One of the early actions of the Biden administration, alongside big-ticket priorities such as addressing the coronavirus pandemic and combatting climate change, was to order a review of America’s strategic supply chains. While the review was driven by concerns across industries, it was also designed to address a specific, simmering crisis: a shortage of computer chips stalling production of everything from gaming systems to new cars.
The global chips shortage, exacerbated by the COVID-19 pandemic, has brought countless production lines to a halt, which experts believe will last into next year, as companies suffer the long-term financial fallout. Automakers alone are expected to lose over $100 billion, resulting in job losses and consumer disappointment.
Last month, the administration unveiled the findings from that 100-day review of supply chains. Specifically related to chips, the Biden administration is expanding production and creating a task force to tackle supply chain challenges across multiple electronics-dependent sectors. The administration is also committed to strengthening apprenticeship and training programs for an industry that has long suffered from a shortage of qualified talent.
While the administration’s focus on this critical issue is an urgent and necessary first step, revitalizing America’s strategic supply chain will require not just targeted action but a more holistic approach, appropriate to the electronics manufacturing ecosystem.
What needs addressing, fundamentally, isn’t this or that particular disturbance in the supply chain; semiconductors today, something else tomorrow. The issue is that America’s supply chains keep generating problems that frustrate consumers, threaten companies and undermine American competitiveness.
Think of a race car team that, after every unsuccessful race, decided the solution was to invest in a better engine. Sure, having a powerful engine is a critical component of a great race car. But it certainly isn’t the only part of a race car, and you can’t expect to succeed if you ignore the performance of the driver or the quality of a car’s transmission, tires and various other parts.
Electronics manufacturing works much the same way; what matters isn’t the parts but the whole of the system. Chips, like an engine, are important. But so, too, are the other components —including the printed circuit boards that tie them all together.
Without a robust electronics manufacturing supply chain that supports systems-level manufacturing, the best chips in the world won’t offer the industry the resiliency, security and innovation the American people want. Ignoring the long-neglected segments of the supply chain will mean the whole of America’s electronics manufacturing industry — and the entire economy tied to it — will suffer.
The Biden administration demurred recently when pressed by the industry to articulate a more expansive and ambitious vision of American electronics manufacturing in the context of its 100-day supply chain reviews. The administration concluded that the review was not the right vehicle for addressing the industry’s concerns.
The review, however, clearly acknowledged that there are important issues related to electronics manufacturing that require government engagement and the Biden administration has a strong team in place that is working hard to understand the issues that beleaguer U.S. electronics manufacturing. For the first time in many years, there is good reason to believe that these issues will be meaningfully addressed independently or as part of the ongoing yearlong sectoral reviews.
The coronavirus pandemic put immense pressure on electronics manufacturing supply chains, exposing just how vulnerable they are to international shocks. The administration needs to prioritize fixing this, building resiliency and bringing supply chains closer to home. These and other recommendations are included in a letter sent by IPC, the global trade association representing the electronics manufacturing industry, in response to the request for comments as part of the 100-day review.
Beyond just policy levers, a key focus of the Biden administration needs to be reframing the way the government thinks about manufacturing, not as a series of isolated processes that occasionally need to be addressed but as an ecosystem that needs to be maintained and cultivated. America needs to look at the whole race car and take stock of what needs to change.
The health and well-being of America’s supply chains are critical enough to the Biden administration to be an early priority in the midst of multiple crises. But reinvigorating America’s supply chains won’t happen overnight, and it can’t happen without a holistic approach beyond the crisis of the moment.
The administration’s semiconductor supply chain review sets out actions to tackle an urgent supply chain crisis. Congress is poised to do its part with legislation as early as this summer to fund the CHIPS for America Act. These measures will help strengthen U.S. semiconductor leadership but keeping the U.S. at the vanguard of innovation will require a more comprehensive strategy. After all, engines don’t win races; cars do.
John Mitchell is president and CEO of IPC, the global trade association representing the electronics manufacturing industry.