On Wednesday, President Joe Biden ordered a review of the U.S. supply chain to address the global semiconductor shortage.
The White House’s 100-day review includes evaluating the country’s ability to source microchips, electric vehicle batteries, pharmaceuticals, and strategic materials. The mandate directs officials in his administration to work with manufacturing sector leaders to bolster America’s production capacity.
The component shortfall prompted several leading automakers to idle some of their vehicle assembly facilities.
The U.S. government also recently sought overseas help to address the crisis from Taiwan. But a recent drought in the area may undercut any efforts to alleviate the crunch in the short-term.
Details on President Biden’s Supply Chain Review Executive Order
President Biden’s Executive Order is intended to make America’s supply chain more robust and less reliant on other countries.
The White House wants to create new domestic manufacturing jobs to fulfill that ambition and stimulate the economy. The U.S. government also wants to create closer relationships with its international allies to ensure a consistent flow of goods into the republic. That way, America will become less vulnerable to disruptive events like the chip shortage and last year’s personal protective equipment (PPE) insufficiency.
“It’s about resilience,” said Biden in a speech regarding the order. “Identifying possible points of vulnerabilities in our supply chains and making sure we have the backup alternatives or workarounds in place.”
The Biden administration intends for the 100-day review to garner actionable suggestions about fortifying the American supply chain. The President noted the initiative received bipartisan support from the U.S. Senate and House of Representatives members in a recent meeting.
Senate Majority Leader Chuck Schumer (D-NY) said he would ask Republicans and Democrats to draft U.S. semiconductor production bolstering legislation. He indicated the country’s ability to produce cutting-edge electronic parts is an economic and strategic priority. Schumer argued lawmakers should make “significant” federal expenditures part of their proposals.
In 2020, a bipartisan congressional group introduced a bill that would bolster America’s ability to design and fabricate cutting-edge semiconductors.
The Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act called for billions of dollars in financial support for new component research, design, and production jobs and facilities. Last week, the SIA and executives from Intel, AMD, Qualcomm, and other U.S. chipmakers asked President Biden to fund the bill.
Given the urgency of the situation, Washington might enact the CHIPS Act as a long-term semiconductor industry boosting measure relatively soon.
Short Term Chip Shortage Solution Complications
In addition to the supply chain review, the U.S. government sought to address the chip crunch in the near-term with Taiwan’s support. But a recent water shortage in East Asian island may prevent any quick fixes from being enacted.
Washington requested that Taipei intervene to help U.S. automakers secure components to restart the production lines they had to idle recently. Consulting firm AlixPartners estimated the part scarcity would cost the global auto industry $61 billion this year.
In response, Taiwan’s economic ministry pledged to bring the White House’s concerns to its domestic foundries.
Taiwan Semiconductor Manufacturing Company (TSMC) subsequently announced it would initiate a “super hot run” to increase its automotive chip output. The firm said it moved to cut its vehicle component production time by 50 percent after meeting with local leaders. Since the corporation supplies global part vendors NXP Semiconductors and Infineon Technologies, its production shift could have a significant impact.
Unfortunately, Taiwan is experiencing a water shortage, and its central and southern reservoirs’ water levels have fallen below 20 percent. The problem developed because the region’s rainfall has been scarce in recent months. Taipei asked domestic corporations to cut their usage by 7 to 11 percent to preserve the existent water supply.
As a result, TSMC and its contemporaries, Vanguard International Semiconductor Corporation (VIS) and United Microelectronics Corporation (UMC), have been trucking in water to facilitate their manufacturing work. The three leading foundries said the drought had not affected their output. However, that might change soon because high demand has led them to run their factories at or near capacity.
Ideally, the U.S., Taiwan, and their allies will ensure no region is responsible for a disproportionate share of global semiconductor production in the future.