Experts say pandemic triggered global microchip shortage, revealed problem for the US

Welcome to the world of semiconductors: rooms bathed in yellow light — that color, least harmful to the tiny, light-sensitive circuit boards.

And computers; computers everywhere, designed to assemble the tiny devices, completing tasks too complicated for human hands.

"We make computer chips to make computer chips," said Tom Sonderman, the president and CEO of SkyWater Technology, a Bloomington chip manufacturer. "We make millions of chips a year, is a simple way to think of it."

Semiconductors are also commonly known as microchips, or simply chips.

The mini-circuitry is the brain inside almost any digital device.

"They go into telephones, computers, game consoles, all sorts of electronic gear," Scott Lambert, the president of the Minnesota Automobile Dealers Association, said.

Fighter jets, hospital ventilators and cars all use them.

The sophistication of the chips varies widely, depending on what they’re used for.

"When you look at, like, a smartphone, it has the most advanced microprocessor," Sonderman noted. "The most advanced solutions, that cost a lot more than an automotive-based solution because of dimensional requirements of the computer chip, as we make things smaller and smaller."

Even with their tiny size, chip manufacturing is a complex process, involving hundreds of people.

They’re made in an area called a ‘clean room,’ which is more sanitary than a hospital operating room.

"We have to control the number of particles in the room," explained Puteri Megat-Hameri, an associate professor of electrical and computer engineering at Minnesota State University, Mankato. "Making a chip, or building a chip requires a very clean environment. You do not want a speck of dust or particles to get on the chip because later, it will create a malfunction, in terms of electrical function of the chip."

Designers use computer-assisted programs to etch layers of microscopic circuits — much like a 3D printer — onto silicon wafers. Then, the wafers are cut up into individual square or rectangular-shaped chips.

"You can see each one of these little squares is a computer chip," Sonderman said, pointing out the square outlines on a dinner plate-sized wafer. "So this one has about 250 computer chips on it."

The whole process takes place inside a chip fabrication plant, or fab, for short.

Making a single chip can take six months.

But after a pandemic year, the U.S. faces bigger problems than manufacturing deadlines.

"Right now we have an immediate chip shortage," Senator Amy Klobuchar (D-MN) said. "In the global automotive industry alone, this shortage is expected to cost $100 billion in revenue in 2021. Why is that? People want to buy a car, but they can’t buy a car now."

So how severe is the microchip shortage in the U.S.?

"It’s as severe as it can be," said Kingshuk Sinha, a professor and supply chain expert at the University of Minnesota.

Kingshuk said chip demand unexpectedly skyrocketed during the pandemic, when stay-at-home Minnesotans — and the rest of the country — bought laptops and other electronics.

"COVID-19 comes along, and all of a sudden we are hunkering down in our homes, and using technologies for all kinds of purposes, right?" he added.

It’s not just in the home.

The chip shortage is on full display in Kentucky, where thousands of Ford trucks, ready to be sold, sit idle because they don’t have the needed chips.

"I’m told they are a nickel apiece," said Scott Lambert, president of the 375-member Minnesota Automobile Dealers Association.

Lambert said dealer inventories have dropped from an average 90-day supply to just 30.

U.S. automakers, he said, are shipping out 3 million to 4 million fewer cars, all because of the shortage of tiny chip components.

"There are about a dozen or so microchips in every vehicle," Lambert said. "And all that means they’re holding up production over 60 cents worth of parts."

Experts say the shortage didn’t happen overnight.

The Semiconductor Industry Association says the U.S. share of global chip manufacturing has fallen from 37% in 1990 to 12% today. The trade group says other governments are investing in chip manufacturing incentives, while the U.S. has not.

So what countries are making them?

"Eighty percent plus are made in Asia," Sonderman said. "The heaviest concentration is in Taiwan. You also have South Korea, Singapore. China of course."

All of that may be changing.

The U.S. Senate recently passed legislation to provide $52 billion to fund chip research, design and manufacturing initiatives — part of President Joe Biden’s American jobs plan.

We asked Sonderman if the shortage is a threat or an opportunity.

"Oh, absolute opportunity," he answered.

Sonderman said if SkyWater receives some of that funding, the company could begin making automobile chips in six months and add 100 jobs to its 520-person workforce.

"By investing in that in the U.S. and then building the manufacturing capability, we can create and, frankly, take back what was ours to begin with, which is a really strong semiconductor manufacturing industry," he said.

In Mankato, university instructors are using a clean room to help teach students the fundamentals of chip design.

It’s a much smaller operation than SkyWater’s but professor Megat-Hameri hopes the school can help the U.S. chip industry catch up with Taiwan, South Korea, China and other countries.

"It would not help us, I would say, immediately," she said. "We are basically preparing the next generation to be able to have this knowledge and skills to do that."

Professor Sinha said much of this will not be easy.

He said even with government help, it will take the U.S. two to three years to catch up with its overseas competitors.

And he says fabs — including the equipment to make chips — can cost several billion dollars each.

"We also need to have equipment manufacturers in-house," Sinha said. "And so we try to make sure that a lot of the supply chain for the semi-conductor chip is essentially within the boundaries of the United States."

The chips bill will likely be up for the House vote sometime in the fall.

Sonderman said he’s optimistic it will pass.

The Semiconductor Industry Association says if the bill becomes law, it could create 185,000 jobs annually and add nearly $25 billion in fab construction per year.

But there’s a lot of international competition out there.

Experts say China is expected to spend $200 billion to subsidize the chip industry there.

European nations have a $175-billion ‘digital fund.’

Still, Klobuchar says the chip plan — if it passes in the U.S. House — will be a game-changer.

"It would help to bring contracts that are now in China back to America," the senator said. "We should be inventing things and exporting things to the world. That’s what this is all about."