EagleHerald Staff Writer
MARINETTTE—Bob Juul of The Motor Store in Marinette said a shortage of semiconductor chips and other auto parts is affecting how quickly he can deliver cars to customers.
“It’s affecting any business. Supplies are a huge issue,” said Juul, general manager of The Motor Store in Marinette. His sales might be off as much as 30%, he said.
It’s an issue Michigan Gov. Gretchen Whitmer is trying to address by encouraging Congress to speed up funding for semiconductor research and development in the U.S.
Wisconsin Gov. Tony Evers joined Whitmer in signing a letter to Congressional leaders Nov. 10 urging them to help improve supply of the computer chips used in cars and other equipment through federal incentives for domestic production.
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act was authorized as part of the National Defense Authorization Act for Fiscal Year 2021, which was enacted in January by a Senate override. But the act didn’t provide the funding.
The funding for the CHIPS Act is included in the U.S. Innovation and Competition Act (USICA), which has passed the U.S. Senate but needs approval from the U.S. House of Representatives. In their letter, the governors are asking Congress to approve $52 billion in incentives to boost domestic semiconductor production, including $2 billion specifically for so-called “mature node” semiconductors used in the auto industry.
A Menominee components manufacturer said the legislation should help its customers in the truck and heavy equipment manufacturing sector.
“I think this legislation sounds like it’s heading in the right direction,” said Dan Ward, vice president of sales and manufacturing at L.E. Jones, a valve manufacturer that supplies the heavy duty truck market and farm segments. “The parts we make they go into engines,” he said.
Juul said more domestic production wouldn’t hurt. “We’d love to build more chips in the United States. But are they?” he asked.
Semiconductor chips are largely being produced overseas, but the act is designed to bring this manufacturing back to the U.S.
The governors’ letter said production is idling at auto plants because of a global chip shortage. So far this year, automakers in North America have lost 3,000 days of work and production of 2.2 million vehicles because of the shortage, according to the letter. Some experts have estimated the shortage could continue into 2023.
“This grim outlook serves to underscore the urgent need to re-shore semiconductor manufacturing back to the United States—the precise aim of the CHIPS Act funding provisions,” the letter said.
Juul said the problem stems from the economic slowdown during the pandemic.
“When the pandemic hit, car manufacturers were shutting down plants. They stopped needing semiconductor chips,” so production capacity of the chips slowed.
Sales of electronics, from iPods to phones and TVs picked up first, Juul said. “They took the capacity. People had a lot of cash, which is weird, and were buying a lot of stuff. Once car manufacturers got on board, they needed capacity. They had trouble getting their chips.”
Juul said the market will correct itself over time. “The chip industry has a history of boom and bust—a lot of bust,” he said.
“It’s billions of dollars of investments to increase capacity. Then you get overcapacity,” he said.
Juul isn’t in favor of new government incentives. “I don’t know if that’s a good idea. It’s the old law of unintended consequences,” he said.
At L.E. Jones, Ward said, “If we can get some sources here and expand our capabilities in chips in the U.S. it would definitely benefit U.S. companies.”
“We’re talking about it. We’re planning around it. Demand is very high right now. We do have some slowdown from time to time with regard to the chip shortage,” Ward said.
While L.E. Jones doesn’t supply automakers, the chip shortage also affects other types of manufacturing, including trucks and heavy equipment.