Why you should care about the semiconductor chip crisis

Are you worried about your chip supply? Not potato chips. Not poker chips. And not wood chips. I am talking about the shortage of semiconductor chips, which you may not realize influence everything from your cell phone to your car, your game console to national security.  

We are talking about a nearly $500 billion semiconductor industry manufacturing silicon wafers using complex processes that allow us to do everything from drive to play. Our internet-connected world is completely dependent on energy, the production of semiconductors and each other for sourcing. 

We are a world awash in gadgets like Xboxes, temperature gauges, webcams and wireless data panels in automobiles. Our schools use computers, our homes use kitchen appliances with sensors and out data is stored in hospitals and factories, and at local retail outlets. So, when one piece of the puzzle falls short, the whole picture is distorted.

The semiconductor chip supply problem is so big that the president of the United States met with CEOs of technology companies last week to address the issue, and has ordered a 100-day review of the semiconductor supply chain. Congress has backed legislation aimed at spurring more domestic chip manufacturing to reduce dependence on Taiwan and South Korea, which President Biden has proposed funding with $50 billion in his infrastructure plan.

Like all modern global crises, this one is about dependence. In an inter-dependent world, one problem like COVID-19 can create a cascade of problems. The shortage of semiconductors has been fueled by expanded use of electronics, pandemic interruptions and production problems at multibillion-dollar chip factories around the world, disrupting purchase orders and creating hoarding in advance of predicted shortages.

Then add climate change and natural disasters that have also affected some companies from Texas to Taiwan.

Shortages this year have been exacerbated by episodes that include a fire at a Renesas Electronics chip factory in Japan, a drought in Taiwan and a cold snap in Texas that temporarily shut down factories operated by Samsung Electronics, NXP Semiconductors and Infineon. 

And add tariffs on Chinese products coming into the United States, which have only sparked more market gyrations. Outsourcing, pricing and now mark-ups all become costs that the consumer will absorb. 

The result is that big corporations are doubling inventory, leaving small manufacturers to face lengthy re-designs of products or find alternatives. The chip shortage potentially affects just about any company adding communications or computing features to products. The personal computer giant HP said the shortage of semiconductors had prevented the company from being able to meet demand for computers ordered by schools. Rising chip prices also have made it harder to offer affordable hardware for less-wealthy school districts during the pandemic, the company said.  

So, what’s the answer to this latest obstacle to getting back to global normalcy? 

First, we can’t blame globalization; instead, we must embrace it. A new administration is making it clear that America will play ball in the global arena and, hopefully, reverse years of following an “America First” strategy. We have to design policies that both benefit the United States and contribute to sound trade policies and economic growth at home and abroad.

Second, we must improve predictive data analysis. Whether it is using genetic sequencing technology to better understand the spread of virus variants or tracking the global supplies of chips, our country must invest in the research and development of technologies that impact or daily lives.

Third, we need to teach our citizens about how politics, policy and STEM-related issues affect us, as well as how laws, institutions and history can inform our lives. We can’t just expect the government or corporate sector to deliver our electricity and computing power or turn on our game consoles. We have to be involved, engaged and educated to help make sound decisions. In short, we must pay attention.

Tara D. Sonenshine is a former U.S. under-secretary of state for public diplomacy and public affairs.