President Joe Biden will sign an executive order Wednesday afternoon aimed at addressing a global semiconductor chip shortage that has forced U.S. car manufacturers and other industries to cut production.
The executive order, which Biden is expected to sign about 4:45 p.m., according to Reuters, will also require a review of U.S. supply chains for large-capacity batteries, pharmaceuticals, critical minerals and semiconductors that power cars, phones, military equipment and other goods.
The U.S. has suffered supply shortages since the beginning of the COVID pandemic, which squeezed the availability of masks, gloves and other personal protective equipment, hurting front-line workers.
The chip shortage, which in some cases is forcing automakers to take employees off production lines, is the latest example of supply bottlenecks hurting American workers.
During the past year, the fragility of vital supply chains has been revealed repeatedly. The coronavirus outbreak led to an initial shortage of masks, gloves and other protective medical equipment. Automakers in the United States and Europe are now dealing with a shortage of computer chips.
Administration officials have met with automakers and are talking with foreign counterparts on how to boost supplies in the short term. But there is no magic bullet to immediately fixing the lack of semiconductors for automakers, an administration official said.
“We welcome today’s executive order and stand ready to work with the Biden administration to ensure the strength and resilience of America’s semiconductor supply chains,” said Bob Bruggeworth, president, CEO and director of Qorvo and 2021 Semiconductor Industry Association board chair. “As part of this effort, we urge the president and Congress to invest ambitiously in domestic chip manufacturing and research. Doing so will ensure more of the chips our country needs are produced on U.S. shores, while also promoting sustained U.S. leadership in the technology at the heart of America’s economic strength and job creation, national security, and critical infrastructure.”
The chip shortage is indicative of why Biden is trying to be proactive with the reviews, so that they can strengthen the supply chains to prevent additional challenges from emerging. Administration officials say that they plan to partner with industry and members of Congress as part of the effort and that no tool is off the table, including the use of the Defense Production Act.
Nearly every major automaker that produces vehicles in the U.S. has cut production because of the shortage by canceling shifts, slowing assembly line speeds or temporarily closing factories. Most automakers have tried to limit the cuts to slower-selling vehicles.
But the shortage has forced the Ford Motor Co. to at times cancel shifts at two plants that make the F-Series pickup truck, the top-selling vehicle in the nation. Besides Ford, Stellantis (formerly Fiat Chrysler), General Motors, Toyota and Honda have had to slow production.
Some are building vehicles without computer chips, which control engines, brakes, transmissions and other tasks, so they can be installed once more semiconductors are available.
The chip shortage has cost the global auto industry the production of about 1 million vehicles, according to IHS Markit. The analytics firm expects the chip crisis to hit bottom toward the end of March, with supplies constrained into the third quarter.
IHS Markit expects the lost production could be made up later in the year. But the shortage could compound already-tight vehicle inventories in the U.S., driving up prices that rose when factories were closed last year due to the novel coronavirus.
Moody’s predicts that the chip shortage will cost Ford and General Motors about one-third of their pretax earnings this year. It also expects electric vehicle maker Tesla to be affected, although less than GM and Ford.
The U.S. Semiconductor Industry Association says the country’s share of global chip manufacturing capacity has dropped from 37% in 1990 to 12% today. The association wants Washington to fund domestic semiconductor manufacturing and research and pass an investment tax credit to help build and modernize chip factories in the U.S.
The wrangling over semiconductors dovetails with China’s economic rise as it became a manufacturing center for electronics. Chinese companies began to account for half of global semiconductor consumption in 2012, and demand has grown as China makes 90% of all smartphones, 67% of all smart televisions and 65% of all personal computers, noted a 2020 research paper by Chad Bown, a senior fellow at the Peterson Institute for International Economics.
The Associated Press contributed to this report.
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