(WATCH) The Chips Act

You may have heard: there is an ongoing shortage of computer chips that go into everything from computers and cars to equipment for the U.S. military. Now, Scott Thuman reports, there’s a plan to solve the problem using your tax dollars.

Two years after the pandemic disrupted global supply chains, one product is still hard to come by – semiconductor chips. They go into everything from computers, and cars to communications equipment for the U.S military. Scott Thuman looks into the federal government’s plan to make them more readily available, by using tax dollars to subsidize chip production.

In a race against time, and under the pressure of a tight deadline, Bruce Montgomery and his team at Syntonics, a technology company based in Maryland, diligently piece together equipment used to extend the range of radio signals.

Bruce Montgomery: Most of our customers have tactical communications requirements. They need radios in a command center in the basement of a building, or in a cave. And in a lot of cases, the antennas are too far away to connect them using anything other than optical fiber. So, you have to use optical fiber to get the radio signals in and out.

The due date on a contract for the U.S. military is just weeks away and building the equipment for them is a complicated process made more challenging in the wake of a pandemic disrupting global supply chains, clogging ports and bottlenecking deliveries.

Montgomery: It means that when we call up the distributor to order something, the distributor goes, ‘Sorry, we don’t have any’ and you go, ‘What?’ It’s like going to the grocery store and being told they don’t have toilet paper!

For Bruce and his team, it’s all about semiconductors, that tiny critical ingredient needed to make it all work.

Montgomery: Lord yes. We’ve got micro controllers, microprocessors, all of these fancy integrated circuits most of which are designed in the United States. Few of which are fabricated here. They’re mostly fabricated in Asia.

Few indeed. A mere 12 percent of the global supply of the semiconductor chips used to make smartphones, refrigerators, and defense industry equipment are produced in the United States. Among their uses, controlling temperature sensors and managing power to illuminate electronic displays.

Compare that to the volume produced in just 4 different parts of Asia, where China, South Korea, Japan and Taiwan collectively manufacture more than 70 percent of the world’s chips.

Getting your hands on them, however, is a different story. It takes about 6 months between ordering and delivery.

Montgomery: We’ve got huge shipping problems right now. Production’s also a real problem. Chinese suppliers tell us they’re only allowed to have electricity two hours a day. The whole supply chain from soup to nuts is screwed up!

Scott Thuman: Have we become too reliant on products from Asia?

Montgomery: We certainly are reliant on electronics parts from Asia. Based on this COVID experience, I’d say, yeah, we’ve become overly reliant.

High-time for that to change, according to Senator Mark Warner, who knows something about chips. He co-founded the early mobile phone company Nextel in 1987, and today says it’s critical the U.S. creates its own resilient supply of chips.

Sen. Mark Warner: Other nations, particularly China, have dramatically increased their investment in this field. Who controls the supply of semiconductor chips really controls, in many ways, the economic future.

Which is why he is calling for the federal government to invest taxpayer dollars on the American semiconductor industry through a bipartisan bill he co-sponsored know as the “Creating Helpful Incentives to Produce Semiconductors” act.

President Biden, late last month, called on Congress to finish the job just as chip manufacturer Intel announced it will invest more than 20 billion dollars to build two chip factories near Columbus, Ohio.

President Joe Biden: I want to see Congress pass this bill right away and get it to my desk. Let’s get another historic piece of bipartisan legislation done.”

Warner: The Chips Act, which puts forward $52 billion, $40 billion would go to build new chip facilities here, $12 billion for research and development. We’re hoping to get it passed in the House, because if we don’t make this investment, there will not be a new semiconductor manufacturing facility ever built again I think in America.

The U.S. has a lot of catching up to do. Since 2011, the Chinese government has spent over 100 billion U.S. dollars subsidizing its own semiconductor industry.

Scott: With all due respect, every lawmaker who sponsors a bill or writes a bill says, ‘This is the one we need to pass. This one is so urgent.’ Why are we to believe that that’s the case?

Warner: This past July 68 of us, broadly bipartisan, we said, this needs to go to the front of the line. South Korea alone is investing 135 billion. Japan is somewhere between 50 and 70 billion, and the chip manufacturing capital of the world over the last 20 years is Taiwan.

The limited supply of chips not only jeopardizes business at Syntonics, it’s a threat to a corporation as large as General Motors, which last fall, physically shut down numerous assembly lines across North America for two weeks when it ran out of hips. Thousands of cars missing that small part, used to power sunroofs and enable blind-spot detection, sat idle, workers sent home.

Wall Street investment strategies further complicate the issue.

Scott Thuman: This is happening at a time when venture capital firms are pouring money into China’s chip sector. What’s your reaction to that?

Warner: I’ve been so disappointed with so much of American business who say, ‘Well, we see how China is treating its people in terms of human rights. But the Chinese market is so big, we can’t turn away from it.’ They’re chasing the easy money, sometimes at the cost of the national security. Part of the law in China requires any private company, that their first responsibility is not to their shareholders, it’s to the Communist Party. And I find it outrageous, frankly, if there are American, and for that matter, other western companies, helping to finance that.

Most of 2022 will pass before Syntonics and its supplier are expected to get back up to speed. In the meantime, Bruce Montgomery will keep scouring the globe.

Montgomery: If they aren’t available, I honestly don’t know what we’re going to do.

Sharyl (on-camera): So, let’s say Congress provides the $52 billion tax dollars. How long would it be before more chips are actually made in the U S?

Scott (on-camera): Well, it certainly wouldn’t be overnight. I’m told that even if we act with a sense of urgency, it could take up to five years just to build the proper facilities. And then there’s a workforce. Senator Warner says there’s plenty of trained employees across the country from building chips over the past 20 years, that then could be used in these positions. But you would clearly have to train more and that too would take a lot of time.

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