The Chip Shortage Seems Awfully Similar to Another One 80 Years Ago

The computer chip shortage bears some striking similarities to the rubber shortage in World War II, including how the U.S. is going to get out of it. The computer chip shortage bears some striking similarities to the rubber shortage in World War II, including how the U.S. is going to get out of it. [Outsider Club logo] The Chip Shortage Seems Awfully Similar to Another One 80 Years Ago [Adam English Photo] By [Adam English]( Written Feb 17, 2022 An 80-year-old story about cars and shortages reminds me of the latest one. There was a time when another key component of vehicles was in short demand, then extraordinary circumstances made the situation far worse. We're talking about rubber, and the tires, seals, hoses, and wire coatings that depended on it. Even before the invention and spread of the automobile in the early 20th century, rubber was already facing production and supply problems. Prices were high and fortunes were made. Cars made it worse, and worldwide war made it an existential crisis. Groundbreaking New Treatment Stops COVID Dead in Its Tracks (Not a Vaccine) A new nasal spray has the power to stop COVID-19 symptoms within just seven days.And the small biotech firm behind this new COVID treatment could skyrocket within the next 12 months — especially if it gets fast-track approval. This is the breakthrough treatment we’ve been waiting for to end the pandemic. And you definitely don’t want to miss out. [Let me show you more about how to retire wealthy off the “COVID killer.”]( As early as the mid-1700's, scientists in Europe were exploring rubber's unique properties. While fortunes were being made in Brazil selling the natural rubber to Europe, mostly for latex products, it wasn't until vulcanization was accidentally stumbled upon by Charles Goodyear that rubber's role as a durable, elastic wonder material was established. Then in 1876, the game changed. Henry Wickham smuggled 70,000 rubber tree seeds to England. Only 2,400 germinated, but these were sent across Southeast Asia and India. It wasn't long before these new plantations provided the vast majority of rubber for the global market. And that market was booming. By 1888, Karl Benz — arguably the inventor of the first modern automobile — decked his first car out with metal tires covered in air-filled rubber. It was the immediate standard, and as automobiles moved from novelties to mass production in the 1910s and 1920s, rubber demand soared. DuPont figured out how to synthesize rubber, which took some pressure off natural rubber sources, but it was hard to refine it into something that could compete with the real deal. It was also dependent on petroleum for production, something that would not bode well in the years to come. By the late 1930s the U.S. was using half of the world's rubber. In a matter of years, World War II was raging and the Allies had lost access to 97% of Southeast Asian rubber. Brazil and Africa saw a boom, but they couldn't begin to replace the demand. Plus it wasn't just car tires and seals that mattered. Rubber had reinvented and revolutionized warfare. Military airplanes used a half ton of rubber. Tanks needed a ton and a battleship needed about 75 tons. Each person in the military required around 32 pounds of rubber for footwear, clothing, and equipment. Again, synthetic rubber was available but it depended on petroleum. The war effort, especially early on, could hardly spare much. The Rubber Reserve Company had been created years prior to stockpile in case of supply interruptions, but its one million tons would hardly last with the U.S. military consuming 600,000 tons annually. If the U.S. was going to arm the world through the Lend-Lease program and push back Imperial Japan and Nazi Germany on two far-flung fronts, it needed a revolution in production, and fast. And thus began an intense funding and R&D intervention by the U.S. government, which believed the war would be lost unless one million tons of high-quality synthetic rubber could be produced in 18 months. Joining forces with the rubber companies, the nascent petrochemicals industry, and university research laboratories, the program managed to push U.S. synthetic rubber from an annual output of 231 tons in 1941 to 70,000 per month in 1945. Mystery Material Could End Our Microchip Crisis FOREVER See this flexible little square? This tiny piece of material could single-handedly solve our microchip crisis once and for all. Because this material is 1,000x more powerful than silicon... 1,000x more conductive than copper... and 200x stronger than steel. That’s why companies like Google, Microsoft, and Facebook are sitting on the edge of their seats right now, just waiting for this next generation of microchips to arrive. And the best part? The tiny tech company behind it all is 12x smaller than Intel, with growth potential that’s off the charts. But I urge you to act now, because as soon as this product launches, those gains will be off the table. [Learn more about this mystery material here.]( So what does any of this have to do with today's car issues? There are a handful of similarities, but three in particular stand out: - An extraordinary event has led to incredibly difficult-to-resolve supply shortages of chips. - These chips overwhelmingly come from Southeast Asia. - These chips take years of capital-intense construction and development to produce in bulk. As for the important ones... - The U.S. is going into the current chip shortage with virtually no domestic production of any kind. - The U.S. government is pulling together industry, researchers, and a giant influx of funding to spur production. Chip technology funding has been relatively small considering how important it is to modern society, just like rubber. This is especially true for the military. That's why the Department of Defense named one small American company as a “trusted supplier” and funded it with $170 million. And why Congress is pushing ahead to throw $52 billion at domestic chip production. It's far too late for anything like the Rubber Reserve Company. No stockpile exists to bridge lean years. But it is not too late for something just like the U.S. Synthetic Rubber Program. Thanks to its “trusted supplier” status and its position as the only truly 100% U.S.-owned and -based chipmaker in existence, [the company that my friend and colleague Christian DeHaemer is covering is going to be at the heart of the effort.]( Take care, [Adam English] Adam English [follow basic]( [@AdamEnglishOC on Twitter]( Adam's editorial talents and analysis drew the attention of senior editors at [Outsider Club](, which he joined in mid-2012. While he has acquired years of hands-on experience in the editorial room by working side by side with ex-brokers, options floor traders, and financial advisors, he is acutely aware of the challenges faced by retail investors after starting at the ground floor in the financial publishing field. For more on Adam, check out his editor's [page](. *Follow Outsider Club on [Facebook]( and [Twitter](. Browse Our Archives [Why I'm Not Crying Today]( [A Day of Reckoning for Washington Insiders]( [Russia Will Cheat the World... 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