The US produces just 12% of the world’s computer chip supply. Here’s why it’s trailing China when it comes to manufacturing and how it plans to get ahead.

computer chip biden
President Joe Biden holds a semiconductor chip at the White House in Washington, U.S., February 24, 2021.

  • The US relies heavily on outsourcing chip-making since it’s cheaper and easier to go overseas.
  • The country’s reliance on foreign manufacturers is even more glaring amid the global chip shortage.
  • The solution, as President Biden has said, is to invest in domestic chip production.
  • See more stories on Insider’s business page.

A crushing computer chip shortage continues to choke the global supply chain.

Automakers are producing vehicles without smart technology – which requires chips – Apple’s MacBook and iPad production was reportedly delayed, and PlayStation 5s are being produced in limited amounts due to the squeeze.

It’s an effect caused over time by pandemic-driven shutdowns and soaring demand for products that need chips.

But one question that has emerged during the crisis is where chips are produced – and why the US doesn’t manufacture much of the global supply.

Here’s why it doesn’t.

Chips are difficult to produce, and it’s cheaper for US companies to outsource

In 1990, the US produced 37% of the world’s chip supply, according to a September 2020 report from the Semiconductor Industry Association. But now, the country is responsible for just 12% of global chip production.

Seventy-five percent of the world’s chip manufacturing comes out of Asia, per the report, and China is positioned to become the largest chip producer by 2030.

Why the decline in the US? It became cheaper to build chip facilities in countries outside of the US. Those foreign governments offer more attractive financial incentives to construct semiconductor factories, like tax breaks and grants. There’s also less regulation in places like Asia. On top of that, there aren’t as many jobs in the US created to run such high-tech factories.

There was a recent attempt to do so under the Trump administration – Apple supplier Foxconn was slated to build a Wisconsin facility that would produce large-screen TV displays and said it would create 13,000 jobs, but the whole project never panned out.

foxconn apple wisconsin factory
The ground breaking for the Foxconn Technology Group on June 28, 2018 in Mt Pleasant, Wisconsin.

Some of the country’s largest chip manufacturers are also some of the biggest in the world. Intel still produces much of its chip supply at home, as the Wall Street Journal reported. But other major US chip producers outsource manufacturing to companies in Asia due to costs. One of those foreign contract companies is Taiwan Semiconductor Manufacturing Company, which produces more than half of the world’s computer chips and is also Apple’s primary supplier.

Making computer chips is a complex process. It’s also difficult and expensive to build new facilities to manufacture the vital silicon component, which means companies have to rely on existing plants. A new semiconductor factory can cost up to $20 billion, as ON Semiconductor CEO Keith Jackson wrote in Fortune, and that price tag is much higher in the US.

There are economic and national security benefits to ramping up US chip production

There could be risks in depending on foreign chipmakers if the US continues to fall behind China in the chip race, as the Journal notes.

President Joe Biden is aware of the issue and the threats posed by relying too heavily on foreign manufacturing. As part of Biden’s $2 trillion infrastructure plan, there’s a $50 billion allotment for domestic chip manufacturing incentives.

In a Monday meeting, Biden said the key to navigating the current chip shortage crisis is to invest in the country’s chip production.

“We need to build the infrastructure of today and not repair the one of yesterday,” Biden said, according to NBC News. “The plan I propose will protect our supply chain and revitalize American manufacturing.”

But as Recode notes, it won’t be a simple task to transition reliance to homegrown chip production. There will be a handful of factors to consider over time, like weaning off of foreign contract manufacturers and ensuring there are enough US workers to power new facilities.

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The US is facing a supply-chain crisis as 21 cargo ships float off the coast of LA waiting to dock

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  • 21 ships were anchored off the coast of Los Angeles and Long Beach waiting to dock on Wednesday.
  • The California ports are congested and account for about one-third of US imports.
  • The delays are just the latest in a host of supply-chain issues.
  • See more stories on Insider’s business page.

A supply-chain crisis is quietly brewing off the coast of Southern California as massive freighters wait for dock space to open up.

California ports in Los Angeles and Long Beach account for about one-third of US imports. These ports operate as a primary source of imports from China and have been heavily congested for months.

On Wednesday, 21 ships were anchored off the coast waiting for a spot to open up to unload at Los Angeles and Long Beach ports, according to data from the Marine Exchange of Southern California.

Anchorages PM 1 Jan 2021

The Southern California ports are facing more congestion than ever, Kip Louttit, executive director of the Marine Exchange of Southern California, told Insider.

“The normal number of container ships at anchor is between zero and one,” Louttit said.

Some of the container ships have been waiting off the shore for weeks. One of the vessels has been at berth since April 3. Of the ships waiting to dock, half of them are what Marine Exchange calls “mega-container ships” or ships with the carrying capacity of 10,000 TEUs.

“Part of the problem is the ships are double or triple the size of the ships we were seeing 10 or 15 years ago,” Louttit told Insider. “They take longer to unload. You need more trucks, more trains, more warehouses to put the cargo.”

The ships carry millions of dollars worth of popular imports, including furniture, auto parts, clothes, electronics, and plastics, according to data from the Port of Los Angeles. Supplies of these materials could be heavily depleted in the US due to the backlog of ships.

Read more: The Suez Canal won’t be the last supply-chain fail. Here are 4 things your small business can do to benefit from the next one.

Louttit said increases in consumer spending and, as a result, a spike in imports, have overwhelmed the ports.

“The ports are setting records moving cargo,” Louttit said.

California port backlogs are already helping drive shortages and delivery delays in the US

California’s port delays seemed to have peaked in early February but have persisted in recent months.

On January 30, Southern California port congestion hit a record high when 38 container ships were waiting along the coast for room to open up to dock and unload.

Gene Seroka, a Port of Los Angeles executive, warned the Los Angeles Board of Harbor Commissioners in February that high import levels caused by increased spending during the pandemic were driving port congestion.

A video from the US Coast Guard shows dozens of ships anchored off the coast.

California port delays are just one of many factors piling onto a global supply-chain crisis

The boats waiting outside of the port, which can carry tens of thousands of shipping containers, are adding to a global container shortage, and, as a result, shipping delays.

Customers are already seeing the impact of shipping delays. During a third-quarter earnings call in February, La-Z-Boy executives said customers should expect delivery dates that are five to nine months out from the purchase date.

February’s Texas freeze and a shortage of computer chips have already pushed companies to increase prices and delay production. Several companies including Nike, Honda, and Samsung have already said they have been hampered by supply-chain issues.

As a result of California port delays and the global container shortage, customers will likely face rising prices and limited options as commodities become increasingly difficult to obtain and produce and companies are forced to compete for containers and delivery dates.

Read the original article on Business Insider

Bubble tea drinkers could be out of luck as a shortage of boba and other products may make the sweet drink hard to find

bubble tea
Bubble tea. bebe14/Shutterstock

  • Bubble tea supplies are running low amid a shortage caused by backed-up US ports.
  • Tapioca pearls, popping bobas, and flavored powders and syrups are stuck in transit.
  • The products are the latest among many that have faced a shortage during the pandemic.
  • See more stories on Insider’s business page.

Your favorite bubble tea shop may not be serving its signature drink for a while as shipping delays are keeping some retailers from getting the supplies to make the sweet beverage.

The shortage started about a month ago, according to Oliver Yoon, the vice president of sales and global marketing for Boba Direct, a Chicago-based nationwide supplier of bubble tea products.

US ports on the East and West Coasts have been overwhelmed for months as consumer spending has increased along with a bevy of logistical issues amid the COVID-19 pandemic. Boats, carrying tens of thousands of shipping containers, are waiting outside ports.

“It’s a perfect storm really,” Yoon said.

Bubble tea, which has exploded in popularity in recent years, is a Taiwanese milk tea drink with a variety of flavors that features chewy pearls of tapioca. Supply has been tightened for the last month, Yoon said, and it’s not likely to let up until the end of April at the earliest.

Bubble tea products like tapioca pearls, popping bobas, flavored powders and syrups, and disposables, are all stuck in a “huge bottleneck,” said Yoon.

But it’s not just bubble tea. “It’s pretty much any kind of consumer product,” Yoon said.

Starbucks franchises, for example, aren’t able to fulfill customer orders of the new oat milk drink offerings and baristas are even reporting shortages of cups and syrups. Fitness gear, roller skates, and furniture, among other products also have been hampered.

Read more: Apple’s reportedly delaying its next Macs and iPads thanks to a global parts shortage, and it’s a bad sign for the whole tech industry

One bubble tea shop owner named Alex Ou told The San Francisco Chronicle, which first reported on the shortage, that some consumers won’t buy a drink if there’s no boba. “They’re literally here for the boba,” he told the publication.

But consumers just need to be patient, said Yoon. “This is temporary, not forever.”

For retailers selling bubble tea, they’re frustrated, too, said Yoon.

“I get it; they’re a small business, and they’re trying to survive. We’re all in the same situation – just trying to survive,” he said. “COVID really affected the situation with importing. No one anticipated what happened last year; it’s one of these domino effects later on in the future.”

Have you tried to order a food or drink item but were told it was sold out for the time being? Email the reporter of this article at ndailey@businessinsider.com.

Read the original article on Business Insider

The US has its own supply-chain crisis brewing as dozens of cargo ships remain stuck off the coast of LA as they wait to dock

AP21072860197380
  • 28 ships were anchored off the coast of Los Angeles and Long Beach waiting to dock on Thursday.
  • The California ports are congested and account for about one third of US imports.
  • The port delays pile on a host of supply-chain issues.
  • See more stories on Insider’s business page.

While the Suez Canal jam may have captured public attention before the cargo ship Ever Given was freed, the US is quietly facing its own supply-chain crisis as dozens of freighters float off the coast of Los Angeles, waiting for dock space to open up.

California ports in Los Angeles and Long Beach account for about one third of US imports. These ports operate as a primary source of imports from China and have been heavily congested for months.

On Thursday, 28 ships were anchored off the coast waiting for a spot to open up to unload at Los Angeles and Long Beach ports, according to data from the Marine Exchange of Southern California.

The Southern California ports are facing more congestion than ever before, Kip Louttit, executive director of the Marine Exchange of Southern California, told The Wall Street Journal.

“Under normal conditions, container ships rarely anchor,” Louttit said.

The ships carry millions of dollars worth of popular imports, including furniture, auto parts, clothes, electronics, and plastics, according to data from the Port of Los Angeles. Supplies of these materials could be heavily depleted in the US due to the backlog of ships.

Read more: The Suez Canal won’t be the last supply chain fail. Here are 4 things your small business can do to benefit from the next one.

Louttit said increases in consumer spending and, as a result, a spike in imports have overwhelmed the ports.

“The ports are setting records moving cargo,” Louttit told The Journal.

California port delays are already helping drive shortages and delivery delays in the US

California port delays seemed to have peaked in early February, but have persisted in recent months.

On January 30, Southern California port congestion hit a record high when 38 container ships were waiting along the coast for room to open up to dock and unload.

Gene Seroka, a Port of Los Angeles Executive, warned the Los Angeles Board of Harbor Commissioners in February that high import levels caused by increased spending during the pandemic were driving port congestion.

A video from the US Coast Guard shows dozens of ships anchored off the coast.

California port delays are just one of many factors piling onto a global supply-chain crisis

The boats waiting outside of the port, which can carry tens of thousands of shipping containers, are adding to the global container shortage, and, as a result, shipping delays.

Customers are already seeing the impact of shipping delays. During a third-quarter earnings call in February, La-Z-Boy executives said customers should expect delivery dates that are five to nine months out from the purchase date.

The Texas freeze, as well as a shortage of computer chips, have already pushed companies to increase prices and delay production. Several companies including Nike, Honda, and Samsung have already said they have been hampered by supply-chain issues.

As a result of California port delays and the global container shortage, customers will likely face rising prices and limited options as commodities become increasingly difficult to obtain and produce, and companies are forced to compete for containers and delivery dates.

Read the original article on Business Insider

Massive ship blocking the Suez Canal has been freed

suez canal ever given egypt
Stranded container ship Ever Given, one of the world’s largest container ships, is seen after it ran aground, in Suez Canal, Egypt March 26, 2021

  • After being stuck since Tuesday, the Ever Given has been “partially refloated.”
  • The massive cargo vessel caused a blockage in the Suez Canal, straining global trade.
  • It’s still not known when the canal will be open the hundreds of ships waiting to enter.
  • See more stories on Insider’s business page.

A massive container ship stuck in the Suez Canal has been “partially refloated,” Bloomberg News reported, citing shipping services provider Inchcape. Inchcape said in a tweet the boat is now being “secured.”

The Ever Given had been stuck sideways across Egypt’s canal since Tuesday, clogging a vital artery for the global economy and forcing multiple ships to turn around and reroute through Africa.

After freeing the bow from the banks of the canal, tugboats are now working on straitening the vessel’s course so it can continue moving up the waterway, the Wall Street Journal reported. The ship’s rudder was freed from the sediment on Friday.

“It is good news,” Osama Rabie, chairman of the Suez Canal Authority, told The Journal. “We are not finished yet, but it has moved.”

A shipping source told Reuters that the ship has restarted its engines. Two sources also told the outlet that the ship was straightened and will be inspected before being moved.

It’s unclear how soon the canal would be opened up to the hundreds of ships that are stuck waiting for it to clear.

Reuters reported that following news the ship was refloated, crude oil prices fell by $1 per barrel to $63.67.

The 1,300 foot-long cargo ship, one of the world’s largest, became wedged in the Suez Canal early Tuesday morning. Egyptian officials initially blamed the weather, including strong winds and a dust storm. But on Saturday, officials said the logjam could be the result of “technical or human errors.”

The nearly six-day blockage forced some ships to take a costly, dangerous detour thousands of miles around the southern tip of Africa and was reportedly costing the global economy $400 million an hour in delayed goods. The Ever Given is operated by the Taiwan-based shipping company Evergreen Group.

Tugboats and dredgers had been working to free the ship for days with little success.

In a video shared on Twitter, boats could be heard honking after the ship was freed. Another clip appeared to show the ship moving again as the sun was rising.

This is a developing story. Check back for updates.

Read the original article on Business Insider

It could take weeks to dislodge the ship stuck in the Suez Canal, straining a vital supply chain route

Suez canal ever given
The Ever Given, trapped in the Suez Canal, Egypt, as of Thursday March 25 2021.

  • One of the world’s biggest container ships ran aground in the Suez Canal Tuesday.
  • The blockage has pinned in hundreds of other cargo ship in transit.
  • An expert involved in clearing the canal said it could take weeks before the waterway opens again.
  • See more stories on Insider’s business page.

A massive container ship has been blocking the Suez Canal, a major global shipping route, for over two days now and experts say it might not be moving any time soon.

The Ever Given, one of the biggest container ships in the world, ran aground on Tuesday morning, blocking all other major vessels from passing through the heavily-trafficked waterway.

The CEO of Boskalis Peter Berdowski, a Dutch company that is helping to address the blockage, said there are a lot of unknowns as to when the waterway will be cleared – making the timeline for its removal nearly impossible to predict.

“We can’t exclude it might take weeks, depending on the situation, Berdowski said on Dutch Television, according to Reuters.

The ship is currently stuck at a near-right angle to the Egyptian canal that connects Europe and Asia. Part of the hulking 224,000-ton freighter had embedded itself in the bank of the canal, blocking hundreds of cargo ships that now face a decision to wait or find an alternate route. Reuters reported that diverted ships would likely be forced to go around Africa – another 15,000 miles farther.

Everything from consumer products to machinery parts to oil flows through the 120-mile passage. Nearly 19,000 ships passed through the canal during 2020, for an average of about 52 ships per day, according to the Suez Canal Authority.

Since Wednesday night, dredgers have been working to free the ship so that it can be refloated and tugboats have been attached to the vessel to try and shift its weight, according to a statement from the ship’s technical manager Bernhard Schulte Shipmanagement.

Suez canal ever given
The Ever Given, trapped in the Suez Canal, Egypt, as of Thursday March 25 2021.

Wind conditions, as well as the sheer size of the vessel, have made relocating the Ever Given increasingly difficult, according to a statement from the shipping company responsible for the vessel.

The Suez Canal blockage is just one of many mishaps to befall the global supply chain in the past few months. Prices of goods are expected to continue to rise as delays in key California ports, computer chip shortages and the Texas freeze complicate an already precarious post-pandemic supply chain.

An economist at Chartered Institute of Procurement and Supply, John Glen, said the blockage could add 10 days to UK delivery times.

“This may seem like a small problem in a country far away, but the Suez Canal has always been an important logistics route for the world’s supply chains and the blockage will likely have serious repercussions if it continues much longer,” Glen said.

Read the original article on Business Insider