Kamala Raman, senior director analyst with Gartner, explains the reasoning behind President Biden’s initial choice of four critical supply chains to address in a 100-day review.
The President’s executive order initially targets four sectors that are considered critical to the U.S. economy and national security: semiconductors, large-capacity batteries, pharmaceuticals and rare earth elements. All are part of “the supply-chain backbone of a functioning economy,” Raman says.
The goal of the order is to examine the nation’s capabilities in those areas and determine how they might be strengthened while serving as a source of increased goods and services for U.S. domestic markets. All have experienced problems in recent years, but each has its own particular challenges. A shortage of semiconductors is especially having a disruptive impact on the automotive industry. The pandemic has worsened the nation’s access to critical medical supplies, many of which are produced in China and in other overseas locations. Batteries are in high demand because of the big increase in production and sale of all-electric vehicles. And rare earth production is dominated by China, threatening U.S. access to materials that are essential to a wide range of high-tech products and devices.
In all cases, misalignment of supply and demand, caused in large part by the coronavirus pandemic, has led to serious concerns about the stability of these critical supply chains. How the executive order ends up affecting those and other key sectors remains to be seen, however. The government could offer certain incentives to build up domestic production, although there will continue to be a need for foreign sourcing. What the order might do in part is shift some of that sourcing from China to countries that are considered allies of the U.S., and therefore able to guarantee a more reliable supply.
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