Harvard's Willy Shih on the global chip shortage, supply chains, and why Biden's $52B for chip manufacturing may not be enough for the US to catch up to TSMC
Since the beginning of the pandemic, the demand for microchips has far exceeded supply, causing problems in every industry that relies on computers.
Context & Ripple Effects
The shortage was already being driven by demand for laptops, 5G chips, and cars, with older chips under particular pressure in the earlier demand surge. Related coverage also tied constrained supply to manufacturers’ emphasis on higher-margin, cutting-edge chips and stockpiling amid US-China trade tensions.
Shih’s assessment places the Biden administration’s $52 billion allocation in a longer capacity race: funding addresses the US manufacturing gap, but not necessarily TSMC’s accumulated lead or the supply-chain pressures disrupting computer-dependent industries.
First-order effects
- The Biden administration’s $52 billion commitment gives US chip manufacturing a major policy-backed capital signal, while Shih’s warning sets expectations that it will not by itself put US producers level with TSMC.
- Computer-dependent manufacturers remain exposed to scarce chip supply as pandemic-era demand exceeds available production capacity.
Second-order effects
- US chip-policy advocates and domestic manufacturers face pressure to show that new funding can address the capacity mismatch identified in the shortage’s tilt toward higher-margin chips, rather than only add investment headlines.
- Buyers across autos, consumer electronics, and networking continue competing for constrained supply, making component availability and pricing a product-planning constraint.
Third-order effects
- The episode points to semiconductor capacity as a strategic industrial-policy issue: catching a leading foundry depends on sustained manufacturing capability and supply-chain depth, not a single appropriation.
- If demand continues to outrun capacity in both advanced and older chips, manufacturers will increasingly treat supply assurance as a core design and sourcing decision rather than a temporary procurement problem.
The trend: Semiconductor supply is becoming a long-cycle capacity and industrial-policy contest, with demand shocks exposing the limits of concentrated manufacturing leadership.