Alarm Over Chip Shortage Prompts White House Action

Alarmed over a semiconductor crunch that forced US carmakers to cut production, President Joe Biden on Wednesday vowed to bring an end to shortages of critical items.

"The bottom line is simple: the American people should never face shortages in the goods and services they rely on," Biden said shortly before signing an executive order to strengthen US supply chains.

The policy announcement comes on the heels of entreaties from businesses worried about not only the near-term chip shortages, but also long-term reliability of rare minerals and other goods.

Supply crunches also have emerged for face masks and other personal protective equipment during the coronavirus pandemic.

Biden's order will call for a 100-day review across federal agencies on semiconductors and three other key items: pharmaceuticals, critical minerals and large capacity batteries.

The US president also will commission a more in-depth one-year review of sources for key inputs in additional industries to analyze risks to critical infrastructure and review steps to make supply chains more resilient.

Biden described as "very productive" talks with congressional Republicans at a White House meeting before the executive order signing ceremony.

"It was like the old days, people were actually on the same page," the president said of the rare show of bipartisan comity.

The move comes amid calls to build more semiconductor capacity in the United States as well as bipartisan skepticism of China, which is a major producer of rare minerals and a growing supplier and user of other critical supplies.

A White House fact sheet on the policy did not mention China, but emphasized US self-reliance, saying "the United States must ensure that production shortages, trade disruptions, natural disasters and potential actions by foreign competitors and adversaries never leave the United States vulnerable again."

Biden's predecessor, Donald Trump -- who launched a costly trade war with China -- also highlighted the need to build US supply chains for critical minerals.

General Motors and Ford have trimmed auto production at US plants due to the semiconductor shortage, which stems in part from outsized demand for personal electronics during the pandemic.

The automakers said the supply crunch would reduce 2021 earnings by at least $1 billion, but have signaled they expect the crisis to lift later in the year.

"We see the situation resolving this year," GM Chief Executive Mary Barra said earlier this month.

But she added, "I think it's a little too early to say precisely when it will end."

IHS Markit estimated that the semiconductor crunch would delay delivery of one million vehicles in the first quarter worldwide, but the industry would still be able to meet full-year targets following a recovery later in the year.

Patrick Penfield, a professor of supply chain practice at Syracuse University, said there are no signficant steps Washington can take in the current semiconductor shortfall.

But Penfield said future policies to incentivize domestic production in key sectors such as pharmaceuticals, defense and medical devices "makes a lot of sense." This could include tax incentives or "buy American" government contracts.

Leading business and technology groups have urged Biden to enact investment tax credits to encourage the building of more semiconductor manufacturing plants, in a February 18 letter signed by the US Chamber of Commerce, the Semiconductor Industry Association and the Alliance for Automotive Innovation, among others.

"To be competitive and strengthen the resilience of critical supply chains, we believe the US needs to incentivize the construction of new and modernized semiconductor manufacturing facilities and invest in research capabilities," the letter said.

Scott Paul, president of the Alliance for American Manufacturing, praised Biden's announcement, but said "it's just a start."

"Bold and dramatic shift in priorities -- from tax and trade policy to innovation and checks on financialization -- are necessary to secure a strong future for American workers, our manufacturing base, and our nation," Paul said in a statement