There's a 'direct correlation' between the chip shortage and inflation: Commerce Secretary

U.S. Commerce Secretary Gina Raimondo joins 'Influencers with Andy Serwer' to discuss the ongoing semiconductor shortage across the globe.

Video Transcript

ANDY SERWER: I want to jump right in and ask you about chips and the semiconductor shortage. I know this is top of mind for you. And understand where things are, but also to ask you about the connection between the shortages of chips and these reports of very high inflation that we've seen lately.

GINA RAIMONDO: Oh, yeah, yeah. Thank you. There's a direct correlation. I mean, the inflation numbers came out yesterday, and, you know, higher, I think, than anybody would want to see. But if you did-- if you get under the covers of the numbers, you realize that a third of the increase in inflation is due to car prices, which is stunning. You know, a third is due to car prices. Why is that? Because last year auto production of cars was down by almost 8 million cars-- 7.7 million cars.

So supply is down. Prices of cars are up 20%. And the reason-- like, the single reason or biggest reason that car production is down so much is because car companies can't get their hands on enough chips. And they will tell you that. If you go to production facilities of cars and trucks, by the way, you will see many, many cars fully assembled but for chips.

So it's pretty simple supply and demand. You know, I'm thinking back to ACT10, which I took 30 years ago. It's like we need to increase the supply of cars so prices will come down. And in order to do that, we need increase in semiconductor chips. So there's really a direct link between the two. And we need Congress to act so they can fix the problem.

ANDY SERWER: And so, there is the CHIPS Act out there. And I'm wondering where that stands right now, and then how that would address this problem.

GINA RAIMONDO: Yeah. So it's kind of stalled in Congress, to be very honest, that the Senate worked hard, got the CHIPS Act passed I think last summer. And it's been a little bit stuck in the House. Speaker says she's for it. I mean, she does support it. But we need to move it.

And so why does it matter? Essentially it's incentives that the Commerce Department could provide to chips manufacturers so they will make chips in America. If you ever have time for kind of a really scary read, you should learn more about how dependent the United States is on other countries, especially Taiwan, for our supply of semiconductors.

Like right now in the United States, we make zero-- none of the most sophisticated semiconductor chips-- none of them. And we get the majority from Taiwan. So apart from the fact that we need to make chips in America so we can make more cars, reduce inflation, create jobs, it's a national security issue as well. We cannot be a secure nation economically or nationally secure if we get 60, 70% of all of our chips from a single company in Taiwan.

So in any event, Congress needs to move. They need to take action now. It'll send money. The Commerce Department will set up a program here where we work in partnership with semiconductor companies asking them to set up shop in America, making chips in America.