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Big and bold

A couple of weeks back an emergency funding proposal was brought forward by US Senate Democratic Leader Chuck Schumer that will approve $52 billion in spending to significantly boost US semiconductor chip production and research over five years.

With bipartisan support this proposal will be included in a much bigger bill that is set to approve $120 billion of spending on basic US and advanced technology research in a bid to better compete with China.

Schumer said that with US manufacturers suffering badly from the on-going chip shortage it was critical that the economy didn’t continue relying on foreign processors. “This amendment will make sure that we don't have to," he said.

Compared to the European response it looks like the hare, rather than the tortoise, will win the race.

While the US is passing legislation the German Chancellor Angela Merkel was expressing concern, and a little frustration, at Europe and its inability to manufacture the semiconductor chips and batteries it needs to compete for the production of cars as well as the burgeoning Internet of Things.

She has warned that Europe risks falling behind in areas like quantum computing, chips and batteries, all of which will be essential for the future of the car industry as it shifts to make more electric vehicles.

"If a big bloc like the EU is not in position to create chips, I am not comfortable about that," she said.

Merkel warned that Europe risked losing the ability to make chips and could end up being totally dependent on Asia for supplies.

While the European Union is creating a new alliance to support local production and development of semiconductors to reduce the reliance on foreign suppliers, any investment in new capacity will take time to deliver. In addressing the issue of chip shortages, Merkel made another and far more interesting point when she called for greater transparency in the supply chain and for much clearer and more watertight contracts.

A good point but one that goes both ways in that OEMs and automotive manufacturers, in particular, need to start committing to longer term contracts and not turning demand on and off when it suits them.

The US move is certainly ‘big and bold’ but Merkel’s call for a global discussion about much greater reliability is a sensible one and should be addressed, because investing heavily in new manufacturing facilities is a costly process and we could simply end up with manufacturing being duplicated at different sites around the world.

Author
Neil Tyler

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