WASHINGTON (NewsNation Now) — President Joe Biden is preparing to sign an executive order Wednesday to review supply chains that have resulted in shortages of critical goods, some resulting in cuts to U.S. production, for example, computer chips for automobile makers.
A global semiconductor chip shortage has forced automakers and other manufacturers to cut production and has underscored the country’s increasing reliance on imports of goods that pose potential national security and economic risks.
Scarcity of four critical products — large-capacity batteries, pharmaceuticals, rare earth minerals and semiconductor chips — exacerbated by the pandemic will be the focus of the planned 100-day review of supply chains launched by executive order and the focus of a bipartisan meeting between lawmakers on Wednesday afternoon.
Administration officials say that they plan to partner with industry and members of Congress as part of the effort and that no tool is off the table, including the use of the Defense Production Act.
The order will also direct six sector reviews to be completed within one year — modeled after the process used by the Defense Department to strengthen the defense industrial base. It will target the areas of defense, public health and biological preparedness, information communications technology, transportation, energy and food production.
Biden will also look to work with international partners to ensure a stable and reliable supply chain but the focus will be on ramping up domestic production and training U.S. workers, according to administration officials who insisted on anonymity to discuss the order.
Over the past year, supply chains have been tested. The coronavirus outbreak led to an initial shortage of masks, gloves and other protective medical equipment.
“Make no mistake, we’re not simply planning to order up reports. We are planning to take actions to close gaps as we identify them,” the administration official added.
Administration officials have met with automakers and are talking with foreign counterparts on how to boost supplies in the short term. But there is no magic bullet to immediately fixing the lack of semiconductor chips for automakers, an administration official said.
The chip shortage is indicative as to why Biden is trying to be proactive with the reviews, so that they can strengthen the supply chains to prevent additional challenges from emerging.
Nearly every major automaker that produces vehicles in the U.S. has cut production because of the shortage by canceling shifts, slowing assembly line speeds or temporarily closing factories. Most automakers have tried to limit the cuts to slower-selling vehicles.
But the shortage has forced the Ford Motor Co. to at times cancel shifts at two plants that make the F-Series pickup truck, the top-selling vehicle in the nation. A lack of chips could cut the company’s production by up to 20% in the first quarter, the company said.
Besides Ford, Stellantis (formerly Fiat Chrysler), General Motors, Toyota and Honda have had to slow production.
Moody’s predicts that the chip shortage will cost Ford and GM about one-third of their pretax earnings this year. It also expects electric vehicle maker Tesla to be affected, although less than GM and Ford.
Some are building vehicles without computer chips, which control engines, brakes, transmissions and other tasks, so they can be installed once more semiconductors are available.
The chip shortage has cost the global auto industry the production of about 1 million vehicles, according to IHS Markit. The analytics firm expects the chip crisis to hit bottom toward the end of March, with supplies constrained into the third quarter.
IHS Markit expects the lost production could be made up later in the year. But the shortage could compound already tight vehicle inventories in the U.S., driving up prices that rose when factories were closed last year due to the novel coronavirus.
The U.S. Semiconductor Industry Association says the country’s share of global chip manufacturing capacity has dropped from 37% in 1990 to 12% today. However, the U.S. accounts for 47% of global chip sales. The association wants Washington to fund domestic semiconductor manufacturing and research and pass an investment tax credit to help build and modernize chip factories in the U.S.
The wrangling over semiconductors dovetails with China’s economic rise as it became a manufacturing center for electronics. Chinese companies began to account for half of global semiconductor consumption in 2012, and demand has grown as China makes 90% of all smartphones, 67% of all smart televisions and 65% of all personal computers, noted a 2020 research paper by Chad Bown, a senior fellow at the Peterson Institute for International Economics.
Biden has been under pressure from Republican lawmakers to do more to protect American supply chains from China by investing in domestic manufacturing of next-generation semiconductor chips. The White House will look to limit its dependence on China when possible.
“I strongly urge Biden administration to prioritize protecting emerging and critical technologies, like semiconductors, from the grasp of the CCP (Chinese Communist Party),” said U.S. Representative Michael McCaul, in a recent letter to the White House from Republicans on the House of Representatives Foreign Affairs Committee.
The supply chain executive order will add to Biden’s vow in January to leverage the purchasing power of the U.S. government, the world’s biggest single buyer of goods and services, to strengthen domestic manufacturing and create markets for new technologies.
The Associated Press and Reuters contributed to this article. All reporting by Josh Boak/AP, Tom Krisher/AP, Nandita Bose/Reuters and Steve Holland/Reuters.
