WASHINGTON/TAIPEI — U.S. President Joe Biden is set to sign an executive order as early as this month to accelerate efforts to build supply chains for chips and other strategically significant products that are less reliant on China, in partnership with the likes of Taiwan, Japan and South Korea.
The document will order the development of a national supply chain strategy, and is expected to call for recommendations for supply networks that are less vulnerable to disruptions such as disasters and sanctions by unfriendly countries. Measures will focus on semiconductors, electric-vehicle batteries, rare-earth metals and medical products, according to a draft obtained by Nikkei.
The order states that “working with allies can lead to strong, resilient supply chains,” suggesting that international relationships will be central to this plan. Washington is expected to pursue partnerships with Taiwan, Japan and South Korea in chip production and Asia-Pacific economies including Australia in rare earths.
The U.S. plans to share information with allies on supply networks for important products and will look to leverage complementary production. It will consider a framework for speedy sharing of these items in emergencies, as well as discuss securing stockpiles and spare manufacturing capacity. Partners could be asked to do less business with China.
The issue has taken on added urgency with a chip shortage this year that has hit automakers particularly hard.
The U.S. has seen its share of global semiconductor manufacturing capacity plummet in recent decades, according to Boston Consulting Group. What was 37% in 1990 is now down to 12%.
While it has asked Taiwan — which tops the list at 22% — to ramp up output, plants there are already operating at full blast, and there are few options for boosting supply in the short term.
Meanwhile, Boston Consulting forecasts that China, helped by an estimated $100 billion in government subsidies, will lead the world with a 24% share in 2030.
Depending too heavily on China for important products poses security risks. Beijing has used regulations to put pressure on trading partners, such as imposing an embargo on rare-earth exports to Japan in 2010 amid tensions over the Japanese-administered Senkaku Islands, which China claims as the Diaoyu.
The U.S. imports about 80% of its rare earths from China, and relies on the country for as much as 90% of some medical products.
Restructuring supply chains is likely to take quite some time, particularly in semiconductors. Because the number of top chipmakers in the world is limited, these companies have the leverage to decide whether to follow America’s lead. Doing so will require understanding and cooperation from other governments.
Washington has already begun laying the groundwork with closer ties to friendly partners like Taiwan. Senior U.S. and Taiwanese officials signed a memorandum of understanding in November to promote technological cooperation in seven areas, including semiconductors and fifth-generation wireless.
Taiwan Semiconductor Manufacturing Co., the world’s top chip foundry, agreed last year to build a fabrication facility in Arizona that is likely to become a symbol of this bilateral relationship. The chipmaker will invest $12 billion in the plant, which will produce semiconductors for the military and is slated to come online in 2024.
