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Asia’s Chokehold on U.S. Manufacturing

Posted June 04, 2021

Ray Blanco

By Ray Blanco

Asia’s Chokehold on U.S. Manufacturing

If you’re not frightened by the global semiconductor shortage...

You should be.

Nearly every object in your life from your car to your coffeemaker use chips.

And as appliances get “smarter” and more connected to the cloud...

The demand for chips is skyrocketing.

Worse still, Asia has America – the world’s leader in all things technology -- in a chokehold over chip production.

Right now, it’s estimated that 80% of the world’s chips are made in Asia. And 65% of U.S. companies don’t even produce their own chips.

Fortunately there’s a fix to this big problem.

It won’t be quick and it won’t be easy.

But it’s the only way to protect your modern way of life...

Just how is the chip shortage?

Take a look at this chart.

wait time

The wait time for new chips is at least 16 weeks.

That means it can be 7 or 8 months until companies who need these chips get them.

And a big reason for the delay is the complex supply chain that has to make it all the way from Asia (Taiwan’s TSMC being the largest maker of chips) to the United States.

And this only means bad things for manufacturers.

Let’s take the automotive industry for example.

Nearly every single new car needs a chip to run.

Whether it’s a part of the GPS navigation system or Bluetooth, features that were once lauded as cutting edge technology are everyday items in modern vehicles.

This has led to hundreds of thousands of vehicles left to wait while they wait for chips to get to them.

Companies like GM and Ford refuse to give dealerships cars without the full setup inside them, which makes for emptier lots.

This makes the cost artificially higher than it needs to be.

A high demand for chips and new automobiles combined with a low supply of chips and purchasable vehicles mean price hikes unlike we’ve ever seen.

So what can we do to fix it?

We need to manufacture our own semiconductors here in the United States.

U.S. chip companies are extremely reliant on Asian countries to produce the semiconductors for them.

The main pull of course initially was that the Asian workforce is extremely cheap compared to that in the states.

But in the case of Taiwan, and South Korea, where a large amount of chips come from…

The wage labor gap is closing, and it’s getting more and more costly to buy chips from Asia — at the further cost of an 8 month delay.

Furthermore, it’s a national security threat.

Military and aeronautic technologies all depend on advanced computer brains to control them. And those brains need chips to fuel them.

If there’s a chip shortage, we risk our defensive capabilities as a nation.

So if American companies don’t start producing chips here...

The federal government should step in and make it worth their while to do so.

I’m talking about tax incentives for domestic manufacturing – from building plants to fashioning fabs.

Of course, regulation and polices could take years to enact.

But the supply chain is the main problem here... and this problem isn’t just going to go away.

On it’s own...

Asia’s share of the chip market is predicted to increase in the coming years, while the United States’ share will only stagnate.

So we need do something soon.

Not just to alleviate the current chip crisis... but protect to the American chip supply chain forever.

The COVID-19 pandemic in a way is a reset on the industry. And it’s time to take action now.

To a bright future,

Ray Blanco

Ray Blanco
Chief Technology Expert, Technology Profits Daily
AskRay@StPaulResearch.com

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