Picture: BLOOMBERG/KRISZTIAN BOCSI
Picture: BLOOMBERG/KRISZTIAN BOCSI

Washington — US President Joe Biden is to order a government review of US supply chains, seeking to end the country’s reliance on China and other adversaries for crucial goods.

However, the process will take months, offering no immediate solution for a shortfall of semiconductors that’s idled automotive production at several factories.

The administration’s 100-day review will cover chips but also include large-capacity batteries, pharmaceuticals and critical minerals and strategic materials such as rare earths, according to US officials who briefed reporters on condition of anonymity.

The issue has taken on urgency with a global chip shortage that’s forced some US carmakers to idle plants. The supply disruptions threaten to harm US economic growth and could lead to layoffs, prompting concern from the White House as Biden seeks to rebuild an economy battered by the coronavirus.

His executive order isn’t aimed at China or any one country but instead focuses on diversifying supply more generally, the officials said. Still, they said an over-reliance on China and other adversaries for critical goods is a key risk that must be addressed.

Biden’s review could lead to financial incentives, tariffs or changes in procurement policies, among other options, one of the officials said. The administration plans to consider ways to encourage production of key items in the US or work with allies to manufacture the items, the official added.

Before signing the order, Biden is scheduled to meet a group of lawmakers from both parties at the White House to discuss the semiconductor shortage, and ways to strengthen supply chains, according to the officials.

Senate majority leader Chuck Schumer said he is asking the chamber’s top Democrats and Republicans to draw up legislation aimed at improving US competitiveness with China in manufacturing and technology, including bolstering the supply of American-made semiconductors.

Last week, Biden’s top economic adviser Brian Deese sought the Taiwanese government’s help in resolving the chip shortage that’s hindering US automotive manufacturing and starting to spill into other industries. His appeal followed earlier pleas from Japanese and European officials for Taiwan’s assistance in ensuring supply.

The Biden administration has also asked US embassies around the world to identify how foreign countries and companies that produce chips can help address the global shortage and to map the steps taken to date.

The chip shortage is tied largely to the pandemic. The stay-at-home era caused by Covid-19 pushed demand beyond levels projected by chipmakers. Lockdowns led to growth in sales of products such as laptops and home networking gear.

Industry-specific reviews

The semiconductor industry has been pushing the president to include tax breaks and other financial incentives in his next legislative package to spur investment and research in the US — an effort that will take months to move through Congress.

Biden’s order will also direct industry-specific reviews focused on defence, public health and biological preparedness, information communications technology, transportation, energy and food production, the officials said. Those assessments, to be completed within one year, will be modeled after reviews the defence department uses to regularly evaluate the US defence industrial base.

Manufacturing more drugs and their raw materials within the US could run into a years-long approval process to start production in new factories. It could also lead to an increase in emissions of ethylene oxide, a carcinogenic chemical used to sterilise glassware and vials.

It’s unclear exactly how much pharmaceutical manufacturing is done overseas because drug companies don’t have to disclose where drugs are made. As of 2019, 72% of facilities that make active pharmaceutical ingredients for the US market were located in other countries, according to the US Food and Drug Administration.

The Biden team will draw on lessons from the current crisis on chips and a shortage of personal protective equipment that plagued the US in 2020, one of the officials said. Wednesday’s order is designed to help the US address future crises before they occur, the official said.

Bloomberg

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