Biden's Executive Order Is Not a Quick Fix for Electronics Supply Chains

Spotlight:

• Executive order is not a "quick fix" for current electronics shortages
• Seeks to bolster U.S. supply chains for the future
• Companies can manage supply shortages through proactive measures

President Biden expects to sign an executive order today to help boost American manufacturing in the automotive, electronics, pharmaceutical, and energy industries.

The order serves as a response to the current semiconductor shortage affecting automotive companies in the U.S. and around the globe.

Yet U.S. officials state the order will not serve as a "quick fix." The aim of it is to insulate U.S. companies from future shortages by bolstering manufacturing and supply within the U.S.

Six sectors are expected to undergo year-long reviews as a result of the order. Meanwhile, four classes of products will undergo 100-day reviews. The four classes of products are as follows:

1. Computer chips
2. High-capacity batteries
3. Pharmaceuticals and their active ingredients
4. Critical and strategic minerals—like rare earths

The reviews conducted will determine the plan of action taken to bolster supply chains in the U.S. For example, if the review of computer chip supply chains determines U.S. companies are at high risk, then officials will urge said companies to move supply chains away from China and back to mainland U.S. or to allied nations.

A senior official clarified that building resilient supply chains does not imply moving all production to the U.S. Strictly moving production to the U.S. would risk angering allies in Canada and the European Union, which Biden had already done in a previous order to limit foreign provisions to the U.S. government.

While today's executive order does not target any specific countries, wide speculation assumes it is another step in an effort to combat the rising economic power of China.

China currently dominates the global supply chain in multiple markets:

1. Rare earths
2. Medical materials
3. Semiconductors

Additionally, China has invested in its manufacturing of emerging technologies such as electric vehicles and advanced telecommunications gear. There is a growing fear among U.S. officials that Beijing could cut off exports to the U.S. at any time they wish.

In response, U.S. legislators will work on drafting new legislative packages with an aim to "outcompete China and create new American jobs," according to Senate leader Chuck Schumer.

Along with boosting capacity for semiconductor manufacturing, new legislation would bolster the manufacturing of the following:

1. 5G
2. Artificial intelligence
3. Biomedical research
4. Quantum computing
5. Storage

While the executive order is a positive step toward solidified electronics supply chains in the U.S., it's still essential for electronics companies to continue to invest in proactive supply chain resiliency strategies.