President Biden should worry that no one can find the new PS5 or Xbox

I don’t know what you think when you read the word “microchip” or “semiconductor”, but I think of the Cold War. In particular, I am thinking of the microchips within the first guided missiles. As author Stephen D. Bryen explains in his book Technological security and national power: winners and losersAmerica got ahead of the Cold War in part because that’s the country that made microchips. And the USSR had no hope of replicating the complex processes that go into making semiconductors. And that’s why President Biden should care that you and I are having a hard time finding the PlayStation 5 and Xbox Series X / S.

Video games are frivolous entertainment, but they have also proven indispensable for many families and individuals during the pandemic. But the US government doesn’t necessarily have to worry about the availability of the console because people like the hobby. Instead, the problem is that the demand for consoles, GPUs and CPUs creates a demand for microprocessors that is disrupting large segments of the economy.

Analysts told the Washington Post they expect carmakers to produce 1.5 million to 5 million fewer cars this year due to chip shortages. This led Ford to reduce production of its F-150 pickup, which is the best-selling car in the US.

AMD, Microsoft, Sony, and Nvidia have also pointed to processor supply limitations as the main reason they can’t keep up with demand for PS5, Xbox Series X, and more.

Manufacturing capacity is at its limit

The underlying problem is a lack of capacity in the manufacturing facilities. Silicon is in everything, which is why manufacturers have booked every production line. This creates multiple problems.

For consoles and PC components, create a log backlog. The PS5, Xbox Series X / S, AMD Ryzen CPU, and Radeon GPUs run on processors that use Taiwan Semiconductor Manufacturing Company’s (TSMC) 7nm manufacturing process. If TSMC wants to move production to AMD, it would have to move it to Microsoft, Sony, or another customer.

The other option for TSMC is to upgrade its other facilities from producing older processors to newer products. And it has done so at the expense of the auto industry.

When demand for vehicles fell early in the pandemic, semiconductor companies spent millions of dollars reallocating their capacity to more profitable processors with higher demand. Car sales rebounded in the second half of 2020, but TSMC and others were unable to flip a switch to start producing those chips again.

It is a zero sum game. So what should Biden do about it?

America should treat semiconductors like it treats guns

Last week, President Biden signed an executive order to review the chip supply chain. He did so at the behest of a bipartisan group of members of Congress. And while we know the Democratic Party loves their studies and reviews, they are not that good at doing anything with the findings.

An honest review of the supply chain should make both parties want to act. Sure, semiconductors are crucial for cars and consoles, but they are also an integral part of medical equipment and military weapons.

And guns are probably the right way to think about processors. If much of our economy and security depends on access to these components, shouldn’t the country have a reliable and robust semiconductor supply chain? Wouldn’t the money the country spent on the failed F-35 serve us better if it ensured a safe and ready supply for such an important piece of technology?

“All made in Taiwan”

Instead, what we have is an almost total dependence on the Taiwan TSMC. This is something that Biden has already taken steps to address. The president’s top economic adviser, Brian Deese, sent a letter to Taiwan’s economy minister explaining his desire to improve production.

“We see significant potential for a broader medium and long-term commitment to improve supply chain resilience,” Deese wrote in the letter, as Bloomberg News first reported. “We also look forward to working closely with you on the broader US-Taiwan economic relationship.”

Taiwan has an excellent business relationship with the United States and other global partners. But the country also has a strained relationship with its neighbor China.

And the point is, we don’t have to imagine a politically unstable future for Taiwan.

Semiconductors are important now and the world cannot produce enough of them now. And because? Because the demand for entertainment and personal computing hardware is too high. That alone is absurd and terrifying and should motivate America to invest in the future of integrated circuits.

Of course, even an immediate move to finance manufacturing in the United States wouldn’t help right away. It will take years to get a project of this magnitude up and running. In the meantime, you are unlikely to find a PlayStation 5 or Xbox Series X on a shelf sometime this year.