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Thomas Gallatin / October 13, 2021

Why the Semiconductor Shortage Matters

The Biden administration scrambles to address a major, long-term supply chain deficiency.

The American auto industry is continuing to suffer from a major supply chain issue. A shortage of semiconductors has cut the supply of new automobiles available for sale by some 70% from pre-pandemic levels, driving up prices of both new and used cars. And the end of this semiconductor supply shortage is still likely over a year away.

The response to COVID — aggressive shutdowns of semiconductor factories in Asia combined with California Governor Gavin Newsom’s heavy-handed restrictions — is continuing to slow any prospect of a robust recovery. Due to Newsom’s COVID policies, the ports of Los Angeles and Long Beach are operating at just 60% capacity, even as hundreds of thousands of shipping containers sit on ships off the coast waiting to be unloaded.

The supply chain was not designed to handle political leaders with an agenda. Stopping businesses via sustained COVID lockdowns and then attempting to restart them, in some cases months later, does not produce an immediate return to business as normal. Likewise, continuing to force restrictions on businesses in the supply chain only slows the recovery.

Meanwhile, the Biden administration is making an effort to address the semiconductor shortage by threatening businesses with the Defense Production Act to compel companies to hand over supply chain data. “What I told them is I don’t want to have to do anything compulsory, but if they don’t comply, then they’ll leave me no choice,” warned Commerce Secretary Gina Raimondo. “We’re evaluating all of our options right now, all the tools. I hope not to go there but we need to see some progress and we definitely need compliance.”

How about calling up Newsom and demanding he completely lift his COVID policies? Or why doesn’t Biden give another press conference, this time announcing that he won’t actually issue his vaccine mandate? Finally, given that Taiwan is a major manufacture of semiconductors, warn China to back off the independent island nation.

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