The management of Vitoria of the automotive multinational Mercedes-Benz referred to the company committee on 19 November a brief but significant note that next Friday’s three production shifts would be interrupted by the “uncertainty” with the supply of parts. Although they searched under the stones, they did not find enough semiconductor chips to keep up with the production chain. This decision, which was not taken by surprise by the union, has had to stop the factory several times since March 2021 for the same reason.

The Vitoria-Gasteiz plant is not the only automotive plant in the Basque Country that suffers these cuts. Volkswagen from Pamplona has also had to leak during these months, but the duration of the last stop has heightened concern: since 26 November at the Landaben plant, the sound of the electric saws and screwdrivers is not heard. This time, the fault lies with a semiconductor chip to control the automatic air conditioning system carried by the vehicles of this brand, which is carried out in Thailand and brought directly.

Alfredo Morales, representative of VW’s UGT trade union, explained to Europa Press that “the lack of semiconductors must be added to the days not worked and not paid, adding that the workers are not receiving the benefits of the SEPE (State Public Employment Service)”. In some cases, the Temporary Employment Regulation (TEU) dossier has been awaiting recovery since July due to bureaucratic problems.

Major automotive companies have in many cases extended or maintained TEUs implemented during the pandemic due to the stock breakdown of semiconductor chips. In Vitoria, for example, the workers at the Mercedes-Benz plant in Jundiz know that they will not work throughout the week of December 27 to spend those remaining UTE days. This allows the company to save some of the wages paid by the SEPE and, at the same time, to take care of workers and public institutions for the loss due to lack of chips.

Current oil

The Chip crisis will result in losses of EUR 180 billion in the European automotive sector, announced by the US consultancy AlixPartners and published by all media with big bombs. In total, 7.7 million cars will remain unsold if these small appliances are not connected. Because, as in many other products, today’s cars carry dozens or scientific semi-conductor chips, from the engine to the interior computer; the citizen is not aware that driving a car is “driving a mobile on wheels”, as explained by the Catalan journalist Jaume Portell in El Salto.

Semiconductor chips are today's oil. In addition to cars, everything has a chip today, both the simplest electronic devices and the most sophisticated weapons. Semiconductor chips have become products that move the world. What happened then to suffer their lack?

In the view of many market economy experts, closures and telework set up to deal with the COVID-19 pandemic have led to an increase in the demand for IT equipment, which right now would only be faced with a short-term demand supply problem, which would be solved in 2022. On the contrary, for many others this crisis has to do with the global energy crisis and the cracks of the neoliberal system, in particular with the natural limitations of the economy of scale.

Smaller than a virus

Produce as much as possible to have lower costs. This is one of the principles of the economy of scale, which in the case of semiconductor chips is perfectly visible. Gordon Moore, founder of the multinational Intel, announced in 1965 that the number of semiconductors that fit into a microprocessor will double every 24 months, which has led to exponential growth in the business associated with these devices.

But Moo's law has an expiration date related to silicon manufacturing semiconductors and the physical limits of other foreign materials, among which is the inability to remove heat produced by the proliferation of semiconductors in the same space. And that date has been put by the Intel itself in 2023. Today, we are able to produce half-conductors that are only 7 nanometers, smaller than a flu virus, close to the final size of an atom.

In addition, there is another problem. Sophistication is such that in the world there are only two workshops capable of generating small semiconductors and advanced in technology: Samsung from South Korea and TSMC from Taiwan. “The example of microchips shows in particular that an economy of scale has its limitations and that with the energy that is diminishing and relocating, it will take off,” explains economist Antonio Turiel in the blog The Oil Crash.

The expert writer on these issues, Félix Moreno, also questions the provisionality of the chip problem, and on his website he offers a series of data on the market for electronic devices: Sales of PCs, mobile phones and headsets have stagnated since 2017, and despite growing slightly in 2020, demand has declined again this year. Peak is, therefore, on a chip, powered by the oil ridge, which in the chip market, in addition to foreign materials, is also crucial, and the limitations of the economy of scale. “I don’t see the need to build more chip factories,” says Moreno. But others don't think so.

The European Union breaks its dogmas

On 18 November, Commissioner for Competitiveness of the European Commission, Margrethe Vestager, announced to the press that many of the international traders were not overlooked: Brussels opened the door to the promotion of the production of semiconductor chips through public support. The EU target is that 20% of global microchips should be produced in Europe by 2030, twice as much as the current one. And for that, he wants to build giant factories. The multinationals Bosch and Intel have already become interested – the last one will invest EUR 80 billion in a decade.

Apart from the change that this EU decision could bring about in Europe’s neoliberal orthodoxy, in which competitive policy has so far been highly regulated and rigorous – Vestager warns that there will be no ‘white checks’, addressing this dogma of competition as a sad nail – this Brussels plan has many economic difficulties. In fact, the construction of one of these major state-of-the-art chip manufacturing plants can cost EUR 20 billion.

Since the 1990s, the main producer countries in the semiconductor chip sector, especially Taiwan and South Korea, have announced millionaire investments, which only South Korea will provide EUR 400,000 million. In the US, the production of microchips has also been considered as a “national security” issue, and in Arizona, large factories are being built with direct public funding (EUR 52 billion), projects that, according to Reuters, are also being studied with 25% tax credit. On the other hand, although Moreno considers that China is the only country with economic muscle to compete in the production of high-tech chips, it arouses the suspicion of the West.

The European Commission is therefore a toothpaste made larger than smaller. Without realizing it, it is best to break cards and promote more rational consumption, production and supply models, so that the energy crisis does not cause greater damage to the real economy of citizens, beyond the provisional regulatory dossiers of autofactories.

[This article is part of the first part of a story that you can find in: 'Thanatia, a planet with no resources', by Xabier Letona]