Chip Deficiency Highlights US Dependency on Vulnerable Supply Chain – 60 Minutes

Car companies around the world have had to shut down production and workers due to a shortage of semiconductors, often referred to as microchips or simply chips. It’s the tiny working brain in just about any modern device, such as smartphones, hospital fans, or jet fighters. The pandemic has caused the demand for chips to rise unexpectedly as we bought computers and electronics to work, study and play from home. But while more and more chips are needed in the US, fewer and fewer chips are being produced here.

Intel is the largest American chip maker. The most advanced manufacturing plant, or simply fabulous, is located outside of Phoenix, Arizona. The new CEO, Pat Gelsinger, invited us on a tour to see how incredibly complex the manufacturing process is.

First, we had to adapt to avoid contaminating the fabric: head-cover – on; rabbit suit – with zipper; goggles; gloves … ready to go.

Lesley Stahl: I am pristine!

Pat Gelsinger: Everything in this environment is monitored.

Together we stepped into a place with some of the most advanced new technology on the planet.

Lesley Stahl: I have to ask you why we are all yellow?

Yellow filters remove light rays that are harmful to the process. Above an automated highway transports materials from one machine to another. The process involves thousands of steps, with layer-on-layer microscopic circuitry etched onto these silicon plates – which are then cut into chips that end up in your computer, for example. Making just one can take six months.

Pat Gelsinger shows correspondent Lesley Stahl a silicone sheet.

Pat Gelsinger: You see, each one of these is a chip.

Lesley Stahl: Is a chip. I am surprised. I thought chips were minor.

Pat Gelsinger: Well, each of these chips has maybe a billion transistors on it.

Lesley Stahl: Oh my god!

Pat Gelsinger: So there are a billion little circuits in it that are all on one of these chips. And then there can be 100 or 1000 chips on a wafer.

Intel’s goal is to keep making the size of the transistors smaller so that you can stack more of them on a chip to make it more powerful and run faster.

Pat Gelsinger: Each one of these captures circuits that are so much smaller than anything, your hair, you know, every other part of human existence. You know, a COVID particle is much bigger than any of the lines we’re making here.

Lesley Stahl: How much does this myth cost?

Pat Gelsinger: $ 10 billion.

Lesley Stahl: Billion ??

Pat Gelsinger: $ 10 billion because each of these devices is maybe $ 5 million. That’s a lot of millions of dollars.

Chips differ in size and sophistication depending on their end use. Intel doesn’t currently make many chips for the automotive sector, but due to the shortage, it plans to reconfigure some of its fabs to start producing them.

Lesley Stahl: I wonder if we’ll still have shortages, not just in cars, but in our phones and for our computers, for everything?

Pat Gelsinger: I think we have a few more years before we can meet this rising demand in every aspect of the business.

COVID showed that the global chip supply chain is fragile and unable to respond quickly to changes in demand. One reason: fabs are extremely expensive to build, refurbish and maintain.

Lesley Stahl: There used to be 25 companies in the world that made the high-end, cutting-edge chips. And now there are only three. And in the United States? – U.


Lesley Stahl: one. A.

Today, 75% of semiconductor production takes place in Asia.

Pat Gelsinger: 25 years ago, the United States produced 37% of the world’s semiconductor production in the US. Today, that number has dropped to just 12%.

Lesley Stahl: Doesn’t sound good.

Pat Gelsinger: It doesn’t sound right. And anyone who looks at the supply chain says, “That’s a problem.”

Pat Gelsinger

A problem because it is very risky to rely on one region, especially one as unpredictable as Asia. Intel is lobbying the US government to revive home chip manufacturing – with incentives, subsidies and tax breaks, as the governments of Taiwan, Singapore and Israel have done. The White House is responding, proposing $ 50 billion for the US semiconductor industry as part of President Biden’s infrastructure plan.

Lesley Stahl: Your business is extremely lucrative. In terms of income, you made $ 78 billion last year. Why would the government bring in a company, a company that is generally doing so well?

Pat Gelsinger: This is a big, critical industry and we want more of it on American soil: the jobs we want in America, taking control of our long-term technological future, and as we also said, the disruptions in the world. supply necklace.

Lesley Stahl: You spent a lot more on stock buybacks than on research and development. Much more.

Pat Gelsinger: We won’t be nearly as focused on buybacks in the future as we were in the past. And that has been discussed as part of my entry into the company, agreed with the board of directors.

Lesley Stahl: Why wouldn’t private industry finance this instead of the government? The industries that depend on these chips – Apple, Microsoft, the companies that are making money?

Pat Gelsinger: Well, they are quite happy to buy from some Asian suppliers.

Actually, they don’t always have a choice. For chips with the smallest transistors – there is No option “made in the US”. Intel currently does not have the know-how to manufacture the most advanced chips that Apple and the others require.

Lesley Stahl: The decline in this industry. It’s kind of devastating, isn’t it?

Pat Gelsinger: The fact that this industry was born from American innovation–

Lesley Stahl: The whole Silicon Valley idea started with Intel.

Pat Gelsinger: Yes… The company tripped. You know, it’s still a big company – we had some product failures, some manufacturing and process failures.


Perhaps the biggest stumbling block was in the early 2000s, when Apple’s Steve Jobs needed chips for a new idea: the iPhone. Intel was not interested. And Apple went to Asia and eventually found TSMC: the Taiwan Semiconductor Manufacturing Company – today the world’s most advanced chip maker, producing chips that are 30% faster and more powerful than Intel’s.

Lesley Stahl: They’re ahead of you on the production side.

Pat Gelsinger: Yes.

Lesley Stahl: significant for you.

Pat Gelsinger: We think it’s going to take us a few years and we’ll be caught up.

Gelsinger Puts Big Bets: Groundbreaking Work on Two New Giant Plants in Arizona, Costing $ 20 Billion; Intel’s biggest investment ever. And he will announce a three and a half billion dollar upgrade from this New Mexico myth this week.

But TSMC is a production mogul worth more than half a trillion dollars. Working with customers to produce their chip designs, it has been sought after by Apple, Amazon, US military contractors, and even Intel, that TSMC is using TSMC to produce their cutting-edge designs that aren’t sophisticated enough to make themselves.

Lesley Stahl: How and why did Intel fall behind?

Mark Liu: It’s surprising to us too.

Mark Liu

We spoke remotely with TSMC Chairman Mark Liu at the company’s headquarters in Hsinchu, Taiwan. His company is a leading supplier of the chips used in American cars. In March 2020, when COVID paralyzed the US – car sales tumbled, causing automakers to cancel their chip orders so TSMC stopped making them. That’s why, when car sales unexpectedly returned late last year, there was a shortage of chips: leaving cars without power on car manufacturers’ lots – costing them billions.

Mark Liu: We heard about this shortage in December. And in January we tried to push as much chip as possible to the car company. Today we think we are two months ahead, that we can catch up with the minimum requirements of our customers. Before the end of June.

Lesley Stahl: Are you saying the car chip shortage will end in two months?

Mark Liu: No. There is a delay. The supply chain is particularly long and complex for car chips. Delivery takes approximately seven to eight months.

Lesley Stahl: Should Americans be concerned that most chips are produced in Asia these days?

Mark Liu: First of all, I understand their concern. But this is not about Asia or not about Asia. I mean the shortage will occur no matter where the production is located because it is due to the COVID.

Lesley Stahl: But Pat Gelsinger at Intel talks about the need to rebalance the supply chain problem because so many, so many chips in the world are now made in Asia.

Mark Liu: I think the US should strive to run faster, invest in R&D, produce more Ph.D., masters and bachelor students to get into this field of production instead of trying to move the supply chain, which is very expensive and really not productive. That will slow down innovation because … people try to keep their technology theirs and give up global collaboration.

There is fierce competition in the world of global cooperation. Days after Intel announced it would spend $ 20 billion on two new factories, TSMC announced it would spend $ 100 billion over three years on R&D, upgrades and a new factory in Phoenix, Arizona, Intel’s backyard, where it Taiwanese company will produce the chips Apple needs, but the Americans cannot make it.

Mark Liu: That was a big investment.

But a shadow has loomed over TSMC, which provides chips for our cars, iPhones, and the supercomputer that manages our nuclear stockpile: Chinese President Xi Jinping, who has intensified his long-standing threat to seize Taiwan.

China’s attempts to develop its own advanced chip industry have failed and it has been forced to import chips. But last year, Washington imposed restrictions on chip makers to export certain semiconductors to China. Both Liu and Gelsinger fear the escalating trade war with China could backfire, and in Intel’s case, harm the company.

Lesley Stahl: Are they your biggest customer?

Pat Gelsinger: China is one of our largest markets today. You know, more than 25% of our turnover is for Chinese customers. We expect this to remain a field of tension and to be navigated carefully. Because if there are points where people can’t keep running their country or business because of the supply of an essential part like semiconductors, boy, then that leads them to take very extreme attitudes because they have to.

Most extreme would be for China to invade Taiwan and take control of TSMC. That could force the US to defend Taiwan, as we did 30 years ago in Kuwait against Iraqis. Then it was oil. Now it is chips.

Lesley Stahl: The chip industry in Taiwan is called the Silicon Shield.

Mark Liu: Yes.

Lesley Stahl: What does that mean?

Mark Liu: That means the world needs all of Taiwan’s high-tech industry. So they will not allow the war to take place in this region, because it goes against the interests of every country in the world.

Lesley Stahl: Do you think your industry is somehow keeping Taiwan safe?

Mark Liu: I cannot comment on security. I mean this is a changing world. Nobody wants these things to happen. And I hope – I hope not – too.

Produced by Shachar Bar-On. Associate producer, Natalie Jimenez Peel. Broadcaster, Wren Woodson. Edited by Warren Lustig.

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