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May 8, 2025By ePlane AI
Impact of Global Chip Shortage on Inflation and Industry
The worldwide computer chip shortage is fanning the flames of inflation and limiting the supply of everything from iPhones to new cars. Unfortunately, this highly disruptive shortage is unlikely to go away until "deep into 2022," Commerce Secretary Gina Raimondo told CNN. Raimondo, who recently toured semiconductor factories in Asia, said short-term problems linked mostly to Covid should sort themselves out during the second half of next year. That’s barring any further Covid shocks that could deal another blow to supply chains. "Hopefully by this time next year or maybe a little before, the short-term crunch will be better," Raimondo said during an interview at her Washington office. "The long-term issue will take years to sort out. We just don’t make enough chips in America." Computer chips are critical components for a wide array of products, everything from Pelotons and tablets to coffee machines. And they are vital for meeting the Biden administration’s climate ambitions. Each electric vehicle has about 2,000 chips – or roughly double what traditional car has. Yet just 12% of the world’s computer chips were made in the United States last year, according to the Semiconductor Industry Association.
The Role of Covid in Supply Chain Disruptions
‘It’s only going to get worse’ Covid has exposed how sensitive America’s intricate supply chains are to shocks, even ones happening on the other side of the world. Covid outbreaks and extreme weather overseas knocked out computer chip production in Asia, while demand simultaneously soared. That’s why the Biden administration is championing the CHIPS for America Act, a $52 billion bill that would encourage domestic semiconductor production and research. "We are imploring Congress to pass the CHIPS Act. It has to happen by Christmas. This cannot take months," Raimondo said emphatically. Although Congress passed the legislation last year, lawmakers are still working to provide resources for the provisions. Funding for the legislation passed the US Senate in June, but it hasn’t been voted on in the House yet. The problem is that even if the funding does get through Congress, it will take years to build and fully scale up new computer chip factories. "This is a crisis now and it’s only going to get worse," Raimondo said.
Economic Impact and Industry Response
New car prices spike at fastest pace since 1970s
The CEOs of dozens of major companies including Ford (F), Nvidia (NVDA) and Verizon (VZ) sent Congressional leadership a letter on Tuesday urging "prompt action" on the CHIPS for America Act to address the chip shortage. "Unfortunately, demand for these critical components has outstripped supply, creating a global chip shortage and resulting in lost growth and jobs in the economy," the CEOs wrote. "The shortage has exposed vulnerabilities in the semiconductor supply chain and highlighted the need for increased domestic manufacturing capacity."
In recent months, Apple, Ford, General Motors and other companies have been forced to slow production of their products in large part due to the chip shortage. The chip shortage has significantly contributed to the biggest inflation spike in three decades. New vehicle prices have soared, causing a ripple effect across various sectors of the economy. Consumers are feeling the pinch as the cost of electronics, appliances, and even everyday goods continues to climb. This unprecedented situation underscores the urgent need for solutions that can bridge the gap between demand and the current limited supply of chips. Without swift and decisive action, the economic repercussions could widen, affecting more than just the automotive and tech industries but also impinging on global economic stability.

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