May 28, 2021 - Economy & Business

Senate's sweeping China competition bill seeks to tackle chip shortage

Illustration of a stack of circuit boards shaped like hundred dollar bills
Illustration: Sarah Grillo/Axios

Elements of the bipartisan U.S. Innovation and Competition Act, a sweeping China-related package that could be approved by the Senate as soon as Friday, could help address the chip shortage in the form of an emergency appropriation.

Why it matters: Production of everything from electronics and appliances to cars has been slowed down because of the shortage, which is expected to last until 2023.

  • Automakers have been hit hardest. The average car needs between 50 and 150 chips.
  • Ford and GM are temporarily shutting down plants because of the issue.

What they’re saying: Commerce Secretary Gina Raimondo points to the shortage as proof that the U.S. needs to increase its chip-making capacity.

  • "We are going to get it done. There’s no option," she told CNBC on Tuesday

The Senate is currently working through compromises on the legislation, which would provide $52 billion for semiconductor manufacturing.

  • The bill is meant to boost U.S. competitiveness against China, in areas like 5G and AI.

The big picture: There's private sector interest in improving the American semiconductor sector.

  • Companies like Intel and Samsung are making massive investments in U.S. chip manufacturing.
  • A recent McKinsey report points to boosting U.S. chip manufacturing as a way to make the country's manufacturing sector more competitive, supporting the premise of the bill as well as President Biden's American Jobs Plan.

What to watch: Factories are also facing a shortage of workers. This could further delay the return to pre-pandemic manufacturing capacity — and push industries toward more automation.

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