Government Won’t Fix the Semiconductor Shortage

Jerry Sanders, a former chairman of the Semiconductor Industry Association and a founder of Advanced Micro Devices , predicted in the 1970s that “semiconductors would prove to be the crude oil of the information age.” It was an understatement.

Midprice automobiles today are controlled by 100 or more silicon chips. Cars couldn’t meet legal standards for mileage or pollution—or even start—without chips, let alone connect to the internet or display a fancy digital dashboard. A supply shortage on only one or two chips can shut down an assembly plant that occupies 100 acres and employs 10,000 people. That’s what has happened to many automotive plants over the past six months. Both the auto and semiconductor industries have requested government help, but the problems aren’t of a kind that subsidies and regulation can fix.

In the late 1970s cars became computerized. My first Silicon Valley employer, American Microsystems, once “lost the recipe” and cut off the supply of memory chips to a Lincoln Continental plant. Without our chips, cars couldn’t be started. Ford later dropped us as a vendor, the penalty for shutting down an auto plant.