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Biden to Address Chip Shortages With Executive Action

WASHINGTON— President Biden will sign an executive order Wednesday directing a broad review of supply chains for critical materials—from semiconductors to pharmaceuticals and rare-earth minerals—with the aim of spurring domestic production while strengthening ties with allies.

A chip shortage is squeezing auto makers in the U.S. and world-wide, and Biden administration officials have been working with industry to free up supplies. Cars use chips for numerous systems, including engine management, automatic braking and assisted driving.

The executive order calls for a 100-day review of supply chains for four areas: semiconductors, used in products from cars to phones, large-capacity batteries used in electric vehicles, pharmaceuticals and rare-earth elements that are key to technology and defense. For example, neodymium is needed for the solid-state lasers used to designate missile targets.

Bags of rare-earth concentrates at a California mine. China dominates the market for rare-earth elements.

Photo: Joe Buglewicz/Bloomberg News

Mr. Biden’s order will also call for a separate, one-year review of supply chains covering six broader sectors, from technology to food production, said Peter Harrell, senior director at the National Security Council for international economics and competitiveness.

The executive order wouldn’t fix the near-term chip shortage, White House officials acknowledged, but the hope is to produce a longer-term plan to help the federal government prevent future supply-chain problems.

In a letter to Mr. Biden Wednesday, Sens. Marco Rubio (R., Fla.) and Chris Coons (D., Del.) praised the 100-day supply-chain review. They said Mr. Biden should also take faster action to address the chip shortage, recommending he invoke the Defense Production Act to “incentivize or, if necessary, require American companies to retain their domestic capacities during this time.”

Matt Blunt, president of the American Automotive Policy Council, said the administration is showing leadership on the problem but the industry needs faster results. “We definitely would encourage continued focus on what can be done to encourage suppliers to meet all of the automotive orders, which right now is not being done,” he said.

Administration officials said the government intends to encourage domestic production with incentives such as job-training programs and business loans, in addition to using the federal procurement process for more American-made purchases. The administration will also explore limiting some imports, officials said. But no specifics were offered Wednesday.

The officials said the administration could use the Defense Production Act, which Mr. Biden is using for vaccine production and securing more Covid-19 equipment, to spur more domestic manufacturing of critical products. The government is expected to also look to public-private partnerships while aiming to shore up relations with allies to address common supply vulnerabilities, such as semiconductors, they said.

“This problem was decades in the making. We can solve it by making smart investments that are long term in nature, that reach families and workers in all of America,” said Sameera Fazili, deputy director of the National Economic Council.

While White House officials said the executive action isn’t aimed at one particular country, it comes as U.S. interest rises in combating China and fostering ties with other supplier countries. China dominates the rare-earths market and is a major player in other supply areas, including pharmaceuticals.

A handful of suppliers from Europe, Japan and the U.S. dominate the global auto-chip market, while China largely relies on imports. Shortages in the auto industry, one of the largest consumers of computer chips, were first noticed in China.

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The current global chip shortage is driven by the pandemic and increased demand for products used while people work at home. The shortage has hampered auto production around the world. Ford Motor Co. recently said that it would cut production of the F-150 pickup truck—one of its most profitable and popular models—because of the chip shortage. General Motors Co. has extended shutdowns at some North American plants into March.

The White House has asked U.S. embassies to identify ways foreign countries and companies could help address the chip shortage, and it has held meetings with auto companies and suppliers to urge them to look for steps they could take in the short-term to alleviate the crunch. Among those involved in the push are Jake Sullivan, the national security adviser, and Brian Deese, Mr. Biden’s top economic adviser.

In a statement Wednesday, Ford said it appreciated Mr. Biden’s efforts to resolve the short-term crunch and to review longer-term ways to improve supply chains. “It is incredibly important for our labor force, our customers and our business that we have a commitment to end this shortage as soon as possible,” the company said.

The Semiconductor Industry Association also welcomed the efforts while urging the president and Congress to invest more 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 group said.

Last week, a group of associations representing technology companies, the automotive industry and other business interests sent a letter to Mr. Biden calling for action to improve supply chains, including promoting the construction of semiconductor-manufacturing facilities and investing in research.

“We believe the need is urgent and now is the time to act,” the letter said.

Before signing the executive order Wednesday, Mr. Biden is scheduled to meet with a bipartisan group of House and Senate lawmakers to discuss supply-chain issues that have grown more visible during the pandemic.

Mr. Biden will link the executive order to his overall plans to create U.S. jobs, particularly in manufacturing that has lost ground to foreign competition, such as China. The administration believes spurring new manufacturing would create jobs in communities of color, officials said. The White House views it as an issue that will allow Republicans and Democrats to work together to create jobs in the U.S.

Senate Majority Leader Chuck Schumer (D., N.Y.) said Tuesday that work had begun on a bipartisan package to address competition with China, including new investments in domestic semiconductor manufacturing.

“Right now, semiconductor manufacturing is a dangerous weak spot in our economy and in our national security. That has to change,” Mr. Schumer said, citing the auto industry. “We cannot rely on foreign processors for the chips. We cannot let China get ahead of us into production.”

The tech battle between the U.S. and China has battered TikTok and Huawei and startled American companies that produce and sell in China. WSJ explains how Beijing is pouring money into high-tech chips as it wants to become self-sufficient. Video/Illustration: George Downs/The Wall Street Journal

Write to Alex Leary at [email protected]

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