[CTC] Biden to Address Chip Shortages, Supply-Chain Problems With Executive Action

Wed Feb 24 07:47:17 PST 2021

https://www.wsj.com/articles/biden-to-address-chip-shortages-supply-chain-problems-with-executive-action-11614160803?page=1 <https://www.wsj.com/articles/biden-to-address-chip-shortages-supply-chain-problems-with-executive-action-11614160803?page=1>

Biden to Address Chip Shortages, Supply-Chain Problems With Executive Action

By Alex Leary
2/24/21

WASHINGTON— President Biden plans to sign an executive order Wednesday directing a broad review of supply chains for critical materials from semiconductors to pharmaceuticals and rare-earth minerals, aiming to spur domestic production while strengthening ties with allies.

A chip shortage is squeezing auto makers in the U.S. and world-wide <https://www.wsj.com/articles/car-chip-shortage-ford-vw-gm-11613152294?mod=article_inline>, and Biden administration officials have been working with industry to free up supplies <https://www.wsj.com/articles/biden-administration-working-to-address-chip-shortage-affecting-automakers-other-industries-11613066609?mod=article_inline>. Cars use chips for numerous systems, including engine management, automatic braking and assisted driving.
“There isn’t kind of a magic bullet to solve the near-term problem,” a White House official who works on economic issues said in a briefing with reporters before Mr. Biden’s action. But the official said the auto problem—like shortages of Covid-19 gear—highlights the need for a comprehensive approach to supply-chain resiliency.

“We’re going to get out of the business of reacting to supply-chain crises as they arise and get into the business of getting ahead of future supply-chain problems,” the official said. “We’re not simply planning to order up reports.”

The Biden administration faces pressure from several industries. Last week, a group of associations representing technology companies, the automotive industry and other business interests sent a letter to Mr. Biden calling for action.

“To be competitive and strengthen the resilience of critical supply chains, we believe the U.S. needs to incentivize the construction of new and modernized semiconductor-manufacturing facilities and invest in research capabilities,” the letter read. “We believe the need is urgent and now is the time to act.”

Before signing the order, Mr. Biden is scheduled to meet with a bipartisan group of House and Senate lawmakers <https://www.wsj.com/articles/white-house-to-meet-with-lawmakers-about-chip-shortage-11614116881?mod=article_inline> to discuss supply-chain issues that have grown more visible during the pandemic, the White House said.
The executive order is expected to call for a 100-day review of supply chains for four areas: semiconductors, used in products from cars to phones, large-capacity batteries used in electric vehicles, pharmaceuticals and rare-earth elements that are key to technology and defense. <https://www.wsj.com/articles/pentagon-invests-in-strategic-metals-mine-seeking-to-blunt-chinese-dominance-11587924001?mod=article_inline> For example, neodymium is needed for the solid-state lasers used to designate missile targets.

China dominates the rare-earths market and is a major player in other supply areas, including pharmaceuticals. While the executive action is not aimed at one particular country, the official said, it comes as U.S. interest rises in combating China and fostering ties with other supplier countries.

Mr. Biden’s order is expected to call for a one-year review of supply chains covering six sectors, from technology to food production, the official said.

The government will seek to encourage domestic production with incentives such as job-training programs and businesses loans, in addition to using the federal procurement process for more American-made purchases. It will also explore limiting some imports, officials said, without providing specifics.

The Defense Production Act, which Mr.  Biden is using for vaccine production and to secure more Covid-19 equipment <https://www.wsj.com/livecoverage/covid-2021-02-05/card/JSKo0to9cXSDEoZic9Bv?mod=article_inline>, could also come into play. The government is expected to also look to public-private partnerships while aiming to shore up relations with allies to address common supply vulnerabilities, such as semiconductors, officials said.
Mr. Biden will link the executive order to his overall plans to create U.S. jobs, particularly in manufacturing that has lost ground to foreign competition, such as China, and in communities of color. The White House views it as an issue that crosses party lines, and Mr. Biden’s meeting with lawmakers Wednesday is designed to highlight that.

“Creating more resilient supply chains is an opportunity for our country to come together to create well-paying jobs for workers across our country,” another administration official said, adding: “This problem is not going to be solved overnight. It was decades in the making.”

The current chip shortage, however, is driven by the pandemic and increased demand for products used while people work at home. It has slowed or stopped auto plants around the world. Ford Motor <https://www.wsj.com/market-data/quotes/F> Co. recently said that it would cut production of the F-150 pickup truck <https://www.wsj.com/articles/fords-2021-to-do-list-is-topped-by-fixing-quality-problems-11612450536?mod=article_inline>—one of its most profitable and popular models—because of the chip shortage. General Motors <https://www.wsj.com/market-data/quotes/GM> Co. has extended shutdowns at some North American plants into March.
While the executive order Mr. Biden is to sign is long-term, the White House has been working to address the chip shortage, officials said, including asking allies and manufacturers for help. Among those involved in the push are Jake Sullivan, the national security adviser, and Brian Deese, Mr. Biden’s top economic adviser.

Bipartisan legislation is also pending on Capitol Hill. Senate Majority Leader Chuck Schumer (D., N.Y.) said Tuesday that work had begun on a package to address competition with China.

“Right now, semiconductor manufacturing is a dangerous weak spot in our economy and in our national security. That has to change,” Mr. Schumer said, citing the auto industry. “We cannot rely on foreign processors for the chips. We cannot let China get ahead of us into production.”

Arthur Stamoulis
Citizens Trade Campaign
(202) 494-8826

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