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Biden to meet with CEOs over chip shortage

President Biden is meeting with Salesforce, GM, TIAA, Ford, and Siemens CEOs on the Build Back Better legislation, the chip shortage, and its impact on inflation. Yahoo Finance's Akiko Fujita and Brad Smith discuss the latest in Washington.

Video Transcript

AKIKO FUJITA: Well, the White House hosting some big name CEOs today, from Intel to General Motors and Ford. It's all part of the president's continued push here to try and get something done on that massive spending bill, Build Back Better. And Brad, it does feel like the White House is trying to get some momentum going here. Certainly, names like GM, as well as Ford, certainly a part of the conversation on Build Back Better because there's so many incentives on the climate side with the EVs in there that could be a big benefit for those companies.

But no question supply chain issues are going to come up as well. That's not necessarily something that is addressed in this spending package, but certainly, we've heard from a lot of these CEOs, especially in these earnings call and more to come earnings calls and more to come, that suggest that despite what the White House says, there's still an uphill battle here in trying to get things resolved, especially with the chip sector.

BRAD SMITH: Yeah, that's right. And for the Build Back Better initiatives that have been communicated thus far by the White House, there are a few things that it comes down to. But it also touts a lot of job creation. And so what that job creation looks like in actuality really hinges on how quickly many of the factories, the plants that are looking to be brought up to quell some of the concerns, major concerns, around the chip sector, how quickly that can ramp up, and then bring those jobs into the fold to also answer for some of the larger questions across automotive, consumer tech, and all of the different areas that those chips touch.

And this comes on the same time where we've gotten even more data from the Commerce Department as well and their study particularly around semiconductor data and the need for Congress to pass US Innovation and Competition Act. And so with all of that in mind, we've actually been able to hear from the Ford CEO, as well as from Gina Raimondo as well of the administration. And it's particularly noteworthy at the time that we are going through this particular chip shortage, it's also impacting inflation more broadly as well, as Jim Farley had spoken about, too.

JIM FARLEY: We have the chip crisis going on at the same time, probably the biggest supply shock I've seen in my career. So all of it is happening at the same time. But I think the real encouraging thing is that Ford can develop great products where we do really naturally well. And we're being handsomely rewarded for focusing on our strengths.

GINA RAIMONDO: First of all, the word I heard was "crisis." And I don't think that's an exaggeration. It is a crisis. Chips are unique in their importance. You know, there are chips in everything you use-- phones, cars, medical equipment. So it's a unique product. And the shortage is a crisis. Secondly, we need to make more chips in America.

BRAD SMITH: And so just to add on to-- and add some context to what we just heard, from what we do know as right now, the semiconductor facilities are operating at maximum utilization, according to the Commerce Department. Demand remains up 17% since 2019. And if you think about the roadmap as well for electric vehicles, for some of the consumer products and technology in our homes, the wearables, that demand is only going to continue to increase.

And so for those bottlenecks, if they are not immediately rectified or a plan set in place and actionable that immediately gets set into place, I should say, that is something that's going to have much more larger ranging impacts on how we are actually able to meet some of our own goals on everything from environmental sustainability to the economic growth as well in the future.

AKIKO FUJITA: Well, and bottom line with chips, Brad, when you think about the landscape globally, it is heavily weighted towards Asia, specifically Taiwan with TSMC. And that's been a big focus for the administration to bring manufacturing back to the US so that when there are these supply shortages, you're not so reliant on one region. They've been able to really get some big victories here. We were talking about Intel's announcement, that $20 billion factory they're building in Ohio. They've got one in Arizona as well, TSMC also building in Arizona.

And on that front, we did see some movement over in Congress specifically on this competition bill, talking about trying to reduce reliance on China, the House introducing the American COMPETES Act, $52 billion to encourage more semiconductor production in the US. So things are moving along. The problem is that this is not a six-month, one-year story. To build out this footprint, it's going to take several years. In the meantime, there is still a shortage that's led to production halts. And a lot of companies are still having to deal with it without the sources in place here in the US.

BRAD SMITH: Certainly. Just quickly, it's about this fabrication process. And I think many of us have understood or at least come to understand even more about what goes into place for some of the nanotechnology that's necessary for that fabrication process. And we'll see how quickly some of these new plants that are set to come online to kind of remediate the dependency that we've seen overseas bring some of that back here and domestically, and where, quickly, that nano production can be ramped up as well.

AKIKO FUJITA: Yeah, no question about that. And, you know, we're talking about TSMC over in Asia, by the way, overtaking some of those Chinese tech names in terms of valuation. That shows you how critical they've become at a time when, over the years, we have seen increasingly semiconductors, at least in the US, go fab-less. And now we're seeing a big reversal here with Intel leading the way.