Warren, in a new letter obtained by CNN, argues that the chip shortage, and its consequences, is a prime example of how real people can be hurt when a few companies become too dominant in their fields. The Massachusetts Democrat points out that only five companies control 54% of the world’s semiconductor manufacturing, which gives the biggest players “immense market power”.
“This market concentration has reduced competition, allowing giant companies to offer huge returns to shareholders,” Warren wrote in a letter sent Thursday to Commerce Secretary Gina Raimondo. “But it has hurt consumers by allowing these dominant companies to raise prices and underinvest in key capabilities, which also has the effect of reducing innovation and product quality.
The Semiconductor Industry Association responded in a statement to CNN, saying the trade group agreed with Warren that America should encourage more domestic chipmaking, but rejected the senator’s other points.
“Some of the senator’s other claims are simply irrelevant, “said John Neuffer, CEO of the business group.” The semiconductor industry is one of the most competitive, innovative and economical sectors in the world, revolutionizing entire segments of the economy. and dramatically improve our way of life. “
âConsumers are wronged
The Warren Pressure is the latest example of progressives claiming corporate greed is amplifying historic levels of inflation.
Last week, Warren slammed Hertz for gorging on stock buybacks instead of investing in a new offering that could ease skyrocketing car rental prices.
Likewise, White House economists last week published a blog post saying that the “dominant” meat processors “are using their market power to secure ever-larger profit margins,” contributing to the recent surge in meat prices.
To make his point on computer chips, Warren named Taiwan Semiconductor Manufacturing Co., a supplier to Apple, Nvidia and other tech companies, as one of the companies that has grown too powerful. She also said that ASML, a Dutch company that trades on the Nasdaq, is the only company that makes machines needed for advanced chips, and that it cannot meet demand.
âSo while dominant semiconductor companies like TSMC and ASML are posting huge profits and rewarding shareholders,â Warren wrote, âconsumers are being harmed by shortages and higher prices.â
Neither company responded to CNN’s requests for comment.
The Semiconductor Industry Association noted that the industry has innovated rapidly over the years and that this development requires significant investment.
“Today’s semiconductors are magical, containing tens of billions of transistors on a chip the size of a quarter,” the trade group said in a statement. , transistors were a billion times more expensive than they are today. “
Covid, not corporate concentration, is seen by many as the short-term driver of the computer chip shortage. Consolidation took place over many years. There was no shortage of chips before Covid.
Spikes in car prices are the most egregious example of how the shortage of computer chips and supply chain issues in general have affected ordinary people. New car prices climbed a record 11.1% in November from a year earlier.
But it’s not just about cars. Computer chips are essential components for televisions, exercise machines, and home appliances – just about anything that has an on-off switch. And that has contributed to the biggest rise in consumer prices in almost 40 years.
âThese semiconductor makers put stock price, earnings and growth ahead of the needs of American consumers and workers,â Warren wrote. âAs the COVID-19 pandemic has demonstrated, this behavior can lead to dire consequences and shortages for our country.
Billions of funding could be on the way for chipmakers
That’s why Warren is calling on the Commerce Department to use its power to distribute tens of billions of dollars in funding from legislation currently being debated by Congress, and to push back consolidation in the industry.
To address the chip shortage and strengthen national supply chains, Congress passed the CHIPS Act last year, which encourages domestic production and research of semiconductors. Only 12% of the world’s computer chips were made in the United States in 2020, up from 37% in 1990.
The Senate passed legislation that would fund the CHIPS for America Act. Raimondo, the Commerce Secretary, implored the Chamber to do the same.
If that funding reaches Congress, it would open the door to a large amount of federal government grants aimed at revitalizing the U.S. semiconductor industry, including $ 19 billion in fiscal 2022 alone.
Under the CHIPS Act, the Commerce Department would be responsible for distributing funds to projects the Commerce Secretary deems “in the best interests of the United States.”
“It is clearly in the national interest of the United States to use this funding to combat industry consolidation,” Warren wrote to Raimondo. “I encourage you to seize this opportunity through proper use and appropriation of these funds, ensuring that American consumers and workers see the full benefits of domestic investment.”
Buyout control, antitrust action
Warren’s letter included a series of questions to Raimondo about how the Commerce Department plans to choose which projects receive financial assistance and how the funds will reduce the impact of layoffs and price hikes.
The Massachusetts Democrat also asked how Raimondo would ensure that the funds “are not used to increase company profits, increase executive compensation and reward shareholders through share buybacks.”
A spokesperson for the agency said the Commerce Department “received the letter and we plan to respond directly to Senator Warren. Secretary Raimondo agrees with Senator Warren on the urgent need to diversify the chain. ‘semiconductor supply’.
Concerns over corporate concentration in the chip industry have prompted regulators to reverse what would be the largest semiconductor acquisition in history. Earlier this month, the Federal Trade Commission launched legal action to block Nvidia’s $ 40 billion takeover of UK chip design company Arm.
Warren praised the FTC lawsuit and suggested that more action should only be a starting point.
âAlthough the Trump administration has done little to stop this nefarious consolidation, under President Biden, the federal government is beginning to oppose industry consolidation that could undermine the resilience of the supply chain. supply, âWarren wrote.