President Signs Executive Order to Address Semiconductor Shortage

  • President Biden signed an executive order Wednesday evening to review the semiconductor supply chain in order to address the current shortage and prevent future supply shocks.
  • The president said that the administration hopes to expand domestic production of semiconductors so the U.S. is less reliant on foreign suppliers.
  • Other goods will also have their supply chains examined as a part of the executive order, including large-capacity batteries for electric vehicles, critical and strategic earth minerals, and pharmaceuticals.

    The problem of a global shortage of the semiconductors that are crucial in producing computers, electronic devices, and cars has now reached the Oval Office. President Biden last night signed an executive order launching a 100-day review of the semiconductor supply chain to address the shortage. His stated goal is to increase U.S. domestic supply of the tiny objects, which are needed everywhere that electronics is present in a vehicle, so as to avoid this kind of bottleneck in the future.

    Three other goods will also have their supply chains reviewed: large-capacity batteries for electric vehicles, critical and strategic earth minerals, and pharmaceuticals.

    Since early 2021, the worldwide semiconductor shortage has sent shock waves throughout the automotive industry. GM, Ford, Stellantis, Toyota, VW, Honda, Nissan, and Subaru have all had to adjust production at assembly plants in North America to properly allocate an inadequate supply of semiconductors, the parts that make up microchips and are used all over a vehicle, notably for infotainment and driver-assist technology.

    Under the executive order, policy recommendations will be made to strengthen the supply chain for semiconductors and the other named products. The goal, President Biden said at a press conference last night, is to implement those recommendations and expand domestic semiconductor production. Currently, a vast majority of semiconductors are made outside of the U.S.

    “Diverse, resilient, and secure supply chains are going to help revitalize our domestic manufacturing capacity,” Biden said. Nonetheless, he added, “We all recognize that the particular problem won’t be solved immediately. In the meantime, we’re reaching out to our allies—semiconductor companies and others in the supply chain—to ramp up production to help us resolve the bottlenecks we face now.”

    The executive order was well-received by Autos Drive America, an industry trade group representing automakers including Toyota, Volkswagen, Hyundai, and others. “We applaud the administration’s Executive Order that will review U.S. supply chains to identify ways to avoid future shortages of critical products and help grow our economy and America’s workforce,” Jennifer Safavian, president and CEO of the group, said in a statement.

    The shortage of semiconductors has begun to impact industries beyond autos, now reaching companies such as Apple and Sony. However, automakers were first to feel the supply crunch. That’s in part because the companies themselves cut their semiconductor orders when new-vehicle demand collapsed at the start of the COVID-19 pandemic in spring 2020. Then, when demand recovered quickly and the automotive industry ordered semiconductors again, the consumer electronics industry was already ahead in line for the parts and took precedence. That, along with a lack of production capacity to meet current demand, has led to the shortage.

    Earlier this month, trade groups representing industries including autos and tech sent a letter to the president asking him to work with Congress to invest in semiconductor manufacturing in the U.S. “Given the central role of semiconductors, strengthening the U.S. position in semiconductor research, design, and manufacturing is a national priority,” the letter says. “To be competitive and strengthen the resilience of critical supply chains, we believe the U.S. needs to incentivize the construction of new and modernized semiconductor manufacturing facilities and invest in research capabilities.”

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