Clickability tracking pixel

Biden Orders Review of Some Tech-Related Supply Chains

President Joe Biden plans to issue an executive order to conduct a review of U.S. supply chains, including key industries such as semiconductor manufacturing, high-capacity batteries used in electric vehicles and more.

by Riley Beggin and Kalea Hall, The Detroit News / February 19, 2021
Replacing carbon-emitting gas-powered cars with EVs requires whittling away EVs’ price premium, and that comes down to one thing: battery cost. Shutterstock/Marbury

(TNS) — President  Joe Biden  plans to issue an executive order to conduct a review of U.S. supply chains, including key industries such as semiconductor manufacturing, high-capacity batteries used in electric vehicles, rare earth minerals and medical supplies.

The order directs a review of those sectors within 100 days, according to a draft copy of the order first reported by Reuters and obtained by The Detroit News. Within a year, multiple federal agencies will review the larger supply chains and potential vulnerabilities in the sectors of defense, public health, telecommunications, energy and transportation.

The order comes amid a global shortage of semiconductor chips necessary to produce modern vehicles and as the nation's leading automakers pivot to invest more in electric and autonomous vehicles, which will be more reliant on batteries and the minerals needed to make them.

"Pandemics, cyberattacks, climate shocks and extreme weather events, terrorist attacks, economic competition, and other events can all potentially threaten the availability of critical and essential goods and materials," the draft order reads.

The United States needs strong, resilient supply chains in order to protect national security and meet America's needs during emergencies and in the face of global geopolitical competition."

Biden is expected to release the order before the end of the month, but it has not yet been finalized and may change.

The agencies will produce reports reviewing federal government actions and recommend whether reforms are needed to strengthen supply chains, the order says, and recommend how to engage international allies to do so. The order also directs the agencies to offer workforce and educational reforms and ways to ensure the supply chain supports economic growth in communities of color and "economically distressed" areas.

The order reflects concern among policymakers that the U.S. is too reliant on other countries for critical goods, as highlighted by the shortage of medical supplies at the beginning of the pandemic.

It also will provide an opportunity for the federal government to determine how reliant it is on countries like China, a major competitor in the global economy, as U.S. businesses ramp up production of electric vehicles and other future technologies.

The White House has been discussing potential solutions to the semiconductor chip shortage with automakers and suppliers and has reached out to officials in Taiwan, which is home to the world's largest chip producer.

The process will be "critical to U.S. manufacturing and U.S. jobs," said  Ann Wilson , senior vice president of government affairs for the Motor & Equipment Manufacturers. "We are going to be very interested to hear what the administration's goals are in doing these reviews and how we can make sure that we work with them so they can understand where our pain points and our challenges are."

Vehicle manufacturers often want to have a variety of sources for components because natural disasters, such as the winter storm that affected the industry this week from the Midwest to Mexico, can disrupt production, she said.

"As we move forward in transforming the transportation industries, all three of those issues (semiconductors, batteries and rare earth minerals) are going to be critical to understand how they come into the United States, what the needs for them are in the United States, and not just need currently, but the need in the future," she said.

General Motors Co.Ford Motor Co. and Stellantis NV have all had to cut production at various plants because of a semiconductor supply shortage.

GM halted production at the FairfaxKansas, plant where the Cadillac XT4 and the Chevrolet Malibu are built, the CAMI plant in Ontario where the Chevrolet Equinox is built, and the San Luis Potosi plant in Mexico where the Equinox, the Chevrolet Trax and the GMC Terrain SUVs are built.

Ford has had various production halts and reductions because of the shortage, including at the F-150 Kansas City and Dearborn Truck plants that operated last week on reduced shifts. Stellantis' Windsor Assembly Plant in Ontario where the Chrysler Pacifica has been temporarily idled because of the shortage.

IHS Markit predicts the chip shortage will cost the industry nearly 1 million units of production in the fix quarter. IHS expects the current struggle with chips to hit bottom at the end of March, but the supply is expected to remain tight into the third quarter.

The short supply of semiconductors could result in a 10% to 20% production loss in the first quarter for Ford. If current estimates were projected across the first half of the year, the shortage could result in an adjusted pre-tax earnings loss of between $1 billion and $2.5 billion this year, Chief Financial Officer  John Lawler  said during Ford's earnings release call.

GM said last week during its earnings call the microchip shortage could deliver a $1.5 to $2 billion hit to earnings this year.

"It will get worse before it gets better," said  Phil Amsrud , principal senior analyst at IHS Markit.

In the short term, the only thing automakers can do is juggle the priorities of semiconductor manufacturers to make more products for autos than for other markets. In the long term, he said the industry "needs to make supply assurance as high a priority as cost savings to incentivize the supply chain to be more diverse."

(c)2021 The Detroit News. Distributed by Tribune Content Agency, LLC.


Never miss a story with the daily Govtech Today Newsletter.

Subscribe


E.REPUBLIC Platforms & Programs