March 9, 2021

Global Chip Shortage Challenges Biden’s Hope for Manufacturing Revival

G.M. has halted production at one plant in the United States, one in Canada and another in Mexico until at least mid-March. At a fourth plant, the company has decided to produce vehicles without the electronics that are in short supply. When components become available, G.M. will install them and then ship the vehicles to dealers.

Ford canceled shifts last week at two important pickup truck plants. One of them, near Kansas City, Mo., is closed this week because of inclement weather and a shortage of natural gas in the Midwest.

Economists say the effect is likely to be small but noticeable. Mark Zandi, the chief economist at Moody’s Analytics, said he expected the chip shortage to reduce new vehicle sales by 450,000 units in 2021. That would lower overall economic output in the United States by approximately $15 billion, or not quite 0.1 percent of gross domestic product, which is expected to increase by 5.6 percent this year, he said.

Industry analysts say the shortages are partly because of a pre-pandemic trend toward consolidation and inventory depletion in the chip sector, which was exacerbated by the kind of coronavirus-related disruptions that have led to shortages of other products, such as exercise bikes, tablets and toys.

Factory shutdowns, first in China and then elsewhere around the world, disrupted production of the chips and the cars and electronics that require them. Automakers and consumer electronics companies then underestimated the surge in demand from at-home buyers, leaving companies scrambling with chip makers to secure their supply, according to analysts.

President Donald J. Trump’s trade policy might have also played a role, as chip makers anticipated that new U.S. restrictions on the type of technology that Chinese companies such as Huawei could buy would lower demand. Chip makers responded by trimming output.

Winter storms this week have also shut down or slowed production at chip factories owned by Samsung and NXP Semiconductors near Austin, Texas, potentially exacerbating the shortages.

Article source: https://www.nytimes.com/2021/02/18/business/economy/chip-shortage-semiconductors-manufacturing-biden.html

Speak Your Mind