Comprehensive semiconductor supply chain review planned by US government

Posted:
in General Discussion
Following nearly six months of profound availability constraints, the US government is about to assess semiconductor, battery, and rare earth metal supply chains for inefficiencies and national security concerns.

Credit: The White House
Credit: The White House


The assessment will analyze the "resiliency and capacity of the American manufacturing supply chains and defense industrial base" to support areas like national security and emergency preparedness, according to a draft executive order seen by CNBC. The review will be carried out by Biden's economic and national security teams.

According to the draft order, the Biden Administration plans to review gaps in domestic manufacturing and supply chains that are currently dominated or rely on "nations that are or are likely to become unfriendly or unstable."

The executive order is being finalized, and the White House could change the actual text of it by the time it's implemented.

The review will take place in two parts. The first phase will comprise a 100-day review of supply chains for high-priority items like semiconductors, batteries, and medical supplies. The second phase will broaden the review to sectors, including public health, energy, and transportation.

A year after the order is issued, the team will submit an analysis and recommendations on potential actions to take. Those could include trade route edits or diplomatic agreements.

Analysts expect relations with China to normalize under President Biden. That's after a four-year trade war between China and the U.S. that was marked by tariffs and export bans.

Although the executive order doesn't specifically mention China, President Biden said that his administration was readying itself for "extreme competition" with the country. The order would be one of Biden's first tangible efforts to shore up both American economic and defense interests.

Meanwhile, Apple is reportedly in the midst of diversifying its supply chain and moving some of its manufacturing outside of China. The Cupertino tech giant's supply chain and production processes are highly dependent on China, an issue underscored by the pandemic.

Comments

  • Reply 1 of 15
    hope they look at medical supplies also
    baconstangdewmejony0watto_cobra
  • Reply 2 of 15
    The reason this is happen is due to the fact many companies had cut back production due to the fact our governments were spreading doom and gloom to the point companies had not idea what to expect other than to think demand was going to drop off. These companies cut supplier quickly since they did not want to get caught with over supplier and inventory because this is the quickest way of going out of business. Then add in all the rules and travel restrictions which does not allow companies to run at full operational capacity because people can not work close to one another. At this point all the supplier are behind the demand curve and will not catch up until the end of year assuming the useful idiots in our government do not put in more road blocks in the way.

    The problem now is the fact the government is just walking up and realizing their supplier can not get chips to make military equipment. Even if the chips are made in the US much of the raw materials to make chips come out of China. Then add in the fact many of the shipping companies took container ship off line to maintenance and repair during what they though was going to be decrease demand time.  

    Let just hope the government does not create more problem so the problem gets worse.
    sdw2001
  • Reply 3 of 15
    hexclockhexclock Posts: 1,250member
    Only government can take 100 days to find the answer to a question that the average person can find in 5 minutes. Check please. 


    viclauyycwatto_cobramuthuk_vanalingam
  • Reply 4 of 15
    entropysentropys Posts: 4,163member
    And Australia ships it all to China for refining. None of that icky work stuff thank you very much. Too much green and red tape.
    edited February 2021 watto_cobra
  • Reply 5 of 15
    Now that the parents have returned, we can get on with the here and now.
    The creepy uncle that didn't understand anything that wasn't trying to shove cash in his pocket, has left the building...
    viclauyycjony0watto_cobra
  • Reply 6 of 15
    So many CCP lovers. Fine, just don't ever complain about the "lack of social justice" in America again. Funny how that is: SJWs talk endlessly about how bad human rights are in capitalist countries like America but never socialist ones like Cuba, Venezuela, China, Viet Nam, Argentina and Bolivia back in the day etc. The only reason why Russia is public enemy #1 is because they aren't socialist anymore. This same crowd was fine with Putin back when he was a KGB operative for the U.S.S.R. There were TONS of apologists for what the U.S.S.R. was doing. But they switch from socialism to kleptocracy but otherwise keep doing the same as always and NOW they are evil. 

    So transparent. And it never changes.
    elijahg
  • Reply 7 of 15
    maestro64maestro64 Posts: 5,043member
    hexclock said:
    Only government can take 100 days to find the answer to a question that the average person can find in 5 minutes. Check please. 


    Yes, very true what most people do not understand how did we get into this situation. China was not always the main producer for a long time it was Australia and Brazil, but back in the early 2000's China cut the cost of REM material to the point other countries could not afford to keep their mines operating. Once the other mines were offline China begin to manipulate the markets at one point they were able to drive up pricing 1800% at that point the other countries begin to bring their mines back on line only to have China drop pricing again. They did everything they could to other producers offline. China knew the future of tech markets was to control REM and they using it to their advantage.
    baconstangwatto_cobra
  • Reply 8 of 15
    hexclock said:
    Only government can take 100 days to find the answer to a question that the average person can find in 5 minutes. Check please. 


    It is more about the rare earth deposit and Environmental production. China just has a lot more rare earth than the rest of the world. With their weak environmental protection enforcement, they can just process the rare earth without caring about the earth. CCP considers rare earth as a strategic material, thus it’s priority is higher than environment. 

    I read that US rare earth mine will send the material to China to process and ship it back to US. Because it is cheaper and much less pollution.
    elijahgwatto_cobra
  • Reply 9 of 15

    cloudguy said:
    So many CCP lovers. Fine, just don't ever complain about the "lack of social justice" in America again. Funny how that is: SJWs talk endlessly about how bad human rights are in capitalist countries like America but never socialist ones like Cuba, Venezuela, China, Viet Nam, Argentina and Bolivia back in the day etc. The only reason why Russia is public enemy #1 is because they aren't socialist anymore. This same crowd was fine with Putin back when he was a KGB operative for the U.S.S.R. There were TONS of apologists for what the U.S.S.R. was doing. But they switch from socialism to kleptocracy but otherwise keep doing the same as always and NOW they are evil. 

    So transparent. And it never changes.
    Traditionally, democrat give more hard time to communist countries. It was Nixon who visited China back in the days. That is why China want trump to be elected in the first place. And don’t forget trump is Putin’s puppet. 
    baconstangwatto_cobra
  • Reply 10 of 15
    hexclockhexclock Posts: 1,250member
    viclauyyc said:
    hexclock said:
    Only government can take 100 days to find the answer to a question that the average person can find in 5 minutes. Check please. 


    It is more about the rare earth deposit and Environmental production. China just has a lot more rare earth than the rest of the world. With their weak environmental protection enforcement, they can just process the rare earth without caring about the earth. CCP considers rare earth as a strategic material, thus it’s priority is higher than environment. 

    I read that US rare earth mine will send the material to China to process and ship it back to US. Because it is cheaper and much less pollution.
    It’s only going to get worse as we need more and more neodymium magnets for the wind turbines they want to build all over the place. 
    Research is being done to find a replacement for rare earths, but for now, we are stuck using China as our main source. 
    watto_cobra
  • Reply 11 of 15
    dewmedewme Posts: 5,356member
    maestro64 said:
    The reason this is happen is due to the fact many companies had cut back production due to the fact our governments were spreading doom and gloom to the point companies had not idea what to expect other than to think demand was going to drop off. These companies cut supplier quickly since they did not want to get caught with over supplier and inventory because this is the quickest way of going out of business. Then add in all the rules and travel restrictions which does not allow companies to run at full operational capacity because people can not work close to one another. At this point all the supplier are behind the demand curve and will not catch up until the end of year assuming the useful idiots in our government do not put in more road blocks in the way.

    The problem now is the fact the government is just walking up and realizing their supplier can not get chips to make military equipment. Even if the chips are made in the US much of the raw materials to make chips come out of China. Then add in the fact many of the shipping companies took container ship off line to maintenance and repair during what they though was going to be decrease demand time.  

    Let just hope the government does not create more problem so the problem gets worse.
    I'm not disagreeing that what you bring up is a contributor. But I think the problem is much more nuanced and traceable to many different factors, many of which are cost driven and reactionary. When I worked on military system development a very large proportion of the components that went into military systems were very carefully sourced with consideration for maintaining a reliable and available source of original build, repair, and replacement parts that encompassed a good portion of the expected lifetime of the system. Part of the equation was ensuring that domestic production capabilities remained intact, or sufficient spares pre-purchased, so parts would be available as needed. Was it perfect? No, but it did at least consider supply chain and lifecycle factors beyond initial acquisition costs.

    Long story short - at some point in the early 90s, which was coincident with the end of the cold war, the engineers and military tacticians were beaten down a notch or two by accountants and politicians and more parts of key military systems were moved to commercial off-the-shelf components. I was part of that transition and I know the cost, performance, and footprint improvements were substantial. Why not harvest someone else's R&D? To be clear, it's not an all or nothing switchover, and accommodations were made to deal with the risks, such as better modularity, but like everyone knew there would be trade-offs, and in classical form the tradeoffs pitted immediacy and short term benefits against longer term considerations and risks. In commercial and financial markets we'd call this "short term thinking." In military systems acquisition we'd call this "short term thinking." Notice a common theme?

    The loss of organic/domestic production and manufacturing capabilities in key semiconductor, battery, materials, components, etc., is largely rooted in this same short term thinking approach that rewards managers at all levels for delivering bottom line results this quarter, under their watch, while kicking the can down the road on possible longer term consequences of their short term actions. I know it sounds too obvious, but we've bought into the short term thinking and instant gratification at so many levels that we don't even see what's so clearly in front of our faces at all times. We're not alone, and nobody, not even China, is forcing us to stay on this path. All we can really do is deal with the consequences, which sadly, usually don't amount to much more than increasing the mortgage principle on our failures. We just kick the can and hope our children and grandchildren can figure out what to on their watch, long after we're gone.  

    muthuk_vanalingam
  • Reply 12 of 15
    Now that the parents have returned, we can get on with the here and now.
    The creepy uncle that didn't understand anything that wasn't trying to shove cash in his pocket, has left the building...
    Odd comment considering that the “creepy uncle” who didn’t understand anything is the one who woke up our country (and Europe) to the real threat from China.  And thank goodness he did before it’s too late. Meanwhile his predecessor was mesmerised by China and did nothing to help America compete with China for his 8 years in office. I am not sure the current resident will do any better but this is a hopeful sign.  

    Also he also did not get any cash from China something the current office holder cannot say. 
    elijahg
  • Reply 13 of 15
    avon b7avon b7 Posts: 7,664member
    Now that the parents have returned, we can get on with the here and now.
    The creepy uncle that didn't understand anything that wasn't trying to shove cash in his pocket, has left the building...
    Odd comment considering that the “creepy uncle” who didn’t understand anything is the one who woke up our country (and Europe) to the real threat from China.  And thank goodness he did before it’s too late. Meanwhile his predecessor was mesmerised by China and did nothing to help America compete with China for his 8 years in office. I am not sure the current resident will do any better but this is a hopeful sign.  

    Also he also did not get any cash from China something the current office holder cannot say. 
    He has caused untold damage to the US semiconductor industry. It is already suffering from lost revenues. US semiconductor associations representing the interests of over a thousand US companies protested to the Trump administration last year. The protests fell on deaf ears.

    In terms of policy, the damage went far beyond the semiconductor industry itself. The worst thing is that the real impact won't be felt for a few years. The trigger has been pulled. Now it's only a question of time. 

    https://www.piie.com/blogs/trade-and-investment-policy-watch/how-trumps-export-curbs-semiconductors-and-equipment-hurt-us
    baconstangmuthuk_vanalingam
  • Reply 14 of 15
    maestro64maestro64 Posts: 5,043member
    dewme said:
    maestro64 said:
    The reason this is happen is due to the fact many companies had cut back production due to the fact our governments were spreading doom and gloom to the point companies had not idea what to expect other than to think demand was going to drop off. These companies cut supplier quickly since they did not want to get caught with over supplier and inventory because this is the quickest way of going out of business. Then add in all the rules and travel restrictions which does not allow companies to run at full operational capacity because people can not work close to one another. At this point all the supplier are behind the demand curve and will not catch up until the end of year assuming the useful idiots in our government do not put in more road blocks in the way.

    The problem now is the fact the government is just walking up and realizing their supplier can not get chips to make military equipment. Even if the chips are made in the US much of the raw materials to make chips come out of China. Then add in the fact many of the shipping companies took container ship off line to maintenance and repair during what they though was going to be decrease demand time.  

    Let just hope the government does not create more problem so the problem gets worse.
    I'm not disagreeing that what you bring up is a contributor. But I think the problem is much more nuanced and traceable to many different factors, many of which are cost driven and reactionary. When I worked on military system development a very large proportion of the components that went into military systems were very carefully sourced with consideration for maintaining a reliable and available source of original build, repair, and replacement parts that encompassed a good portion of the expected lifetime of the system. Part of the equation was ensuring that domestic production capabilities remained intact, or sufficient spares pre-purchased, so parts would be available as needed. Was it perfect? No, but it did at least consider supply chain and lifecycle factors beyond initial acquisition costs.

    Long story short - at some point in the early 90s, which was coincident with the end of the cold war, the engineers and military tacticians were beaten down a notch or two by accountants and politicians and more parts of key military systems were moved to commercial off-the-shelf components. I was part of that transition and I know the cost, performance, and footprint improvements were substantial. Why not harvest someone else's R&D? To be clear, it's not an all or nothing switchover, and accommodations were made to deal with the risks, such as better modularity, but like everyone knew there would be trade-offs, and in classical form the tradeoffs pitted immediacy and short term benefits against longer term considerations and risks. In commercial and financial markets we'd call this "short term thinking." In military systems acquisition we'd call this "short term thinking." Notice a common theme?

    The loss of organic/domestic production and manufacturing capabilities in key semiconductor, battery, materials, components, etc., is largely rooted in this same short term thinking approach that rewards managers at all levels for delivering bottom line results this quarter, under their watch, while kicking the can down the road on possible longer term consequences of their short term actions. I know it sounds too obvious, but we've bought into the short term thinking and instant gratification at so many levels that we don't even see what's so clearly in front of our faces at all times. We're not alone, and nobody, not even China, is forcing us to stay on this path. All we can really do is deal with the consequences, which sadly, usually don't amount to much more than increasing the mortgage principle on our failures. We just kick the can and hope our children and grandchildren can figure out what to on their watch, long after we're gone.  

    Oh I very familiar with COTS and milspec parts. When our government went COTS route it was about cost and only costs and they did not consider the entire supply chain. At that time many of the COTS parts were still made in the US but that has evolved over time and they never reconsider their decision.  The US government always think they can just pull out the letter saying needed for national security which is what they are doing today. That just means if a company can make a part the US government get their parts first. However, if the chip guys can not get the raw material to make a chip that does not mean a thing. I will also tell you what when raw material supplier start allocating they will ask their customer who are their customers, allocates in the end sometimes depend on who are the end customers. You can bet if China can hurt the our military they will no allocate raw material those who do business with US Military. My son work for one the contractors who make Aerospace and Military assemblies as part of COTS and they are not allow to tell who are the customers and this causes problems with getting an allocation even with the Government letter.
    edited February 2021
  • Reply 15 of 15
    avon b7avon b7 Posts: 7,664member
    One thing seems clear to me.

    Any proposals would require years of planning and development and would entail costs that the private sector would not be able to make viable. 

    The only solution would be for huge government subsidies and direct government control (for national security reasons). 

    Doors to business opportunities overseas are already being slowly closed due to Trump's cowboy antics but also because most foreign powers with the capacity for semiconductor independence were already moving ahead with freeing themselves of US dependence, and long before Trump reached office. 

    In fact, it was given as the main reason for the EU processor initiative. 




    edited February 2021 muthuk_vanalingam
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