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Commerce Secretary Gina Raimondo on the Chip Shortage, Supply Chain Issues, and Russian Sanctions

8 minute read

Earlier this week, I wrote about how potato chips may be harder to come by as Russia’s invasion of Ukraine hinders production of sunflower oil, a common snack food ingredient. Today, I spoke with United States Secretary of Commerce Gina Raimondo about an ongoing shortage of different sort of chip: the kind that power your laptops, cell phones, vehicles, video game consoles, electronic medical equipment, and more.

COVID-19’s stranglehold on world’s supply chain vastly reduced the number of semiconductor chips available for import to America, which has, in recent years, relied on other nations for the majority of its chip needs. Less chip imports meant increased demand for them across manufacturers, depressing supply and increasing consumer prices of finished goods. New cars surged in price by 13%. Used cars jumped by more than 40%. Some printers have increased by 20%.

As Americans struggle to keep up with a pace of inflation unseen in 40 years, lawmakers are attempting to reconcile the differences between two bills, each of which would provide more than $50 billion in funding for a piece of legislation—the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act—which passed in January 2021 and authorized programs that promote the research, development, and creation of more domestically manufactured semiconductor chips.

Raimondo connected with TIME on March 9 to discuss the timing of the funding legislation, when Americans might start to see its impact on their pocketbooks, and how her department—and the Biden Administration as a whole—are responding to the broader global supply chain crunch amid an ongoing pandemic and a Ukraine-Russian crisis.

These answers have been condensed and edited for clarity.

Used cars jumped in price by 44% between December 2019 and December 2021. In recent months, the price of larger TV models has shot up around 30% compared to last summer, according to market research company NPD. What role did COVID-19—and semiconductor chips—play in those price increase?

Raimondo: Both have played very large roles. COVID created wide-scale global disruption across supply chains. The fact that we literally flipped the switch and turned off the economy—sent manufacturing workers home, stopped shipping and trucking, [and] stopped production all at once all over the world—created massive disruption in the supply chain. It turns out you can flip the switch off, but you can’t flip the switch on. And as a result, there have been logistical challenges, shipping challenges, [and] product shortages. By the way, on top of that, there have been numerous manufacturing shutdowns because of COVID outbreaks. So all of that has led to product shortages, which has led to increased prices. It’s basic supply and demand.

Separately, semiconductors are a unique product in its ubiquity. Chips are in everything. Literally everything: your phone that you’re probably using to record this, your computer, the speakerphone I’m talking to you on your car, et cetera. The greatest contributor to increased car prices has been the lack of chips. The car industry made about 7.5 million fewer cars last year than they predicted simply because they couldn’t get access to chips. It’s impossible to overestimate the role of chips in driving inflation and in disrupting our supply chain.

How might Russia’s invasion of Ukraine exacerbate this chip shortage?

Raimondo: I don’t think it will significantly affect it, if at all, because neither Russia nor Ukraine make any chips. Furthermore, the United States, along with dozens of other countries around the world—all of Europe, the United Kingdom, Korea, Canada, New Zealand, Australia—we have all said that we are not going to be shipping any chips to Russia. So if anything, there’ll be more supply for the rest of the world.

How will the CHIPS Act further help this shortage of semiconductor chips?

Raimondo: Fundamentally, we need to make more chips in America. President Biden was very clear about that in the State of the Union the other night. The semiconductor industry was invented in America. Once upon a time, not that long ago, we made almost 40% of all the world’s chips in America. Now we make only 12%, which means we’re extremely dependent on other countries for our chips. And so what the CHIPS Act does is it allows us to incentivize companies to build manufacturing facilities in America to make more chips in America.

What does the timeline look like for this legislation? And beyond that, if it is signed into law by the President, how long would it take before Americans start to see the benefits of this legislation?

Raimondo: I’m optimistic that it will get to the President’s desk this Spring sometime. It has broad bipartisan support. I talk to members of Congress in the House and in the Senate, Republicans and Democrats, every day. Speaker [Nancy] Pelosi strongly supports the bill. [Senate Majority] Leader [Chuck] Schumer supports the bill. The President has asked them to get it to him quickly. And I think it will happen this Spring.

Then the money will come to the Commerce Department, and we’ll begin the work of implementing it. On the one hand, it definitely will take us some time, some number of months, to establish the program here at the Commerce Department, and begin to put the money out the door. However, I think the minute the President signs the bill, that sends a market signal to semiconductor companies, and tells the business community, that certainty is coming—that this money is coming—and that pulls private investment off the sidelines. So I think the second [the] President signs it, you’re going to start to see companies announcing that they are ready to invest in the chips industry in America.

How significant will this legislation be in terms of job creation?

Raimondo: Massive, massive job creation. I’ll give you one example. I was in Ohio recently with Intel, a chip maker. And they’re putting one new manufacturing facility in Ohio. It’s a big investment, a $20 billion investment. The CEO of the company at that event said publicly, when the President signs the CHIPS Act, he’s prepared to move from a $20 billion dollar investment to an $100 billion investment—so making his manufacturing facility five times as big. The one manufacturing facility that he announced that day will create more than 10,000 jobs in Ohio. The average salary, he said, was [over] $120,000 a year. And many of these jobs don’t require a college degree. So that’s just one facility in one state [creating] 10,000 jobs. You will see hundreds of thousands of good paying manufacturing jobs happening all over America.

Read More: Intel Reveals Plans For Massive Chip Factory in Ohio

This act may eventually help lower car prices, technology prices, or cell phone prices. But it’s not going to help prices at the gas pump, which have increased 40% to 50%, or food prices, which have increased 7%. As this Ukraine-Russia conflict continues, prices on those items will further swell. I’m wondering if you can say anything about what the Commerce Department is doing as Americans feel this pinch across the board, not just in technology?

Raimondo: If I was Secretary of Energy, I would have a more detailed answer on what we’re doing for energy prices. The President spoke to the nation [earlier this week] and is extremely focused on the pain that high gas prices are causing Americans and doing everything we can as an Administration to bring them down. For my part, what we’re doing at the Commerce Department is we are focused across the entire supply chain. So today, you and I have been talking about chips, but I’m a co-chair of the President’s Supply Chain Disruption Task Force. So we’re also working to increase domestic production of batteries, solar panels, [and] other products that we need to be made in America. The more we make in America, the more supply we have here, it will just bring down prices.

The Commerce Department has been working with the Treasury Department on pushing out sanctions. I’m wondering if you can explain to readers what the Commerce Department’s role is in these sanctions against Russia?

Raimondo: Simply put, we are no longer selling to Russia [the] technology equipment and supplies that they need to maintain their military operation. And we have convinced all of our allies around the world—all of Europe, Canada, the UK, Japan—to do the same thing. The flight panels that are used in Russian military aircraft come from France. The engines that are used in their aircraft, some come from the U.S. and some come from Germany, some from France. All Russian semiconductors come from another country. And we’ve banded together with the rest of the world to say we are not going to send these products to Putin, because we want to hobble his military operation.

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Write to Abby Vesoulis at abby.vesoulis@time.com