EL PASO, Texas (Border Report) – What Jon Barela saw on a recent trip to the Midwest put the semiconductor chip shortage in context: Thousands of new cars parked in factories instead of heading to dealer lots.
“They’re fully assembled but they’re missing computer chips. This is having an adverse effect on our economy,” he said.
The president and CEO of the Borderplex Alliance says the effects of the shortage – caused in part by COVID-19 disruptions and supply chain problems – can be felt throughout North America.
“Many of our investors are involved in the manufacturing industry and they have been hit very hard by the shortage of semiconductors for their products,” he said. “We also have retailers. Those who sell cars … their supply base has been very limited in the past several months. Very little car inventory is coming because of the semiconductor inventory shortage. They expect this to play out into 2022.”
Across the border in Juarez, automotive-related maquiladoras have slowed down production and some have cut back on employee hours.
“I cannot quote exact loses, but production has been trending lower,” said Thor Salayandia, president of the Juarez Chamber of Industry and Manufacturing. “Production is down 10, 20, 30, 50 percent, depending on the industry sector.”
Barela said the shortage isn’t just an economic issue but a potential U.S. security issue as well. “Airplanes, military hardware, all of it is based on semiconductor usage. This shortage not only affects American companies but our military strength as well,” he said.
The painful lesson shores up the case for rebuilding semiconductor production in North America, he and others say. Most semiconductors are made in Asia nowadays, whereas production centered around the United States before the turn of the century.
“There is an urgent need to diversify that important supply chain of vital semiconductors to North America. There is no better place than the borderland region to make computer chips,” Barela said. “We are working very hard to get the attention of semiconductor manufacturers, so they look at our region, at our risk-adverse environment to expand or relocate.”
Such production facilities likely would be built in Juarez, where a lot of subsidiaries for American Fortune 500 companies operate factories. Juarez business leaders are all for the idea of reshoring semiconductor production. However, that will take time – at least two years once someone comes up with a concrete plan, Barela said.
In the meantime, business leaders on both sides of the border expect the collateral damage from the shortage to continue well into 2022.