The global shortage of semiconductor processing chips continues to impact automotive and technology industries, creating more layoffs as companies advance planned summer shutdowns.
The latest job cuts are with a Jeep Cherokee factory in northern Illinois. The U.S. arm of Stellantis, formerly known as Fiat Chrysler, said Friday it was cutting one of the two work shifts at its Belvidere Assembly Plant as of July 26, resulting in the possible layoff of about 1,641 workers, company spokeswoman Jodi Tinson said, per the Associated Press.
Last month, Autocar reported that a number of automakers were working to overhaul their components supply-chains as a workaround to ensure continued production. However, analysis company IHS Markit said at the time that the shortage could cut global production by nearly 700,000 vehicles year-on-year, although the final figure could be even higher.
There may be a slight glimmer of light toward ending the unprecedented global microchip shortage, although it won’t happen overnight. The U.S. Senate Committee on Commerce, Science, and Transportation voted to approve the $110 billion Endless Frontier Act on Thursday, according to Reuters.
The Endless Frontier act would authorize most of the money, $100 billion, over five years to invest in basic and advanced research, commercialization, and education and training programs in key technology areas, including artificial intelligence, semiconductors, quantum computing, advanced communications, biotechnology and advanced energy.
What caused the global chip shortage?
But how does this tie in with automotive companies laying off workers due to a global semiconductor chip shortage? Basically, we could blame the coronavirus pandemic, and that would be partly right. But it goes a little deeper than that.
Looking back to the beginning of 2020 and the start of the global pandemic, many businesses, including automakers, closed their production lines as countries and cities went into lockdown as the virus raged. This shutdown also caused semiconductor makers to switch their factories from making the chips to producing more profitable consumer-electronics processors.
The South China Morning Post would have us look at the bigger picture regarding semiconductor chips. China’s 14th five-year plan calls for basic research spending to reach 8 percent of total R&D expenditures, without specifying a specific amount of money.
China’s investment in basic research was just 0.12 percent of GDP in 2018, according to figures from the Organisation for Economic Cooperation and Development (OECD), compared with 0.47 percent for the US and Japan’s 0.41 percent.
However, according to Cameron Johnson, an adjunct faculty instructor at New York University and a partner at Tidal Wave Solutions, the U.S. is still lagging behind China when it comes to policy commitments supporting technological development.
“The Endless Frontier Act is trying to stimulate both US public and private entities in developing, enhancing, and accelerating new technologies and processes to move into the 21st century, and specifically, to compete with China,” Johnson said.
For the U.S. – the Endless Frontier Act is part and parcel of a major shift, meaning “a state-led science and technology research mechanism may once again lead core technology industry development”, said Zhou Zipeng, an analyst at a think tank affiliated with the state-run investment bank China International Capital Corp, in a note this week.
