On Wednesday, the White House held a private briefing with some US senators on the catastrophic risks to the American economy posed by semiconductor supply chain concerns, as it seeks $52 billion in funds from Congress to subsidize production. “The best estimates are that the lack of available semiconductors probably cut a full percentage point off of GDP in 2021,” White House National Economic Council Director Brian Deese told reporters.
The White House said that Commerce Secretary Gina Raimondo, Deputy Defense Secretary Kathleen Hicks, and National Security Advisor Jake Sullivan were present at the briefing to “discuss the urgent need to invest in made-in-America semiconductors as well as research and development that will protect our economic and national security.”
White House warned about a shortage
A continuous chip scarcity has hampered manufacturing in the automotive and electronics industries, prompting some companies to reduce output. There have been increasing requests to reduce reliance on foreign chips.
“A significant disruption in our supply of semiconductors could cause historic damage to the US economy – far greater than the current impact of chip shortages on the American auto industry – and undercut our technological competitiveness and military advantages over adversaries around the world,” the White House said. After months of debate, the White House has pushed Congress to approve US subsidies for semiconductor chip manufacturing.
In June, the Senate approved $52 billion in chip financing, as well as $190 billion to improve US technology and research in order to compete with China, while the House of Representatives approved its version in early February. Deese expressed the hope that both the Senate and the House will select negotiators this week so that a formal process to finalize a compromise bill may begin “soon.”
“The risks are enormous,” Deese said of what a severe interruption would mean for the US economy. “Key rivals’ economic movements – most notably China’s surrounding the rising vulnerabilities we have from the semiconductor issue,” Deese said. A Commerce Department analysis reviewed by Reuters that was prepared for the briefing emphasized that semiconductor fabs take years to build.
“In the face of an emergency, there is no quick remedy,” it wrote, adding that private sector investment in American chip production is insufficient and “will not be adequate to alleviate the risks associated with the present U.S. supply chain vulnerabilities.” The proposals adopt various ways to address the United States’ competitiveness with China on a variety of problems, including trade and certain climate-related legislation.
According to the Biden administration, the United States manufactured roughly 40% of all chips in 1990, but now only accounts for 12% of worldwide output.