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(Bloomberg) -- President Joe Biden said he’s directing his administration to address shortfalls in semiconductor production that have idled production at some auto plants as he signed an order to review U.S. supply chains.
“We need to make sure that supply chains are secure and reliable,” Biden said Wednesday at the White House. “I’m directing senior officials in my administration to work with industrial leaders to identify solutions to this semiconductor shortfall.”
Biden acknowledged the problem won’t be solved immediately. The issue has taken on urgency with a global chip shortage that’s threatening to harm U.S. growth just as Biden seeks to rebuild an economy battered by the coronavirus. Some automakers are cutting workers’ hours due to the shortfall and unions are raising alarm about the prospect of layoffs.
Biden’s executive order seeks to end the country’s reliance on China and other adversaries for crucial goods. The administration’s 100-day review will cover chips along with large-capacity batteries, pharmaceuticals and critical minerals and strategic materials like rare earths.
The order doesn’t directly call out China or any one country. Still, White House officials said an over-reliance on Beijing and other adversaries for critical goods is a key risk that must be addressed.
Biden’s review could lead to financial incentives, tariffs or changes in procurement policies, among other options, said one of the officials, who spoke on condition of anonymity. The administration plans to consider ways to encourage production of key items in the U.S. or work with allies to manufacture the items, the official added.
Biden met with a group of lawmakers from both parties at the White House Wednesday afternoon to discuss the semiconductor shortage, and ways to strengthen supply chains.
Members of both parties praised the efforts of the president, who told the lawmakers he’d like to engage in regular such discussions.
“It was refreshing to have a meeting that was truly bipartisan,” said GOP Representative Michael McCaul, who was among those meeting with the president. He said Biden is fully supportive of their efforts to fund semiconductor legislation, pledging to lawmakers “I want to back you, I’m all in,” McCaul said in an interview.
Senate Majority Leader Chuck Schumer said he is asking the chamber’s top Democrats and Republicans to draw up legislation aimed at improving U.S. competitiveness with China in manufacturing and technology, including bolstering the supply of American-made semiconductors. He said lawmakers should consider “significant” emergency spending to rebuild U.S. semiconductor production capacity.
Senator John Cornyn, who was among those meeting with Biden, told reporters that the topic of invoking the Defense Production Act to address the chip shortage came up in the Oval Office discussion.
Biden’s top economic adviser, Brian Deese, last week sought the Taiwanese government’s help in resolving the chip situation. His appeal followed earlier pleas from Japanese and European officials for Taiwan’s assistance in ensuring supply.
The Biden administration has also asked U.S. embassies around the world to identify how foreign countries and companies that produce chips can help address the global shortage and to map the steps taken to date.
The shortages are tied largely to the pandemic. The stay-at-home era caused by the coronavirus pushed demand beyond levels projected by chipmakers. Lockdowns led to growth in sales of products such as laptops and home networking gear.
The semiconductor industry has been pushing the president to include tax breaks and other financial incentives in his next legislative package to spur investment and research in the U.S. -- an effort that will take months to move through Congress.
Biden’s order directs industry-specific reviews focused on defense, public health and biological preparedness, information-communications technology, transportation, energy and food production. Those assessments, to be completed within one year, will be modeled after reviews the Defense Department uses to regularly evaluate the U.S. defense industrial base.
Manufacturing more drugs and their raw materials within the U.S. could run into a years-long approval process to start production in new factories. It could also lead to an increase in emissions of ethylene oxide, a carcinogenic chemical used to sterilize glassware and vials.
It’s unclear exactly how much pharmaceutical manufacturing is done overseas, because drugmakers don’t have to disclose where their goods are made. As of 2019, 72% of facilities that make active pharmaceutical ingredients for the U.S. market were located in other countries, according to the Food and Drug Administration.
The Biden team will draw on lessons from the current crisis on chips and the shortage of personal protective equipment that plagued the U.S. last year, one of the officials said. Wednesday’s order is designed to help the U.S. address future crises before they occur, the official said.
The order calls for reviewing supply chains every four years and directs the administration to consult with outside groups, including businesses, academia, unions and state and local governments, according to the White House.
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