U.S. will miss electric-vehicle targets without big investments in semiconductor manufacturing, commerce secretary warns

Source: By Jeanne Whalen, Washington Post • Posted: Monday, November 29, 2021

Electric cars require more computer chips to build, but chips are already in short supply globally, adding urgency for Congress to endorse subsidies for semiconductor production, Gina Raimondo says

Commerce Secretary Gina Raimondo speaks during a news briefing on Nov. 9. (Leah Millis/Reuters)

The United States won’t meet the Biden administration’s goal of widespread electric-vehicle adoption without urgent investment in domestic semiconductor manufacturing, Commerce Secretary Gina Raimondo said.

Demand for computer chips is already far outstripping supply, a problem that will intensify with widespread adoption of electric cars, which require more chips per vehicle, Raimondo told journalists before a planned speech on the semiconductor shortage Monday in Detroit.

She urged Congress to pass the Chips Act, which would authorize $52 billion in subsidies for domestic semiconductor manufacturing and research. The Senate passed the bill in June, but the House has not yet cleared it.

The Biden administration is aiming to make half of all new vehicles sold in 2030 zero-emissions vehicles, including electric, plug-in hybrid or fuel cell electric vehicles.

“We will not hit those goals if Congress does not quickly pass the Chips Act,” Raimondo said, adding that China, South Korea and other countries are already generously subsidizing semiconductor manufacturing. “We are wasting time, precious time, every day that the Chips Act isn’t passed and appropriated in Congress.”

“Electric vehicles require orders of magnitude more chips than internal combustion cars, and different kinds of chips, more sophisticated chips,” she added.

A global shortage of semiconductors has hobbled the auto industry for the past year, forcing many automakers to suspend production for weeks at a time. Demand for the components is soaring as more consumer goods become computerized and as Americans ramp up spending on electronics of all kinds. But chip supply is scarce because semiconductor factories are extremely expensive and time consuming to build.

The costs to automakers have been huge: The global auto industry will produce 7.7 million fewer vehicles this year because of the chip shortage, costing it $210 billion in revenue, according to the consulting firm AlixPartners.

The related collapse in auto sales to consumers shaved more than two percentage points from U.S. gross domestic product growth in the third quarter.