"Indeed, the automobile sector has been a major cause of inflation in the last 12 months: Between December 2020 and December 2021, the prices for new vehicles jumped 11.8% and the prices of used cars rose an astounding 37.3%" US Secretary of Commerce Gina Raimondo.
Bloomberg reports that The Biden administration has concluded that a global semiconductor shortage will persist until at least the second half of this year, promising long-term strain on a range of U.S. businesses including automakers and the consumer electronics industry.
According to Wikipedia, the 2020–2022 global chip shortage is an ongoing crisis in which the demand for integrated circuits (commonly known as semiconductor chips) is greater than the supply- affecting more than 169 industries and causing to major price increases, shortages and queues amongst consumers for automobiles, graphics cards, video game consoles, computers, and other products that require semiconductors. Wikipedia cites the collective causes for the chips shortage as being the COVID-19 pandemic, the China–United States trade war, the various severe weather incidents among others.
In his article titled "Inflation has direct correlation with America's chip shortage" Ben Werschkul highlights how the Biden Administration has recently taken to targeting the industries and companies contributing the most to high inflation, ranging from the extremely ambitious oil and gas companies, to greedy meat dealers.
Major Cause Of Inflation
In a recent interview, US Secretary of Commerce Gina Raimondo is reported to have linked yet another industry to the problem, drawing a “direct correlation” between inflation and the shortage of semiconductors- the computer chips needed to manufacture automobiles. More so, data from the Society of Motor Manufacturers and Traders indicate that more electric cars were registered in 2021 than in the previous five years combined, straining the limited supply of chips and hiking prices in the market. According to Raimondo, the auto price jumps stem largely from a decline in production because car companies can't get enough chips.
"There is a need to increase the supply of cars so as to reduce prices. In order to do that, we need more semiconductor chips,” Raimondo is said to have told Yahoo Finance's editor-in-chief, Andy Serwer. According to a recent report conducted by the semiconductor Industry Association, The U.S. role in semiconductor manufacturing has fallen from nearly 40% in 1990 to 12% today.
Need For Action
In a bid to solve this semiconductor problem, The US enacted 'The CHIPS for America Act' — which passed the Senate last June and currently awaits a vote in the House. This includes $52 billion to prod semiconductor companies to base fabrication plants in the U.S.
According to Ben Werschkul, US Secretary of Commerce, Raimondo noted that if lawmakers send the money, her Department would work in partnership with semiconductor companies, asking them to set up shop in America, making chips in America.
According to this Act, the program would reach out to American semiconductor companies like Nvidia (NVDA), Intel (INTC), and Micron (MU) as well as foreign companies “in allied countries” like Samsung and the Taiwan Semiconductor Manufacturing Company.
“We want and need them to be built in America, hiring Americans, to make this stuff on our shores,” Raimondo asserted.
https://finance.yahoo.com/news/inflation-chip-shortage-commerce-secretary-122005269.html
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