Jim Cramer has had enough of the ongoing chip shortage and he wants something done about it.
“If you google the definition of insanity you should find our totally ridiculous approach to China, defense, supply chain disruptions, and port congestion, with a sprinkling of some meetings between tech chieftains and the White House,” Cramer wrote on Real Money ahead of Thursday’s chip summit meeting in Washington.
Cramer said he’s “grown tired” of the same old nonsense in Silicon Valley and in Washington, D.C., adding “the president and these companies are approaching this all wrong,” he added.
“Yes, they’re trying to include $52 billion in the budget to get semiconductors built here, but it's been all talk for ages because the industry itself wants the U.S. government to pay for as much as possible instead of realizing how hopeless Washington is as a source of any sort of help in doing so.”
There are only two approaches that can work here, Cramer said.
“The first is for these companies to recognize that if 20% of all container ships are stuck waiting to unload in West Coast ports then the problem is endemic and they should stop thinking it will be cured,” he said. “There's nothing that will be cured in time to help these industries within the next two years.”
Secondly, chip companies should plan on their own, supplier-to-customer, greenfield semiconductor plants.
“The chips they need are so low-end versus the high-performance chips, but they won't be built in this country unless there is cooperation between, say, a Ford and an Avnet (AVT) - Get Avnet, Inc. Report or a GM and a Global Foundries, which makes older chips for the military in upstate New York,” he said. “Ford, for the price of the $2 billion in lost sales, could build a low-end plant like the Intel factory in Israel that has almost no employees but plenty of wafers. If you know the shortage is not going to cure itself, you have to go do something about it.”
More troubling, is the situation in Asia.
“The Chinese obviously have ambitions to take over Taiwan which has the big machines it needs to build up its own chip industry,” he noted. “They need the big ASML Holdings (ASML) - Get ASML Holding NV ADR Report machines that are instrumental in making critical chips and we are blocking the Dutch company from sending these $150 million machines … We are forcing China's hand here and I don't know how much longer they can afford to play a waiting game.”
He’s not optimistic about a solution.
“There will be no change in what is happening,” he said. “Most chips that are needed will continue to be made in Taiwan. The Chinese will move ever closer to Taiwan by taking over islands near the U.S. ally. It will destabilize the democracy and in two years we won't have a chip shortage, we just won't have any chips because they are too expensive to make here.”