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A Global Shortage In Computer Chips Hits Auto Industry. What Industries Are Next?

ARI SHAPIRO, HOST:

Automakers around the world are being hobbled by something thinner than a piece of paper. A chip shortage is shutting down auto factories, sending workers home and halting productions on several car lines. NPR's Ryan Kailath reports on how we got here.

RYAN KAILATH, BYLINE: Cars these days are basically 2-ton computers on wheels. So when auto production first shut down at the beginning of the pandemic, it meant a lot of extra computer chips sitting around. At the same time, we were all sitting around, working from home and schooling from home and attending weddings from home.

KRISTIN DZICZEK: We all needed new computers. Every school kid needed a Chromebook. There's the new PlayStation 5 (laughter).

KAILATH: According to Kristin Dziczek of the Center for Automotive Research, chipmakers pushed their extra supply into all our new TVs and smart speakers and Internet-connected washing machines. Whatever device you're hearing this story on probably contains a computer chip. Meanwhile, auto sales rebounded way faster than anyone predicted, says Patrick Manzi with the National Auto Dealers Association.

PATRICK MANZI: Most of us did not expect this. The sales rate in April fell to the lowest on record, at least back to the '70s since we've been tracking this.

KAILATH: When car carmakers suddenly needed chips again, those supply lines were spoken for. And switching them back takes time, up to six months to reallocate capacity. So now carmakers have a dire short-term need that can't be addressed in the short term. Manzi expects global production to drop by about a million cars this quarter.

MANZI: It is a nontrivial amount.

KAILATH: For American autoworkers at idled plants, that means up to 25% pay cuts for the duration. And the effects will trickle down through the massive cottage industry of car parts suppliers and everyone they employ. At the car lot, Manzi says...

MANZI: There will be vehicles to buy. It just may be a little bit more difficult to find that exact specification that you're looking for. If you wanted the red one with the leather, maybe they only have the gray one with the leather, right?

KAILATH: Now President Biden is stepping in, ordering a review into expanding chip manufacturing in the U.S. instead of Taiwan and Korea, treating chips as essential American goods, crucial to so many things we use every day. But new American factories would take years to bring online. In the meantime, the shortage is spreading, disrupting supplies for cellphones and laptops. Analysts say it will likely get worse before it gets better. For consumers, it's probably a good time to drive carefully and try not to drop your cellphone.

Ryan Kailath, NPR News, New York. Transcript provided by NPR, Copyright NPR.