The Chips Have Fallen
The microchip shortage has hit healthcare hard, but Congress is only solving part of the problem.
- By David Kopf
- Feb 01, 2022
It’s funny how expressions morph over time. These days, when people say, “let
the chips fall where they may,” they tend to imply that a person shouldn’t worry about small
details. However, the 19th century idiom, derived from chopping wood, means that when
performing an important job or making a big decision, it’s important to focus on the main task
at hand (chopping logs) without worrying about the consequences of the job (the chips) that
might be unknown. The phrase recognizes that the chips are also important.
That expression couldn’t be more apropos for the history of the U.S. semiconductor and
microchip supply, which is now so tight that it’s impacting healthcare and the HME industry.
We are now confronted by the fallout of decisions made in the past, and it’s going to require
the government to fix them. But how well is the government doing?
The current situation: multiple supply chain issues are causing shortages of the microchips
used in many medical devices, such as oxygen concentrators, CPAPs and ventilators. Moreover,
the supply chain problems are compounded by the fact that other industries and products
ranging from automobiles to consumer electronics use the same chips. The supply and demand
are completely out of balance.
How bad is the shortage? Researchers AutoForecast Solutions estimated the world lost 11.3
million units of production in 2021 and will likely lose 7 million more units in 2022.
So, why is there a shortage? The short answer is the pandemic’s overall supply chain impact.
However, the underlying reason we find ourselves in this position is due to manufacturing
decisions made by U.S. semiconductor and microchip companies three decades ago. Starting
in the early 1990s, the U.S. semiconductor industry began focusing on innovation while
offshoring its production capacity. That trend only increased at the beginning of the 21st
century. Nowadays, the is scant domestic production. According to Brookings, as of 2020, the
United States only accounted for 12 percent of global semiconductor manufacturing.
So, as soon as the pandemic started choking off the flow of goods into U.S. ports, the flow
of component electronics such as microchips plummeted. Add to that the fact that the United
States was in a trade war with China and implemented policies that impacted Chinese chip
manufacturers, as well as fires at key plants and weather-related production problems, and the
supply of microchips suffered even more.
Fortunately, because the microchip shortage affects so many U.S. industries, Congress is
working to address the situation through increased domestic semiconductor and microchip
production. The House is currently working to pass the America COMPETES Act of 2022, the
lower chamber’s sister bill to the Senate’s U.S. Innovation and Competition Act (USICA), which
the upper body passed in June. Both bills would provide appropriations language to fund $52
billion for domestic semiconductor R&D and production.
But the bills don’t address the current situation. We won’t see the output from any increase
in domestic production of microchips resulting from the bills’ funding for some time. In the
meantime, we still have a chip shortage impacting the United States, and in particular, our
healthcare infrastructure while we continue to grapple with the Covid-19 pandemic.
The solution to this very-present problem is something most people in healthcare will
recognize: triage. Either through regulation or legislation, the federal government must work to
temporarily implement some kind of hierarchy for distributing chips so that manufacturers of
healthcare equipment either get priority or a larger share of chips coming into U.S. ports. The
country’s healthcare and pandemic response depend on it.
This article originally appeared in the Jan/Feb 2022 issue of HME Business.
David Kopf is the Publisher and Executive Editor of HME Business and DME Pharmacy magazines. Follow him on LinkedIn at linkedin.com/in/dkopf/ and on Twitter at @postacutenews.