Biden urged to redirect rare computer chips to the auto industry, citing national security law

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Ford Explorers sit at the Ford assembly plant in Chicago on June 24, 2019.

KAMIL KRZACZYNSKI / Reuters

Some critical industries could suffer if the US government uses a national security law to redirect rare computer chips to the auto industry, a senior administration official told Reuters.

The analysis suggests the White House may choose to reject calls to invoke the Defense Production Act by automakers and a bipartisan array of US lawmakers.

Many automakers have been forced to slow down or halt production due to a lack of semiconductors and have discussed with the White House the possible use of the 1950 law that allows the government to force companies to produce materials for reasons of national security.

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Still, many auto industry officials have said privately that they don’t think invoking the law will be feasible or likely.

Asked about the possibility of using the law, the administration official said that “the short-term outlook is difficult”.

Reallocating semiconductors to automakers “would result in fewer chips for others,” the official, involved in high-level discussions on the issue, told Reuters. Such a move could hurt manufacturers of consumer electronics such as laptops and medical devices such as pacemakers, the official added.

“It’s the worst nightmare if you’re a supply chain manager,” said another person familiar with White House thinking. “As a nation, this is terrible.”

No final decision has been made, people familiar with the matter said.

The official said the administration was pushing chip users and producers to increase transparency by improving the ability to forecast demand and generating better information on how chips travel through supply chains to end users.

The administration plans to issue recommendations once it completes a 100-day review required under a February executive order from Biden, including ways to “incentivize and encourage home production and d ‘increase capacity,’ the official said.

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The review covers the supply chains of semiconductors, high capacity batteries, critical minerals and pharmaceuticals, and active pharmaceutical ingredients.

Biden used Korean War-era law to bolster vaccines and supplies of essential medical equipment to fight the COVID-19 pandemic. The chip issue threatens the US economy and puts jobs in electoral battlefields from Texas to Michigan at risk.

Ford Motor Co last week warned the chip shortage would cut second-quarter production by 50%. Biden asked Congress for $ 50 billion to strengthen the national chip industry and $ 50 billion to create a new Commerce Department office to monitor national industrial capacity.

US Senator Chris Coons of Delaware, who had advocated the use of defense law, said he was “satisfied” with the administration’s actions so far.

Washington has called on Taiwan and other foreign governments to increase chip production levels for U.S. buyers, the official said. The administration is considering regulatory options and possible multilateral agreements to avoid future crises, the person said.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC) is looking to build more U.S. chip manufacturing plants in Arizona beyond what has already been planned, Reuters reported.

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Industry data shows that US manufacturers account for only about 12 percent of the world’s semiconductor manufacturing capacity, up from 37 percent in 1990. More than 80 percent of chip production takes place in Asia.

“There is no quick fix,” said Chad Bown, senior researcher at the Peterson Institute for International Economics.

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