Commerce Secretary Gina Raimondo is visiting Detroit Monday to stress the urgency of domestic manufacturing as a semiconductor shortage continues to hobble the state’s automotive industry.
Raimondo will meet with U.S. Rep. Debbie Dingell, U.S. Sens. Debbie Stabenow and Gary Peters, the UAW and other members of Michigan’s congressional delegation. Raimondo is urging congressional support of the Chips Act, which would authorize $52 billion in subsidies for domestic semiconductor manufacturing and research. The bill passed the Senate but is waiting for approval from the House.
“The truth is every single day we wait for the full passage and implementation of this bill is a day we can’t afford to fall further behind,” Raimondo said. “And by the way, other countries aren’t waiting. Other countries are moving forward with large investments.”
Raimondo listed off investments and subsidy plans already in place in China, Taiwan and South Korea. In September, the European Union proposed its own version of the Chips Act.
Adding extra pressure domestically is the race toward electric vehicles. Chip production will need to accelerate in order to meet the Biden administration’s goal to make half of all new vehicles zero emissions by 2030, a goal Raimondo said the U.S. is falling short of.
In 1990, the U.S. had 37% of the global chip manufacturing share. Today that number has dropped to 12%, according to the 2021 Semiconductor Industry Association (SIA) report.
The roundtable discussion comes shortly after Raimondo’s trip to Asia focused on building relationships in the semiconductor industry. The U.S. launched a request for information and an early alert system to get a full picture of where the bottlenecks are and how they can be resolved quickly.
Despite arguments against proprietary information, 150 companies around the world submitted data on semiconductor supply and demand, Raimondo said. The early alert system was launched in September and has already been used to communicate disruptions in Malaysia in the past two months. A full report on the supply chain and its vulnerabilities will take several weeks, Raimondo said.
“When we get to the business of investing with Chips [Act] money we have to be incredibly detail oriented, if we’re going to get this right,” Raimondo said. “All of the data we’re collecting will just enable us to do a better job. We’re getting smarter about the supply chain.”
Globally, 391 auto manufacturing plants have been impacted by the semiconductor shortage. More than 220 of those plants have shut down for 21 or more days, according to AutoForecast Solutions.
North America leads “a sticky race” as AutoForecast Solutions CEO and President Joe McCabe calls it. On a global scale, North America has 2.3 million unrecoverable vehicles compared to China at one million.
Unrecoverable vehicles are cars that weren’t built during plant shutdowns and won’t be made up before the year’s end or possibly ever.
Last year, production stopped because of covid outbreaks in manufacturing plants across the world. This year, the workers are back but the materials aren’t, McCabe said.
“It doesn’t matter if you have a a healthy labor pool,” he said. “If you don’t have the parts to build it you can’t build the cars. Simple as that.”
Related: As GM waits for semiconductors, nearly completed Flint trucks pile up in vacant field
Manufacturers are getting smarter and their adaptability shows in the rows and rows of nearly completed trucks in Flint. More profitable trucks and SUVs have taken precedent over smaller passenger cars and that trend will likely continue as companies like Ford, General Motors and Stellantis make up their losses.
This year, Ford will have an estimated 65,000 unrecoverable vehicles, GM will have 116,000 unrecoverable vehicles and Stellantis in Michigan will have 98,000 unrecoverable vehicles based on AFS data.
“Recovery right this second is going to get less and less every day, not just every week,” McCabe said. “We’re going to be forced to push some of these unrecoverable volumes into our into our 2022 story because that’s the nature of this beast – we’re running out of time.”
Many of those lost cars will be passenger cars that were taken off the production schedule and won’t be replaced, McCabe said. Manufacturers are also getting creative with what non-safety accessories they can cut out, like heated seats and steering wheels, so that they can put vehicles on the market quicker.
With these adjustments McCabe estimates by mid-2022 production will level off and plant shutdowns will become less frequent. But a true solution won’t come until there’s sustainable chip production in the U.S., he said.
“We need more domestic investment in our supply chain again,” McCabe said. “It’s our fault that we have offshored that and now it’s showing the cracks in that strategy.”
The pandemic tipped the scales when weighing the cost benefit of outsourcing labor, McCabe said. The U.S. is a leader in global chip design but hands over the manufacturing to Asia where 75% of chips are made.
“The balance of not having the chips right this second shows that the weight should go towards the domestic manufacturing and not just the sheer cost savings of offshoring,” McCabe said.
Manufacturers are now reaching out directly to suppliers. Earlier this month, Ford announced a collaboration with New York-based GlobalFoundries Inc. to expand Ford’s semiconductor supply and engage in joint research.
Meanwhile, GM announced it’s spreading its bets and working with a mix of seven domestic and international suppliers.
In Ann Arbor, the global technology company KLA opened its second headquarters. The $200 million facility will employ 300 people with an additional 300 new hires planned for the next year and half. The Michigan campus will house the KLA’s AI Center of Excellence where machine learning applications help advance semiconductor manufacturing, according to a KLA press release.
President Biden has visited Michigan five times this year, including a visit earlier this month at General Motors’ Factory ZERO, the company’s first all-electric vehicle assembly plant. His press stops have focused on staying competitive in a global market and drumming up support for his Build Back Better policy.
Ahead of her Detroit trip, Raimondo echoed the president’s push to rebuild Michigan’s automotive industry and reverse course from investing in overseas production.
“Our manufacturing sector, manufacturing ecosystem, workforce and innovation just atrophied from a lack of investment in focus, and few states understand the pain that went along with that more than Michigan,” Raimondo said. “Michigan understands what a healthy and vibrant manufacturing industry can mean for the economy and for families who make a living in manufacturing.”
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