Editor's Note

The Chips Have Fallen

The microchip shortage has hit healthcare hard, but Congress is only solving part of the problem.

• By David Kopf
• Feb 01, 2022

It’s funny how expressions morph over time. These days, when people say, “let the chips fall where they may,” they tend to imply that a person shouldn’t worry about small details. However, the 19th century idiom, derived from chopping wood, means that when performing an important job or making a big decision, it’s important to focus on the main task at hand (chopping logs) without worrying about the consequences of the job (the chips) that might be unknown. The phrase recognizes that the chips are also important.

That expression couldn’t be more apropos for the history of the U.S. semiconductor and microchip supply, which is now so tight that it’s impacting healthcare and the HME industry. We are now confronted by the fallout of decisions made in the past, and it’s going to require the government to fix them. But how well is the government doing?

The current situation: multiple supply chain issues are causing shortages of the microchips used in many medical devices, such as oxygen concentrators, CPAPs and ventilators. Moreover, the supply chain problems are compounded by the fact that other industries and products ranging from automobiles to consumer electronics use the same chips. The supply and demand are completely out of balance.

How bad is the shortage? Researchers AutoForecast Solutions estimated the world lost 11.3 million units of production in 2021 and will likely lose 7 million more units in 2022.

So, why is there a shortage? The short answer is the pandemic’s overall supply chain impact.

However, the underlying reason we find ourselves in this position is due to manufacturing decisions made by U.S. semiconductor and microchip companies three decades ago. Starting in the early 1990s, the U.S. semiconductor industry began focusing on innovation while offshoring its production capacity. That trend only increased at the beginning of the 21st century. Nowadays, the is scant domestic production. According to Brookings, as of 2020, the United States only accounted for 12 percent of global semiconductor manufacturing.

So, as soon as the pandemic started choking off the flow of goods into U.S. ports, the flow of component electronics such as microchips plummeted. Add to that the fact that the United States was in a trade war with China and implemented policies that impacted Chinese chip manufacturers, as well as fires at key plants and weather-related production problems, and the supply of microchips suffered even more.

Fortunately, because the microchip shortage affects so many U.S. industries, Congress is working to address the situation through increased domestic semiconductor and microchip production. The House is currently working to pass the America COMPETES Act of 2022, the lower chamber’s sister bill to the Senate’s U.S. Innovation and Competition Act (USICA), which the upper body passed in June. Both bills would provide appropriations language to fund $52 billion for domestic semiconductor R&D and production.

But the bills don’t address the current situation. We won’t see the output from any increase in domestic production of microchips resulting from the bills’ funding for some time. In the meantime, we still have a chip shortage impacting the United States, and in particular, our healthcare infrastructure while we continue to grapple with the Covid-19 pandemic.

The solution to this very-present problem is something most people in healthcare will recognize: triage. Either through regulation or legislation, the federal government must work to temporarily implement some kind of hierarchy for distributing chips so that manufacturers of healthcare equipment either get priority or a larger share of chips coming into U.S. ports. The country’s healthcare and pandemic response depend on it.

This article originally appeared in the Jan/Feb 2022 issue of HME Business.