Wednesday, September 28, 2022

How The CHIPS and Science Act Will Impact Trucking

Image How The CHIPS and Science Act Will Impact Trucking

Supply chain relief may ultimately be in reach for new truck manufacturers and customers, following the recent passage and implementation of the CHIPS and Science Act.

The global shortage of semiconductor computer chips has been cited as one of the biggest reasons for the unavailability of new Class 8 trucks. As a result, fleets have faced difficulties acquiring new trucks, which means the average age of their vehicles, as well as fuel and maintenance costs, continues to rise.

How exactly did we get here and what will the legislation mean for the industry going forward?

This Q&A covers some of the important things you need to know to better understand this issue:

What are chips?
Also known as semiconductors, integrated circuits (ICs) or microchips, these chips are only the size of a coin but are responsible for providing the computing power needed for everything from light switches and video games to smartphones and fighter jets.

According to Transport Dive, a traditional combustion truck requires up to 500 chips to control a variety of components and functions from power windows and air conditioning controls to the engine, powertrain and braking system. Electric trucks may require up to 5,000 chips.

Why is there a chip shortage?

Believing sales would plunge as a result of the pandemic, automakers decided to cancel orders for parts with computer chips.

Sales for new vehicles quickly recovered, but by the time of this rebound, available chips had been taken by other industries for products like phones, computers and video games. This caused auto manufacturers to fall even further behind.

How long could the chip shortage continue?
Some experts say through all of 2023 and into 2024, while others point out increased capital spending, more factories coming online and an economic slowdown as signs that it may end sooner for some industries.

Actify CEO Dave Opsahl, whose company sells operation management software to automotive companies, told Wired that the supply of chips has not improved for carmakers, and shortages of raw materials like resin and steel, as well as labor, have also gotten worse.


What is in the CHIPS and Science Act?

The CHIPS and Science Act provides:

$52.7 billion for American semiconductor research, development, manufacturing, and workforce development including:

• $39 billion in manufacturing incentives with $2 billion earmarked for legacy chips used in automobiles and defense systems
• $13.2 billion in R&D and workforce development
• $500 million for international information communications technology security and semiconductor supply chain activities
• A 25% tax credit for companies that invest in semiconductor manufacturing equipment or construction of manufacturing facilities

$170 billion for scientific research, innovation and space exploration with $13 billion going to education in the science, technology, engineering and math fields.

How could the CHIPS and Science Act help heavy-duty fleets?

Currently, there are tens of thousands of North American-made cars and trucks sitting in lots awaiting microchips. Although it may take several years until the U.S. can increase production of domestic chips, doing so would strengthen the supply chain, make the country less reliant on foreign suppliers and aid in avoiding future manufacturing bottlenecks.

Relieving the manufacturing backlog will also help many large trucking companies that purchase new trucks every 3-5 years to offset repairs and maintenance costs for older vehicles, improve average fuel economy and reduce other overhead. In addition, newer trucks provide fleets with:

Improved aerodynamics, rolling efficiency and engine/transmission optimization, which allows engines to burn less fuel.
• Safer and more reliable equipment.
• Opportunities to trade out old equipment when average mpg trends downward due to age and wear and tear.

While it remains to be seen how quickly the U.S. will be able to ramp up production of chips and trucks by extension, there are signs that the global chip supply is heading in a positive direction. However, those chips and the products that rely on them are likely to get more expensive as we head into 2023.

To learn more about the CHIPS and Science Act, visit chips.gov.

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