The second is that the chip industry’s customers are adapting, too. When demand collapsed early in the pandemic, carmakers cut their orders with chipmakers. The car industry’s size and clout mean that it is used to ordering suppliers around. But when demand recovered, it found itself at the back of the queue, because of long lead times and competition for capacity from the even bigger and more influential tech industry.
The unpleasant experience of being the supplicant rather than the boss has prodded carmakers to take tighter control over supplies of vital components. Following in the tyre-treads of Tesla, Volkswagen has announced plans to develop driver-assistance chips in-house. Other firms are forging closer relationships with chipmakers. Toyota, a Japanese firm, has weathered the shortage relatively well, partly because it was slower to cut orders when the pandemic hit. In June Robert Bosch, a big supplier of automotive parts, cut the ribbon on a €1bn ($1.2bn) chip factory of its own in Dresden. Redesigned supply chains will be more resilient.
The third, unwelcome effect has been a surge of techno-nationalism. America is planning to hand out billions of dollars to lure chipmakers back from East Asia. Europe wants to double its share of global production, to 20%, by 2030. Even Britain has declared the fate of a small chip factory in Wales to be a matter of national security.
There is some force in the argument that chips have come to occupy what used to be called the “commanding heights” of an economy, in the way that oil refineries or car factories did in the 20th century. The concentration of production in Taiwan, in particular, is an uncomfortable geopolitical risk. But as last century’s governments discovered, subsidies lead to overcapacity and gluts—and, eventually, to yet more calls for public money to prop up uncompetitive businesses. The chip shortage is mostly a self-solving problem. Governments should resist the temptation to see themselves as saviours. ■
