The End of Just-In-Time Manufacturing as we Know It
Just-in-time (JIT) manufacturing was initiated in the 1950s and 1960s by Toyota. The approach was developed as part of the Toyota Production System (TPS), which aimed to minimize waste and improve efficiency in manufacturing processes.
The concept of JIT revolves around producing the right quantity of products at the right time, thus reducing inventory costs and waste associated with overproduction.
JIT worked beautifully, and this approach was later adopted and adapted by many other industries and companies around the world, contributing to the modern principles of lean manufacturing.
China and Taiwan became global suppliers in semiconductors, and shipments arrived around the globe on time as the chips were needed by manufacturers
Then came Covid-19 global pandemic.
China, Taiwan and many other countries shut down in 2020 as the virus killed millions. Semiconductor manufacturing took a huge hit, forcing major disruptions in the chip supply chain. Automobile manufacturers couldn’t produce cars, Appliance manufacturers couldn’t produce refrigerators, washers, dryers and stoves. There were wholesale shortages of almost any item that needed semiconductors to operate. Covid-19 exposed a major flaw in JIT manufacturing.
It’s now 2023, and the supply chain bottlenecks are gradually getting resolved, but chip shortages still exist.
Enter the CHIPs Act
In response to massive semiconductor supply chain shortages, the Biden Administration passed the $50 Billion CHIPs Act.
According to the Department of Commerce, “The United States and its allies and partners produce nearly all of the world’s most advanced semiconductor materials and manufacturing equipment. But as suppliers have expanded overseas, the United States has also grown vulnerable to risks stemming from the geographic concentration of critical suppliers, as well as from threats to supply chain security and integrity. At the same time, the CHIPS Incentives Program presents a unique opportunity to strengthen the U.S. supplier ecosystem as a historic expansion of U.S. chipmaking capacity boosts domestic demand for semiconductor materials and tools.”
In a recent article from Reuters, the U.S. Commerce Department reported that more than 460 companies have lined up to win government subsidy funding to bring semiconductor manufacturing back to the United States.
Which Communities Stand to Benefit?
According to Semi.org, the following communities stand to benefit the most from the CHIPS Act as innovation hubs:
- Arizona – The Silicon Desert
- California – Silicon Valley
- Idaho – Boise
- Upstate New York
- Ohio – Columbus
- Oregon – Portland
- Austin – Central Texas
- Virginia – Manassas
Not only will investments in U.S. semiconductor manufacturing create well-paying jobs, but it will bring the much-needed trips closer to the firms that need them.
Covid taught the world that JIT manufacturing only works if there are no disruptions in the supply chain. The CHIPS Act promises to help prevent future supply chain interruptions from happening.
Stay tuned to Global Investment Daily for future updates on semiconductor manufacturing in the United States.