One year since the start of the COVID-19 pandemic, supply and demand in the global economy have both gone haywire. With the huge government stimulus needed to combat this crisis, the so-called era of small government and unlimited globalization is truly at an end. President Biden has issued an executive order calling for an investigation into the national manufacturing base and supply chain infrastructure to offset “pandemics and other biological threats, cyber-attacks, climate shocks and extreme weather events, terrorist attacks, geopolitical and economic competition.” As the backbone of the high-tech economy, the administration is now pushing to invest $37 billion to support reviving semiconductor manufacturing in the US.

Lead times for many semiconductors are one year out right now, and these devices are in just about everything we use. Business and financial media have detailed how the shortage of semiconductors has caused production cutbacks in the automotive industry: Ford, Toyota, Nissan, VW, and Fiat Chrysler Automobiles (now a part of Stellantis) are among global carmakers that have scaled back output. Other carmakers have announced they’ll likely miss their 2021 targets. And it’s not just carmakers that are in trouble. The chip shortages are expected to cause widespread shortages of everything, from electronics to medical devices to technology and networking equipment.

As recently reported by Reuters, automakers and medical device manufacturers have asked the Biden administration to subsidize construction of new U.S. semiconductor manufacturing capacity. And in response to the shortages, Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest semiconductor manufacturer, has increased its 2021 capital spending budget to $28 billion. But funding and building a new semiconductor fab is at least a five-year process.

Controlling semiconductor technology is still a concern in 2021. Only one Dutch company, ASML, makes the most sophisticated 5 nm extreme ultraviolet photolithography machines. They remain in very short supply. TSMC enjoys the near exclusive use of these machines, while the United States intervened in November 2019 to prevent ASML from selling a machine to China. In this sense, security concerns have always haunted the globalization of the computer chip and are one reason why a few companies still enjoy monopoly-like power over some sectors of the industry.

To a great extent, the chip shortage has been a ticking time bomb, building since late last year due to a few (unrelated) supply-chain disruptions. When the Covid-19 pandemic caused a precipitous drop in vehicle sales in spring 2020, automakers cut their orders of all parts and materials — including the chips needed for functions ranging from touchscreen displays to collision-avoidance systems. Then in the third quarter, when demand for passenger vehicles rebounded, chip manufacturers were already committed to supplying their big customers in consumer electronics and IT.