Commerce Secretary Gina Raimondo on the Chip Shortage, Supply Chain Issues, and Russian Sanctions

Earlier this week, I wrote about how potato chips may be harder to come by as Russia’s invasion of Ukraine hinders production of sunflower oil, a common snack food ingredient. I talked to Gina Raimondo (US Secretary of Commerce) about the ongoing shortage of a different kind of chip. This is the type that powers your cell phones and vehicles as well as laptops, mobile phones, vehicle, gaming consoles, medical equipment, and other electronic devices.

COVID-19’s stranglehold on world’s supply chain vastly reduced the number of semiconductor chips available for import to America, which has, in recent years, relied on other nations for the majority of its chip needs. There was a greater demand from manufacturers for chip chips, which led to a decrease in imports and an increase in consumer prices. Prices of new cars rose by 13%. Prices for used cars rose more than 40% Printing machines have seen an average 20% increase.
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As Americans struggle to keep up with a pace of inflation unseen in 40 years, lawmakers are attempting to reconcile the differences between two bills, each of which would provide more than $50 billion in funding for a piece of legislation—the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act—which passed in January 2021 authorized programs that promote the research, development, and creation of more domestically manufactured semiconductor chips.

Raimondo connected with TIME on March 9 to discuss the timing of the funding legislation, when Americans might start to see its impact on their pocketbooks, and how her department—and the Biden Administration as a whole—are responding to the broader global supply chain crunch amid an ongoing pandemic and a Ukraine-Russian crisis.

These questions have been simplified and edited to ensure clarity.

Prices of used cars rose by 44% in the period December 2019-2021. NPD market research has found that the prices of large TVs have increased by 30% over last summer. What role did COVID-19—and semiconductor chips—play in those price increase?

Raimondo:Both played major roles. COVID caused widespread disruption in supply chain operations across the globe. The fact that we literally flipped the switch and turned off the economy—sent manufacturing workers home, stopped shipping and trucking, [and] stopped production all at once all over the world—created massive disruption in the supply chain. It turns out you can flip the switch off, but you can’t flip the switch on. There have been shipping and logistical problems as well. [and]Products shortages. Moreover, many manufacturing plants have shut down due to COVID epidemics. This has caused product shortages that have resulted to an increase in prices. It’s basic supply and demand.

Additionally, the ubiquity of semiconductors makes them a truly unique product. Everywhere you look, chips are there. Literally everything: your phone that you’re probably using to record this, your computer, the speakerphone I’m talking to you on your car, et cetera. The shortage of chips has contributed to the highest increase in car prices. The car industry made about 7.5 million fewer cars last year than they predicted simply because they couldn’t get access to chips. It’s impossible to overestimate the role of chips in driving inflation and in disrupting our supply chain.

How might Russia’s invasion of Ukraine exacerbate this chip shortage?

Raimondo: I don’t think it will significantly affect it, if at all, because neither Russia nor Ukraine make any chips. Furthermore, the United States, along with dozens of other countries around the world—all of Europe, the United Kingdom, Korea, Canada, New Zealand, Australia—we have all said that we are not going to be shipping any chips to Russia. So if anything, there’ll be more supply for the rest of the world.

The CHIPS Act will help to alleviate this shortage.

Raimondo: We need more American chips. President Biden spoke out about this in the State of the Union Address. America invented the semiconductor industry. Once upon a time, not that long ago, we made almost 40% of all the world’s chips in America. Now we make only 12%, which means we’re extremely dependent on other countries for our chips. The CHIPS Act allows us to encourage companies to set up manufacturing plants in America in order to produce more chips.

Is there a timeline for this bill? Is it possible for Americans to begin to reap the benefits of the legislation once it has been signed by the President?

Raimondo: I’m optimistic that it will get to the President’s desk in this spring sometime. There is broad bipartisan support for it. Every day, I speak to both Republicans and Democrats in Congress, in the House, and in Senate. Speaker [Nancy]Pelosi is a strong supporter of the bill. [Senate Majority] Leader [Chuck]Schumer backs the bill. They have been asked by the President to quickly get it to him. It will be done this spring, I believe.

Then the money will come to the Commerce Department, and we’ll begin the work of implementing it. It will be a while before we can establish this program at the Commerce Department and start putting the money out there. However, I think the minute the President signs the bill, that sends a market signal to semiconductor companies, and tells the business community, that certainty is coming—that this money is coming—and that pulls private investment off the sidelines. Therefore, I believe the second. [the] President signs it, you’re going to start to see companies announcing that they are ready to invest in the chips industry in America.

What impact will this legislation have on job creation?

Raimondo: Massive, huge job creation. I’ll give you one example. Recently, I was with Intel in Ohio. And they’re putting one new manufacturing facility in Ohio. It’s a big investment, a $20 billion investment. The CEO of the company at that event said publicly, when the President signs the CHIPS Act, he’s prepared to move from a $20 billion dollar investment to an $100 billion investment—so making his manufacturing facility five times as big. He announced the opening of Ohio’s only manufacturing plant that will provide more than 10,000 new jobs. According to him, the median salary is [over]An annual salary of $120,000 And many of these jobs don’t require a college degree. So that’s just one facility in one state [creating] 10,000 jobs. There will be hundreds of thousands good-paying manufacturing jobs all across America.

Learn More Intel Announces Plans for a Massive Chip Factory In Ohio

It may help to reduce car and technology prices as well as cell phone costs. But it’s not going to help prices at the gas pump, which have increased 40% to 50%, or food prices, which have increased 7%. These items will continue to see their prices rise as a result of the ongoing conflict between Ukraine and Russia. I’m wondering if you can say anything about what the Commerce Department is doing as Americans feel this pinch across the board, not just in technology?

Raimondo: If I was Secretary of Energy, I would have a more detailed answer on what we’re doing for energy prices. The President gave a speech to the nation [earlier this week]. and is focused on Americans suffering from high gas prices. The Administration will do everything possible to lower them. For my part, what we’re doing at the Commerce Department is we are focused across the entire supply chain. So today, you and I have been talking about chips, but I’m a co-chair of the President’s Supply Chain Disruption Task Force. So we’re also working to increase domestic production of batteries, solar panels, [and]Other products we require to be manufactured in America. It will bring down the prices if there is more American production.

Commerce Department worked with Treasury Department to push out sanctions. I’m wondering if you can explain to readers what the Commerce Department’s role is in these sanctions against Russia?

Raimondo: We are not selling to Russia anymore. [the]They also need the technology supplies and equipment they require to keep their military operations running. And we have convinced all of our allies around the world—all of Europe, Canada, the UK, Japan—to do the same thing. France is the origin of the flight panels used in Russian military aircraft. Their engines are sourced from different countries: some originate from the U.S., others from Germany or France. Every Russian semiconductor comes from another country. And we’ve banded together with the rest of the world to say we are not going to send these products to Putin, because we want to hobble his military operation.


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