'Take the Lead’ on Chip Shortage: White House to Industry

The global semiconductor shortage “continues to negatively impact U.S. workers and consumers and is a persistent headwind to the U.S. economic outlook,” said the 100-day supply chain review published Tuesday by the White House in answer to President Joe Biden’s call for the report in his Feb. 24 executive order. The Commerce Department’s assessment took center stage in the 250-page report. The Energy, Defense and Health and Human Services departments also weighed in.

Later that day, the Senate was on track to pass the U.S. Innovation and Competition Act (S-1260). Also see 2106080074. The U.S. should promote long-term “leadership and resilience” in semiconductors by “fully funding” the Chips Act, said the report.

The report takes “the first critical step” toward addressing the “short-term shortage and a long-term challenge to U.S. leadership across the semiconductor supply chain and customer base,” said Commerce Secretary Gina Raimondo. “We know government alone cannot fix this problem. The private sector plays a central role in addressing this crisis.”

The Semiconductor Industry Association -- quoted extensively in the report -- wants the administration and Congress “to swiftly enact needed federal investments in chip technology to help ensure more of the chips our country needs are researched, designed, and manufactured on U.S. shores,” said CEO John Neuffer. “Daily news reports remind us that the resiliency of global supply chains implicates cybersecurity, national security, and economic security,” said John Miller, Information Technology Industry Council general counsel. ITI welcomes the administration's “commitment to building trusted, secure, and resilient supply chains, and we support its plan to realize that goal,” he said.

Though the private sector “must take the lead” in resolving this shortfall, government can assist in “mitigating” damage “by facilitating investment, transparency, and collaboration with industry and with partners and allies,” said the White House. A “secure and resilient” semiconductor supply chain will require a “whole-of-country effort” that exploits the “resources and ingenuity” of stakeholders, it said. Commerce should “redouble its partnership with industry to facilitate information flow between semiconductor producers and suppliers and end-users,” and promote “transparency” during this crisis, said the document. “The private sector should continue to play a leading role, including through identifying ways to incentivize information-sharing.”

The administration should “strengthen engagement with allies and partners to promote fair semiconductor chip allocations, increase production, and encourage increased investment,” said the report. Agencies can do “broad and high-level diplomatic outreach” to be sure chip manufacturing capacity “in ally and partner countries is maximized,” it said. Chip companies should make “reasonable efforts to conduct scenario planning,” said the report. “Ensure backward compatibility of form and function so that newer chips can be substituted for older ones.”

The administration should support small and medium-size suppliers because they are “the majority of U.S. firms involved in semiconductor and related device manufacturing and would benefit from specialized support,” said the report. “Their needs are diverse, ranging from R&D funding to prove emerging technologies, financing to support commercialization, and support in resisting predatory foreign acquisition practices.” Help “commercialize new technology by targeting investments to promising late-stage innovators,” it asked government. The supply chain can’t be “robust and resilient” without a “diverse and healthy ecosystem of suppliers,” said the report. “We must rebuild our small and medium-sized business manufacturing base.”

It’s neither “possible nor desirable to produce all essential American goods domestically,” said the interagency portion. But the U.S. “for too long” stood by and watched as “other countries successfully invested in policies that distributed the gains from globalization more broadly,” it said.

Though the administration welcomes fair competition, “in too many circumstances unfair foreign subsidies and other trade practices have adversely impacted U.S. manufacturing and more broadly, U.S. competitiveness,” said the report. It urged a “strike force” within the Office of the U.S. Trade Representative “to identify unfair foreign trade practices that have eroded U.S. critical supply chains and to recommend trade actions to address such practices.” Supply chain resilience should also be incorporated into U.S. trade policy toward China, it said.

Commerce should decide whether to launch a Section 232 investigation on imports of neodymium magnets, said the report. They “play a key role in motors and other devices,” yet the U.S. “is heavily dependent on imports for this critical product,” it said. A 2011 Consumer Electronics Daily report pegged the surging price of neodymium magnets found in speaker drivers, mics, smartphones and many other products to Chinese government tactics (see 1108310086).