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White House holds semiconductor summit as shortage seems to worsen

The global semiconductor shortage that has paralyzed automakers for nearly a year shows signs of worsening, as new coronavirus infections halt chip assembly lines in Southeast Asia, forcing more car companies and electronics manufacturers to suspend production.

A wave of delta-variant cases in Malaysia, Vietnam and the Philippines is causing production delays at factories that cut and package semiconductors, creating new bottlenecks on top of those caused by soaring demand for chips.

Underscoring that the problem has defied easy solutions, the White House on Thursday held its second summit in five months with semiconductor manufacturers and buyers, in part to gain more clarity on the scope of the crisis, according to senior administration officials.

Attendees included senior executives from Intel, General Motors, Ford, Apple, Microsoft, Samsung and two dozen other companies.

“The automotive industry is working toward a cleaner, safer and smarter transportation future," Auto Innovators President and CEO John Bozzella said in a statement afterward. "A sustained commitment to investing in and building additional domestic semiconductor capacity that meets the current and future needs of the auto industry in the United States is absolutely essential to get there."

Frustration has mounted on all sides. Automakers want semiconductor companies to crank out more chips for cars. Smartphone companies do not want their semiconductors diverted to automakers. Chip manufacturers say the auto industry shot itself in the foot by canceling semiconductor orders after the COVID crisis hit. They are also impatient for Congress to approve federal subsidies to boost domestic semiconductor manufacturing. That measure has cleared the Senate but not the House.

The Biden administration, meanwhile, says that while it can play a supporting role and backs the subsidy legislation, it expects the private sector to take the lead in sorting out the crisis.

“It’s on industry to come up with the solutions here and to identify some of the path forward,” one of the administration officials said Wednesday, speaking on the condition of anonymity to preview Thursday’s meeting. “But we do think that our role collecting data and publishing it can help improve industry’s ability to make the adjustments that might be needed.”

Semiconductor shortage hammering automakers, costing billions in lost production and sales

Also known as computer chips, semiconductors are the brains behind modern electronics. Demand for the components is soaring as more consumer goods become computerized, but supply is scarce because semiconductor factories are extremely expensive to build.

Intel’s chief executive has said he expected shortages to last into 2023.

Automakers, which rely on dozens of chips to build a single vehicle, have been particularly hard hit, forced to halt production lines globally as they await chip supplies. The debacle is likely to cost the auto industry $450 billion in global sales from the start of the crisis into 2023, according to Seraph Consulting, which is advising car companies on the shortages.

Martin Daum, chief executive of the Daimler AG division that makes trucks and buses, described the problem as intensifying.

“Until the second quarter we were able to manage the situation quite well at Daimler Truck,” Daum said Wednesday. “But since summer the semiconductor situation has worsened for us. Our production in Germany and the U.S. was affected, which led to a situation in which we could deliver fewer vehicles to our customers.”

Even automakers such as Toyota and Hyundai, which planned for potential shortages and initially managed to avoid crippling shutdowns, are starting to encounter problems, said Ambrose Conroy, founder of Seraph Consulting.

Toyota this month was forced to slash production at 14 factories in Japan over a lack of semiconductors. Some of the cuts will continue into October due to a lack of components from Southeast Asia, Toyota has said.

Ford and General Motors in recent months have been suspending production for weeks at a time at more than a dozen North American factories. As a result, Ford this month said its U.S. sales declined by 33% in August compared with a year ago.

The list of attendees at the White House meeting — including the medical device maker Medtronic and the appliance manufacturer Siemens — shows how the problem is hurting industries beyond autos.

“This is having an impact all across the economy, with automobiles, yes, but even beyond that, into medical devices, networking equipment — we’re hearing regularly from companies that cannot get the supply they need,” one of the Biden administration officials said.