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House needs to pass CHIPS Act now to ease semiconductor shortage

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US Commerce Secretary Gina Raimondo discusses the impact of the semiconductor chip shortage at UAW Region 1A office in Taylor, Michigan on November 29, 2021.

Jeff Kowalsky | AFP | Getty Images

DETROIT — Commerce Secretary Gina Raimondo on Monday urged the House of Representatives to immediately pass legislation that supports U.S. production of semiconductor chips to avoid future supply interruptions and lower the country’s dependence on parts from China.  

Speaking in the Motor City, Raimondo used an ongoing global shortage of chips that has depleted vehicle inventory levels and caused rolling shutdowns of U.S. auto plants as proof that the country needs to onshore its supply chains for critical components such as semiconductor chips.

“If we want to compete globally, we invest domestically, and specifically in revitalizing the semiconductor industry,” Raimondo said during a speech Monday at the Detroit Economic Club. She noted U.S. chip assembly represents only 12% of the global production, down from 40% in the 1990s.

The U.S. Innovation and Competition Act, or USICA, passed the Senate with bipartisan support in June but has stalled in the House of Representatives. The Creating Helpful Incentives to Produce Semiconductors for America Act, or CHIPS Act, which is tucked inside the broader competition bill, includes $52 billion for domestic semiconductor production and incentives to invest in new semiconductor manufacturing facilities in the U.S. and establishes a National Semiconductor Technology Center.

“We need the House to pass the CHIPS Act immediately so we can get to the business of doing this,” Raimondo said.

The chip shortage has caused problems throughout the global automotive industry, but Detroit automakers have been affected more than others. The shortage is expected to shave $210 billion in revenue from the automotive industry this year, according to consulting firm AlixPartners.

Automakers such as Ford Motor and General Motors have announced plans to work more closely, even partner, with semiconductor suppliers in an attempt to avoid such shortages in the future.

While many believe the worst of the semiconductor shortage is behind the automotive industry, the Biden administration has pushed for more U.S. production of critical components such as chips for the U.S. automotive industry and other sectors.

Raimondo said increasing the domestic production of chips is critical as the automotive industry starts producing more electric vehicles.

The Biden administration has pushed for EVs to make up half of new U.S. auto sales by 2030. Raimondo called it an “excellent goal” but said the “truth of the matter is that requires a lot of chips.”

She said the average EV has about 2,000 chips, roughly double the average number of chips in a nonelectric car.

Overall, Raimondo used the event to urge passing of the semiconductor bill as well as to tout Biden’s Build Back Better Act, which is awaiting action in the Senate.

Raimondo said she remains “bullish” on the U.S. economy and American manufacturing.

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