How Biden plans to tackle the chip shortage

Biden administration officials including Sameera Fazili, deputy director of the National Economic Council, described next steps in the president's executive order to bolster supply chains, including for chips. (WH.gov)

President Biden’s executive order to address the chip shortage and other critical supply chains will set in motion a comprehensive 100-day “whole of government” review that invites input from business, workers, academia and foreign allies, according to administration officials.

“We are going to get out of the business of reacting to supply chain crises as they arise and get into the business of preventing future supply chain problems,” said Peter Harrell, senior director for international economics and competitiveness. During a press briefing on Wednesday, he recalled the impact of a shortage of auto chips that led to assembly plant closures and the scarcity of masks to prevent the spread of COVID-19 a year ago.

The order sets off immediate 100-day reviews of four critical products: computer chips, large-capacity batteries used in electric vehicles, pharmaceuticals and their ingredients, and critical minerals.

 Also, six sector reviews of supply preparedness will be completed over the next year into defense, public health and biological preparedness, information and communications technology, transportation, energy and food production.

 “We’re not simply planning to order up reports,” Harrell said. “We are planning to take actions to close gaps as we identify them.”

The president, Harrell and Sameera Fazili, deputy director of the National Economic Council, met with congressional leaders prior to the signing of the executive order on Wednesday. Fazili tied the building of a more resilient and secure supply chain to the opportunity to create well-paying jobs in accordance with the president’s “Build back better” mantra.

“Over the past few years we have moved from crisis to crisis when some essential product was suddenly in short supply,” Fazili said. “We need the capacity to respond quickly when hit by a challenge. This executive order moves the whole government towards being prepared.”

“This problem was decades in the making,” Fazili added. “We can solve it by making smart investments that are long-term in nature that reach families and workers and all of America.”

Among the priorities, the administration will be pairing investments into research as well as  manufacturing in addressing supply chain constraints, Fazili said. Administration officials mentioned the possibility of stockpiling or building up domestic manufacturing, but Fazili said no budget has been formulated as yet and would be the focus of ongoing discussions with members of Congress.

“The solutions we will be implementing will vary a little bit by supply chain,” Harrell said. “The supply chain for semiconductors looks different than the supply chain for rare earths.”

Peter Harrell
Peter Harrell

Harrell said a suite of recommendations may result from the effort to include a “mix” of incentives ranging from implementing manufacturing surge capacity to ramp up products quickly, stockpiling goods, and working with allies and partners to make sure the U.S. has an open flow of goods. “We’ll be looking at a range of different tools, not just any particular single tool,” he said, but did not specifically commit to using the Defense Production Act to boost chip production.

 “I don’t think we’re here to talk about how we would use the DPA on any particular supply chain at this point,” Harrell said in response to a reporter.  “As we look at making resilient supply chains across the board, all tools are on the table.”

The 100-day review process will use a broad definition of risks affecting supply chains including climate and political risk, the challenge of too few workers available for a particular job sector, as well as not enough factories or the right equipment, Fazili added.

Actions will be recommended to improve resiliency that may include providing government data to the private sector for better planning. The government might take action to leverage stockpiling of products or support some level of domestic production, Fazili suggested.

The Biden administration will also work with Congress to find “more tools” to bolster the supply chains and consult with a variety of stakeholders on the potential for public-private partnerships.  “Government action alone cannot solve complex supply chain challenges,” she said. 

The effort kicked off with the executive order “will further our research and development prowess…while also recognizing that our ability to maintain innovative edge in research requires us to invest in both research and manufacturing,” Fazila added. “When you pair thinkers and doers that’s how you create the technologies and products that help us tackle tomorrow’s challenges.”

Not all the answers will be “about ramping up domestic production,” Fazili said. “It’s a global problem in some of these supply chains. We are committed to working with partners and allies to reducing these vulnerabilities that are affecting all of us.”

The president’s executive order won praise from semiconductor trade groups.  “We urge the president and Congress to invest ambitiously in domestic chip manufacturing and research,” said Semiconductor Industry Association board chair Bob Bruggeworth, CEO of Qorvo.

“Doing so will ensure more of the chips our country needs are produced on U.S. shores, while also promoting sustained U.S. leadership in the technology at the heart of America’s economic strength and job creation, national security and critical infrastructure,” Bruggeworth added.

The share of global chip manufacturing capacity has decreased from 37% in 1990 to 12% today, according to the SIA. Nearly half of semiconductor revenues are earned by U.S. based firms, but many manufacturing facilities are based abroad.

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