Computer Chip Shortage Will Bring Patch for Supply-Chain Holes

An executive order has been signed to support four critical industries: pharmaceuticals, critical minerals, semiconductors and large-capacity batteries.

President Joe Biden, first lady Jill Biden, Vice President Kamala Harris and her husband Doug Emhoff bow their heads during a Monday ceremony at the White House to honor the 500,000 Americans that died from Covid-19. (AP Photo/Evan Vucci)

WASHINGTON (CN) — President Joe Biden signed an executive order Wednesday afternoon to boost crucial supply chains that have been suffering due to the pandemic. 

The announcement from the White House came one week after the U.S. Food and Drug Administration outlined a shortage of medical devices while the nation fights the spread of Covid-19. Hospital gowns, gloves, masks, respirators and lab-testing equipment are some of the affected categories. 

To combat the problem, the White House said Biden will launch a review of the supply chains for pharmaceuticals, critical minerals, semiconductors, and large-capacity batteries — deeming these products essential for daily American life. 

As part of the 100-day study, the Biden administration hopes to reinforce U.S. supply chains and outcompete China. While the executive order does not reference the country by name, the global market has come to rely more and more on products coming out of the country’s tech companies. 

U.S. Senate Majority Leader Chuck Schumer on Tuesday called the shortage “a dangerous weak spot in our economy and in our national security,” and asked Congress to draft bipartisan legislation to invest in domestic computer chip production. 

“You’ve seen that auto plants throughout America are closed because they can’t get the chips cannot rely on foreign processors,” he said. “We can’t let China get ahead of us in chip production.” 

Chinese tech companies produce 90% of all smartphones, 67% of all smart televisions, and 65% of all personal computers, according to a paper by economist Chad Brown, senior fellow at the Peterson Institute for International Economics. 

The executive order wants to address domestic supply chains specifically, the official said, but “clearly one of the vulnerabilities we have in supply chains is the potential for strategic competitor nations to try to use control of supply chains against us.” 

Down from 37% in 1990, the United States accounts for 12% of global chip manufacturing capacity, according to the U.S. Semiconductor Industry Association. More than 80% of such capacity comes out of Asia. 

Biden’s executive order addresses existing shortages as well as potential vulnerabilities, with the objective of producing more jobs for American workers. It fits firmly within the administration’s promise to invest $700 billion into bolstering U.S. manufacturing and technology firms, including $300 billion in research and development into American tech concerns. 

To prevent future shortages, Chris Tang, a business administration professor at UCLA, has suggested that the administration require more visibility from these industries.

“I think this is a wake-up call to regulate companies to have to record and trace the supply chain,” Tang said in a phone interview Wednesday. “Without this, it’s very difficult for the government to identify where the weakest links are, and how to make the supply chain more secure.” 

Before signing the executive order, the president met with a bipartisan group of House and Senate lawmakers to discuss the supply chain problems. 

In a briefing Tuesday, an administration official touted the country’s ability in the early months of the pandemic to overcome supply-chain hurdles that had caused shortages of masks, gloves, and other critical personal protective equipment.

The United States also experienced a critical drug shortage last year. According to an October 2020 study by University of Minnesota’s Center for Infectious Disease Research and Policy, 29 out of 40 drugs used to combat the coronavirus were in short supply across both the United States and Europe. There were also shortages of drugs for other illnesses, such as morphine, lorazepam and ketamine. 

The Association for Accessible Medicines (AAM) released a statement Wednesday outlining potential solutions for reinforcing the drug supply chain, like supporting domestic manufacturers of essential medicines and updating Medicare for better access to medication. 

AAM also produced a study that found that the supply chain was quite resilient at the beginning of the pandemic. Despite a spike in demand for medicine immediately after a national emergency was declared on March 13, medical wholesalers were able to meet the demand within a few weeks. 

But medicine wasn’t the only industry challenged this past year. Automakers have recently faced a shortage in semiconductor chips needed to produce vehicles. There was a dip in production immediately after the national emergency declaration, and then chip makers pivoted to produce more chips for schools than cars, since most schools had shifted to virtual learning.  

Car companies have had to slow down production, and many could lose vast sums of money as a result. General Motors, for example, is facing a $2 billion shortfall this year. 

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