has also invited more semiconductor business to the state. 

In August of last year, SK Siltron CSS, a subsidiary of a South Korean semiconductor firm, created a new semiconductor wafer facility in Bay City, which is expected to generate 150 jobs.

“SK Siltron CSS is proud to partner with the State of Michigan to build the supply chain and create the skilled jobs required to support the next generation of EVs, ensuring Michigan remains the automotive center of the world,” said Jianwei Dong, chief executive officer for SK Siltron CSS, at the time of the announcement.

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