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Chip Shortage: What are the short-term and long-term solutions to supply issue?

Posted at 12:13 PM, Sep 28, 2021

(WXYZ) — The chip shortage, it's been plaguing the auto industry during the pandemic, but what are the short-term and long-term solutions?

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"We are heavily impacted. If an OEM goes down, in which we supply parts, then we go down too. So it's caused a tremendous amount of volatility for our business," said Joe Perkins, CEO of Mobex Global.

Mobex Global, a parts supplier for the Big 3 doesn't handle the coveted semiconductor chips.

But Perkins says the ripple effect of the chip shortage has caused a 30 percent drop in production volume. Add to that, volatility and inefficiencies.

"Obviously, the answer has to be more capacity in the industry with respect to chip production, inclusive of on-shoring that," said Perkins.

Making chips in the U.S. is a potential long-term solution that Congresswoman Debbie Dingell introduced a funding bill for this summer.

"There needs to be more of a sense of urgency. I've said it to the President. I've said it to White House staff. I have said it to the leaders in my party. Fred Upton and I have sent a letter this week," said Rep. Dingell, D-Mich.

Congresswoman Dingell is calling this a bipartisan issue. In the short term, she says the U.S. has to depend on countries like Taiwan to get their citizens vaccinated, so they can continue production.

The Biden Administration, specifically the Secretary of Commerce held a roundtable on the shortage last week.

"But that's not enough. Congress needs to act," said Rep. Dingell.

"The White House is trying to figure out where the chips are and where the chips are needed and whether anybody is hoarding chips that should be freed up for other people," said Erik Gordon, University of Michigan professor, Ross School of Business.

Gordon says finding and redistributing the chips are a short-term solution.

"Long-term, I think we're going to see car manufacturers designing their own specialized chips and either manufacturing them themselves or arranging to have them manufactured," said Gordon.

"As long as demand continues at the pace that it has, this will continue to be an issue," said Dan Hearsch, managing director at Alixpartners.

Hearsch says the problem may persist until the second quarter of 2022, and take another 6 to 12 months to finish installing chips. In the meantime, he says, "better planning, better visibility, better transparency will help. But the fact is, it's going to take some time for the demand to meet supply."

7 Action News has reached out to the Big 3, none of them wanted to interview, but General Motors said it is a "very fluid situation, but we continue to manage it to the best of our ability and continue to focus on keeping production going of our highest demand products, like our full-size pickups and SUVs."