Enlarge /. President Joe Biden signed a different ordinance on January 28, 2021.
The White House is making efforts today to alleviate the global semiconductor supply crisis that is affecting a host of other industries, but any boost the administration can provide is likely to be on the other side of many months of bottlenecks.
President Joe Biden plans to sign an executive order this afternoon aiming to "secure America's critical supply chains." The contract will address various challenges in the U.S. supply chain, according to a White House fact sheet, with a particular focus on pharmaceuticals, mineral resources, semiconductors and large-capacity batteries.
The contract is kind of a combination of the favorite cry of all US politicians – "more American jobs" – and the realization that bottlenecks and production problems in critical supply chains had a profound effect on the nation, especially in the past year. An immediate 100-day review is called for, "identifying any short term steps the administration, including Congress, can take" to determine where the vulnerabilities are in those supply chains and what regulators or lawmakers can do to help the US -Production of these critical products to improve components.
In addition to the short-term review, the contract also provides for a year-long assessment of the risks and vulnerabilities in six other US technology supply chains: defense, public health, information technology and communications, energy, transportation, and agricultural technology.
While the order is fixed in practice, there is of course a political component as well. According to a draft from CNBC received last week, no other nations (such as China) are named in the executive order. Instead, it specifically seeks to screen places where the US supply chain is interacting with "nations that are or are becoming unfriendly or unstable."
The shortage of silicon chips is actually linked to the pandemic, according to industry group research. Demand for motor vehicles declined at the beginning of the pandemic as people stopped walking, but demand for other uses – such as virtual learning devices or telemedicine – increased. With every demand pattern around the world turned upside down, the industry has struggled to keep up.
The shortages are gradually affecting all types of products. PC graphics cards are legendarily in short supply, and the lack of wafers is a contributing factor. Businesses are also expressing concern that shortages will affect the availability of game consoles and smartphones in the near future.
The auto industry is currently particularly hard hit, both in the US and around the world. Several automakers have had to slow or stop production in their factories because of a lack of chips to put in new cars.
The Biden government hopes to increase supply in the long term, including by increasing production capacity in the US. "Over the years we have invested too little in (semiconductor) production – which affects our innovative edge – while other countries have learned from our example and increased their investments in the industry," said the White House. "Building resilient supply chains will protect the United States from the shortage of critical products. It will also facilitate the investments required to maintain America's competitive advantage and strengthen US national security."
Industry data backs Biden's reasoning, showing that while the US has the highest market share for chips – slightly less than half of all global sales go to US-based companies – the vast majority of actual manufacturing is likely to take place in Asia and Asia too continue to stay that way. According to a report by the Semiconductor Industry Association (PDF), around 79 percent of chips were manufactured in Asia in 2019. This number is expected to rise to around 82 percent by 2025. Only 10-12 percent of chip manufacturing takes place in the US.