Global chip shortage challenges Biden’s hope for manufacturing boost
WASHINGTON — President Joe Biden came into office with plans to help the economy recover from the coronavirus pandemic and spur a domestic manufacturing revival for goods such as automobiles and semiconductors.
But one month into his presidency, a global chip shortage has shuttered auto factories in the United States, slowed shipments of consumer electronics and called into question the security of American supply chains.
The shortage of a vital component for automobiles, phones, refrigerators and other electronic devices is posing an early challenge to the administration’s promise to revive a manufacturing sector depressed by the pandemic. And it has spurred an effort by the administration to reach out to U.S. embassies and foreign governments to try to alleviate the shortage, even as the White House acknowledges there are most likely few solutions to the supply crunch in the short term.
The White House plans to issue an executive order soon that will take steps to address these kinds of vulnerabilities in critical supply chains over the longer term, an administration spokesperson said Thursday. The order will begin a review of domestic manufacturing and supply chains for critical materials — including rare earths, medical supplies and semiconductors — with a particular focus on reducing dependencies on unreliable or unfriendly foreign actors.
In the meantime, administration officials have begun looking for ways to ease the immediate shortage. Jake Sullivan, the national security adviser, and Brian Deese, the director of the National Economic Council, have been involved in efforts to increase chip availability; Sameera Fazili, the deputy director of the National Economic Council, and Peter Harrell, a senior director at the National Security Council, are leading the focus on supply chains, the White House spokesperson said.
The United States has also tried to leverage its ties with Taiwan, one of the world’s largest chip manufacturers, to make sure American customers are not disadvantaged. In a letter sent on Wednesday, Deese thanked Wang MeiHua, the Taiwanese minister of Economic Affairs, for her “personal attention and support in resolving the current shortages faced by American automobile manufacturers.”
During the past year, the Trump administration tried to strengthen ties with the Taiwanese government and manufacturers like Taiwan Semiconductor Manufacturing Co. to counter China’s growing influence over the chip market.
The Biden administration is also meeting with auto companies and suppliers to identify bottlenecks and to urge them to work together to address the shortage. But the White House has acknowledged that its options to alleviate any shortfall are likely to be limited, given the fierce global competition for semiconductors. Many chipmakers are already running near maximum capacity, and it will take at least several months to further ramp up production, analysts say.
The shortage has been particularly disruptive for auto manufacturers because the production of vehicles relies on dozens of computer chips for electronic components that control engines, transmissions, entertainment systems, brakes and other systems. Both General Motors and Ford have estimated the shortage will lower their operating profit by at least $1 billion this year.
Industry analysts say the shortages are partly because of a prepandemic trend toward consolidation and inventory depletion in the chip sector, which was exacerbated by the kind of coronavirus-related disruptions that have led to shortages of other products, such as exercise bikes, tablets and toys.
Factory shutdowns, first in China and then elsewhere around the world, disrupted production of the chips and the cars and electronics that require them. Automakers and consumer electronics companies then underestimated the surge in demand from buyers, leaving companies scrambling with chipmakers to secure their supply, according to analysts.
President Donald Trump’s trade policy might have also played a role, as chipmakers anticipated that new U.S. restrictions on the type of technology that Chinese companies such as Huawei could buy would lower demand. Chipmakers responded by trimming output.
Winter storms this week have also shut down or slowed production at chip factories owned by Samsung and NXP Semiconductors near Austin, potentially exacerbating the shortages.
The United States is home to companies like Intel, Nvidia, AMD, Micron and Qualcomm, and still responsible for designing many of the world’s most advanced chips. But the American share of global chip manufacturing capacity has fallen to 12 percent from 37 percent in 1990, according to data from the Semiconductor Industry Association.