Chip crisis is changing firms' supply chain strategy

24 September 2021

The US government claims action taken by the Biden administration to tackle semiconductor shortages has seen a change in companies' supply chain management. 

The White House said it had “strengthened communication and trust” between semiconductor manufacturers and automotive and tech firms to help tackle the shortage.

The result, the White House claimed, has been a “change in supply chain management practices”, with firms including General Motors announcing new efforts to build more direct working relationships with semiconductor suppliers.

Last week GM chief executive Mary Barra said the company was making “pretty substantial shifts in our supply chain” and “building direct relationships with the [chip] manufacturers”.

The crisis forced GM to close four of its US plants after shortages halted operations. 

US car production dropped by 72% in the year to August 2021, with just under 1m new vehicles being built, compared to 3.58m built in the same period in 2019. 

The chip shortage has proven “hard to resolve” and is “dragging down the US economy” the White House said. 

The White House said estimates show semiconductor shortages could cut nearly a percentage point from GDP growth in 2021, pointing to how it has resulted in various production shutdowns which have impacted thousands of workers across the automotive and heaving trucking sectors. 

It also explained how the administration has worked with foreign governments in Southeast Asia to keep critical factories up and running by looking to establish early alert systems for Covid-related shutdowns to detect potential disruptions earlier.

The White House said it “continues to look to industry to take further steps to improve transparency, trust, and communication to address supply chain bottlenecks”.

Meanwhile, Tesla CEO Elon Musk has said the shortages are a “short-term problem”.

Despite having previously called the shortages a “huge” issue for automotive and tech companies, he remained optimistic about the outlook of the sector.

He said: "There's a lot of chip fabrication plants that are being built and I think we will have good capacity by next year," he stated at a tech event in Italy today.

Chip makers Intel and TSMC have announced plans to build new plants in the US, however there are currently no estimates as to when these will be completed. 

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