Alarm Over Chip Shortage Prompts White House Action

Alarm over chip shortage prompts White House action

New York, (UrduPoint / Pakistan Point News - 25th Feb, 2021 ) :Alarmed over a semiconductor crunch that forced US carmakers to cut production, President Joe Biden on Wednesday will order a review of critical US inputs, the White House announced.

Biden plans to sign an executive order later Wednesday "to help create more resilient and secure supply chains for critical and essential goods," according to a White House fact sheet.

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 emerged for face masks and other personal protective equipment during the coronavirus pandemic.

"We are not simply planning to order up reports ... We are going to be taking actions to close gaps," said Peter Harrell, senior director for international economics at the National Security Council.

"We're going to get out of the business of reacting to supply chain crises as they arise and get into the business of preventing future supply chain problems," Harrell told reporters.

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.

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.

The Biden White House 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.

- Recovery expected in 2021 - 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.

Even though the semiconductor crisis will likely be resolved in 2021, "it has brought concerns over the supply chain in certain areas to the forefront," IHS said in an analysis earlier this month.

"Both the European Union and Biden Administration in the US are considering ways to address the shortage and reduce the dependence on the supply chain with more localized production." Leading business and technology groups have urged Biden to enact investment tax credits to encourage the building of more US 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.