The United States was once the world leader in semiconductor chip manufacturing. Today, we account for only 10 percent of global production and produce none of the most advanced chips. This doesn’t just create potential issues when purchasing a smart phone or appliance. Our inability to produce semiconductor chips puts our long-term supply chain security at risk.
The ongoing chips shortage has highlighted the critical role chips play throughout the economy. For example, the chips shortage is leading to devastating layoffs and is expected to cost the global auto industry $210 billion in revenue, with 7.7 million units of production forecasted to be lost in 2021. This lack of supply has caused new car prices to climb 11 percent over the past year and, according to the Consumer Price Index, even used cars and trucks are experiencing a 37 percent price increase over the same period.
But beyond powering our cars and other key technologies foundational to our modern-day economy, semiconductor chips play a crucial role in our long-term competitiveness and national security. In fact, some our military’s most cutting-edge weapons systems, like the F-35 Joint Strike Fighter, need them to function.They are fundamental to a broad range of advanced Department of Defense capabilities, such as autonomous systems, artificial intelligence, directed energy, and hypersonic weapons.And our military communication and navigation systems use them, as does our nation’s critical infrastructure.
This is why Congress must work quickly to resolve differences between the United States Innovation and Competition Act of 2021 (USICA) and the America Competes Act — both bipartisan, critical pieces of legislation essential to bringing back manufacturing and create good-paying jobs, reducing prices for middle-class families, and outcompeting China and the rest of the world to win the 21st century and beyond. China is investing enormous sums to become the world’s leading semiconductor manufacturer within the decade. We cannot afford to cede leadership in one of the world’s most important industries. Instead, we must seize this pivotal moment to reassert our historic leadership in semiconductors for the prosperity and security of the American people.
These pieces of legislation will create growth right here in the United States by ensuring we are poised to take advantage of the growing market and demand for semiconductors. The results of a recent Commerce Department Request for Information confirmed what many Americans already know: the supply of chips is low, but demand for them remains incredibly high, running as much as 20 percent in excess of 2019 demand. The primary reason for the shortage is production capacity: The vast majority of semiconductor fabrication plants (or “fabs”) are already running at more than 90 percent utilization. Semiconductors were America’s fourth largest export in 2020 — amounting to $47 billion. USICA and the America Competes Act will allow us to press this advantage and continue expanding the U.S. economy.This will also mean employment opportunities for a variety of skill levels, from manufacturing workers to engineers and scientists, bolstering our domestic manufacturing and production.
Moreover, we will minimize vulnerabilities in all segments of our semiconductor supply chain, keeping Americans safe.
We don’t often have an opportunity for a bipartisan bill that translates into a win for our economy and our defense.With USICA and the America Competes Act we have that chance, but we do not have time to delay. We must get a bill to the president’s desk as soon as possible to restore America’s leadership in chip manufacturing and cement this as the century of American innovation.
Kathleen Hicks is deputy secretary of Defense and Don Graves is deputy secretary of Commerce.
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