A global shortage of computer chips has halted the production of cars, computers and even dog washing machines. But there are already signs that the shortage of chips — the tiny parts that function as the brain or memory in anything electronic — is coming to an end.
That might be good news for our budgets. It’s also an awkward moment for the Biden administration and U.S. lawmakers, who have pushed for taxpayer funding for computer chips with a host of goals, including alleviating shortages.
Some of these goals are reasonable. But the splurge of government money to fix the chip shortage did seemed questionable. Now it looks like a mistake. Let’s talk about why:
Why are chips important again?
Computer chips are needed for smartphones, video game consoles and other consumer electronics. We also use them in fighter jets; in car ignition, braking and entertainment systems; and to track milk production from dairy cows.
Neither does my colleague Don Clark explain last year, it is not strange for chips to temporarily become scarce. What has been unusual over the past few years is the wild combination of pandemic disruption and our overwhelming desire to buy more stuff, which has led to various shortages.
In recent weeks, computer chips have suddenly become abundant. Several computer chip companies have warned that their sales are going from hot to no. Unused chips are accumulate in South Koreamajor production center, at the fastest pace in years.
A big reason is that people around the world don’t buy electronics like laptops, smartphones, and TVs as much as they were a year or two ago. Many people worry about price gouging and the health of economies and abstain. So companies are cutting back on orders for computer chips that would be built into many products.
This is how economics and computer chips work. When people feel good and spend a lot, chip factories grow to make more. They almost always overproduce and have too many chips. Some experts said the pandemic would be followed by a chip bust. We’re not there yet, but we’ll see.
What does the Biden administration have to do with this?
I’ve written before about the consensus in Washington about putting more US government support behind US chip factories and expertise. Congress has discussed – and is we are still debating — the specifics of spending more than $50 billion of taxpayer money on it. Most of the world’s most advanced chips are made in Asia, particularly Taiwan and South Korea.
One of the stated goals of the funding is to help alleviate chip shortages. And now? Nothing has passed, and the deficit ends for some types of chips.
There are good reasons for US taxpayers to subsidize chip manufacturing. Many experts cite the importance of building knowledge for advanced chip manufacturing in America. It is it’s not great that so many core chips are made in Taiwan, in China’s potential sphere of influence. The US military wants to ensure it has a continuous and verified supply of them. (There are US chip factories dedicated to this.)
But the mission of the American chip plan is inconsistent. US officials and industries presented a list of benefits of US chip funding, including creating more US jobs, being able to compete with China and facilitating US industries such as car manufacturers to continue producing their products.
The latter, to be honest, never made much sense. The harsh truth is that cars have to compete for a place on production lines against more lucrative smartphone chips or other luxury equipment. Even if more computer chips are made in America, there is no reason why a chip made in Texas should only be used in the Ford F-150 and not in trucks from European or Asian companies.
The more excuses the government crams into its chip plans, the less clear it is about what America is trying to achieve.
Understand the global chip shortage
Read more from On Tech about computer chips:
Before we go…
Twitter Sues Indian Government: The company is arguments against orders to remove some tweets and block accounts that India says violate the country’s laws, my colleague Karan Deep Singh reported. It’s the latest clash between an American internet company and the world’s largest democracy beyond the appropriate limits of freedom of speech.
This may be one of the largest known data breaches in China. Hackers are offering for sale a Shanghai police database that may contain information on perhaps one billion Chinese citizens, my colleagues John Liu and Paul Mozur reported.
When a Religious Pilgrimage Website Fails: Saudi Arabia has directed Westerners to a single government-authorized website to book travel to Islam’s holy city of Mecca. The Washington Post reported that technical problems prevented thousands of people from performing Hajj. (Subscription may be required.)
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