Unsurprisingly, the electronics industry is reacting favorably to President Biden’s executive order to review critical U.S. supply chains. The Covid-19 pandemic exposed the United States’ dependence on foreign supplies including semiconductors and materials used in PPE, medical tests and pharmaceuticals.
Reliance on foreign sources is not a new issue in electronics but tariffs, the China-U.S. trade war and the pandemic have exacerbated shortfalls. At the beginning of the Covid-19 crisis in China, materials and manufacturing capacity were diverted to medical supplies and equipment. As the pandemic rolled across the globe, supplies to other nations became constrained.
U.S. manufacturers have recently reported supply constraints are holding back a more robust expansion of the industry.
The order is intended to boost manufacturing jobs by strengthening U.S. supply chains for advanced batteries, pharmaceuticals, critical minerals and semiconductors, according to the AP.
“The United States has become increasingly reliant on imports of these goods — a potential national security and economic risk that the Biden administration hopes to address with the planned 100-day review and the possibility of increased domestic production,” AP continued. The administration will also look to work with international partners to ensure a stable and reliable supply chain.
The IPC commended President Biden for ordering a review of industrial supply chains.
“The crippling shortage of semiconductor chips underscores the economic and national security importance of restoring U.S. leadership in electronics manufacturing,” said the IPC.
The U.S. printed circuit board industry, which once accounted for more than 30 percent of total global production, today accounts for less than 5 percent, the association added. Only four of the top 20 electronics manufacturing services (EMS) companies are based in the United States.
Beginning in 2000, electronics manufacturers began moving offshore to save costs. China was among the nations subsidizing new manufacturing businesses and promoting its "business friendly" environment.
“This drawdown in American manufacturing has increased volatility and undermined the supply chains that are critical for electronics manufacturing and other sectors to operate smoothly,” said IPC. “And this isn’t the first time that we’ve experienced shortages as a result. During the pandemic, a shortage in printed circuit boards slowed the production of ventilators when hospitals around the world were in desperate need.”
The IPC emphasized two realities of the electronics supply chain:
- Electronics manufacturing is a foundation for the manufacturing sector across the U.S. economy. Virtually every other sector relies on electronics to greater or lesser extent.
- U.S. leaders must see the electronics supply chain as an ecosystem. All segments of the electronics industry must be strong for the entire ecosystem to thrive. Semiconductor fabrication is just one segment in a sophisticated, global supply chain for electronics.
Congress has also sought to bring chip production back onshore through the CHIPS for America Act which encourages investment in semiconductor foundries and related processes and equipment.
“The new law calls for incentives for domestic semiconductor manufacturing and investments in chip research, but funding for these provisions must come through congressional appropriations,” said Bob Bruggeworth, president, CEO & director of Qorvo and 2021 Semiconductor industry Association (SIA ) board chair.
“Last week, SIA and a broad coalition of other business leaders called on President Biden to work with Congress to fund the provisions in the CHIPS for America Act and to enact an investment tax credit to spur greater domestic chip production,” Bruggeworth's statement continued.
The SIA also welcomed Biden’s order and “stands ready to work with the administration to ensure the strength and resilience of America’s semiconductor supply chains. 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 share of global semiconductor manufacturing capacity in the U.S. has decreased from 37 percent in 1990 to 12 percent today, said the SIA. This decline is largely due to substantial subsidies offered by foreign governments which have placed the U.S. at a competitive disadvantage in attracting new construction of semiconductor fabs. Additionally, federal investment in semiconductor research has been flat as a share of GDP, while other governments have invested substantially in research initiatives to strengthen their own semiconductor capabilities.
The U.S. Chamber of Commerce also praised the effort. “The time is ripe for greater U.S. government support of manufacturing,” the agency said. “The industry is on the cusp of transformation, powered by artificial intelligence, automation, quantum computing, and blockchain technologies. With U.S. government support, American companies will find new opportunities to compete in the global marketplace while creating new, skilled jobs for American workers.”
The government should support the industry’s migration to the factory of the future by creating and sustaining programs to drive capital expenditures, workforce education and credentialing, research and development of core technologies, and more robust domestic availability of raw materials, the Chamber added.