Inflation has 'direct correlation' with America's chip shortage: Commerce Secretary
The Biden Administration has recently taken to targeting the industries and companies contributing the most to high inflation, from "greedy meatpackers" to oil and gas companies.
In an interview this week, Secretary of Commerce Gina Raimondo linked yet another industry to the problem, drawing a “direct correlation” between inflation and the shortage of semiconductors, the computer chips needed to manufacture automobiles.
Indeed, the automobile sector has been a major cause of inflation in the last 12 months: Between December 2020 and December 2021, the prices for new vehicles jumped 11.8% and the prices of used cars rose an astounding 37.3%.
The inflation for all items was 7%, the fastest year-over year increase since 1982.
The auto price jumps stem largely from a decline in production “because car companies can't get their hands on enough chips,” according to Raimondo, who added that business leaders agree with the assessment.
“We need to increase the supply of cars so prices will come down. In order to do that, we need an increase in semiconductor chips,” Raimondo told Yahoo Finance's editor-in-chief, Andy Serwer.
A ‘really scary’ problem
The chip shortage is not just hurting pocketbooks — it's a national security concern, according to Raimondo, a former governor of Rhode Island.
“If you ever have time for a really scary read [look at] how dependent the United States is on other countries, especially Taiwan, for our supply of semiconductors,” she said.
The U.S. role in semiconductor manufacturing has fallen from nearly 40% in 1990 to 12% today, according to a recent report from the Semiconductor Industry Association. The situation is even worse with the world’s most advanced logic semiconductors, 100% of which were manufactured overseas in 2019.
Raimondo has pointed to a need for transparency in the industry, noting there are times where “suppliers wonder who's hoarding, who's stockpiling."
‘We need Congress to act’
So how does the U.S. solve its semiconductor problem?
"We need Congress to act," Raimondo says. “It's stalled in Congress, to be very honest.”
The CHIPS for America Act — which passed the Senate last June and awaits a vote in the House — includes $52 billion to prod semiconductor companies to base fabrication plants in the U.S. If lawmakers send the money, Raimondo said, her Department will “work in partnership with semiconductor companies, asking them to set up shop in America making chips in America.”
That program would reach out to American semiconductor companies like Nvidia (NVDA), Intel (INTC), and Micron (MU) as well as foreign companies “in allied countries” like Samsung and the Taiwan Semiconductor Manufacturing Company.
“We want them and need them to build in America, hiring Americans, to make this stuff on our shores,” Raimondo said.
Heading into the midterm elections, inflation is a front-burner issue for voters: A recent AP-NORC poll shows voters have grown more concerned with inflation and less worried about the coronavirus. And, in bad news for the Biden administration, another poll finds three in five voters pin the blame on the president over corporate America.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
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