No Easy Fix for Broken U.S. Chip Supply Chains
President Joe Biden's recognition of the long-term problems in American manufacturing is an important first step. But it will take thoughtful spending to undo decades of underinvestment.
It will take years and the right investments to solve America’s chip problem.
Photographer: Nicolaus Asfouri/AFP via Getty Images
U.S. supply chains may need fixing, but revitalizing critical American manufacturing won’t be solved with knee-jerk proposals, and there’s more to it than barrels of money.
The White House is expected to order a 100-day review of factory capacity for semiconductors, large-capacity batteries, pharmaceuticals and strategic materials such as rare earths. It starts a necessary process of evaluating American manufacturing vulnerabilities, even if the timetable leaves immediate help out of reach for automakers whose production capabilities have been paralyzed by a severe shortage of chips. Moody’s Investors Service estimated this week that the semiconductor supply logjam will trim earnings at General Motors Co. and Ford Motor Co. by about one-third this year and materially erode their profit margins. But there’s not much the Biden administration can do about the current situation as much as it might want to: New U.S. semiconductor manufacturing capacity will take years to set up, and the power of the Treasury isn’t terribly useful if there aren’t any chips to be had.