Why Congress must help Kentucky manufacturers overcome chip shortage: Opinion
When you see a Toyota Camry or a Ford F-Series Super Duty on the road, you can take pride in knowing it was manufactured here in Kentucky. The Bluegrass State is the top vehicle-producing state per capita in the U.S.—and third in total output—with cars now being Kentucky’s second-largest export.
Today’s vehicles require thousands of tiny computer chips, which power everything from battery systems to in-car entertainment. The ongoing global semiconductor shortage is one reason Americans hoping to purchase a car have too often found empty lots.
Without action from the federal government, our supply of this critical technology could become more vulnerable in the future. Chip supply chain vulnerabilities undermine the state’s auto industry, as well as other top Kentucky industries, including aerospace, logistics and manufacturing.
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Fortunately, there is a solution sitting before us: Congress can move forward with current legislation that would boost the domestic chip sector, making the U.S. more competitive globally and protecting against a similar domestic scarcity in the future.
The U.S. was once a leading location for high-end semiconductor manufacturing. Unfortunately, in recent decades, our position has slipped, falling behind global competitors. From 1990 to 2020, the U.S. went from producing more than one-third — 37% — of modern chips worldwide to just 12%, while China’s share jumped from less than 1% to 15%.
East Asian countries have been able to attract a larger share of the high-end global semiconductor market, including new manufacturing facilities known as "fabs,” by pursuing significant public investment that makes company operations less expensive. As a result, it’s now 25-50% more expensive to build and operate a fab in the U.S. than it is in other countries.
To address this new reality and better support the U.S. semiconductor ecosystem, both chambers of Congress passed bills providing $52 billion in investments and incentives to build fabs and spur research and design projects domestically. Lawmakers are now working on finalizing the differences between their respective bills.
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According to findings from the Semiconductor Industry Association and Oxford Economics, federal investment on this scale would create an average of 185,000 temporary American jobs annually and add $24.6 billion yearly to the U.S. economy as new semiconductor manufacturing facilities are constructed from 2021-2026. Such an investment also would add 280,000 permanent jobs to the U.S. economy beyond 2026, including 42,000 direct semiconductor industry jobs.
The investment would also lead to a more resilient supply chain. With fabs located all over the world, instead of concentrated in a single region, the industry would be more protected against shocks that affect production schedules, such as natural disasters or geopolitical instability.
The window of opportunity for Congress to make these benefits a reality is slamming shut. Commerce Secretary Gina Raimondo recently said if legislation isn’t passed soon, the U.S. will lose out on major investment from semiconductor firms, who will instead locate their new fabs abroad.
Global demand for semiconductors is high and will only continue to skyrocket. It’s no longer a question of whether chip manufacturers will need to build new fabs to meet demand, but a concern of where these plants will be located. Strengthening the domestic semiconductor environment will make the cost of doing business here more comparable to other countries and establish the U.S. a top destination for innovation.
Time is running out to invest in U.S.-based semiconductor research, design, and manufacturing to strengthen America’s future. Kentucky’s economy is counting on it.
John Neuffer is the president and CEO of the Semiconductor Industry Association.