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Biden’s 90 ideas provide long-term aims not short-term fixes

Cons. Discr. - Autos 1103 Health Care 340 Info Tech - Tech Hardware 729 Materials - Metals/Mining 705 U.S. 5143

The administration of U.S. President Joe Biden has published the results of a 100-day review of the state of supply chains in semiconductors, large capacity batteries, critical minerals and pharmaceutical ingredients, including a wide series of policy recommendations for those and six other industrial areas. This report provides some initial insights and key data points while latter reports will dig into sector-specific details.

The review sets the stage for long-term policy measures but is unlikely to transform shortages of semiconductors, discussed in Panjiva’s research of June 1, or pharmaceutical ingredients in the near term. 

Importantly the ongoing process of supply chain policy will include a whole-of-government approach with a task force including the secretaries of Commerce, Transportation and Agriculture to focus on supply and demand imbalances in areas including transportation, construction, electronics and food.

The plans make extensive use of the power of the administration to convene bodies and some new dollars to be invested, but this does not – at first glance – appear to be a European-style statist industrial policy. In aggregate there are nearly 90 detailed recommendations. 

In the case of large-scale batteries, there are 30 recommendations in four areas including stimulating demand for electric vehicles and infrastructure as well as materials sourcing and research / development. 

For critical minerals, there are over 30 specific recommendations in seven work areas, importantly including working with allies to “secure supplies of critical goods that we will not make in sufficient quantities at home” including the Quad (Japan, Australia and India) and G7 (additionally Canada, France, Germany, Italy and the U.K.) nations. 

In the case of active pharmaceutical ingredients, there are 25 recommendations split between the objectives of improving supply chain transparency as well as “increasing the economic sustainability of U.S. and allied drug manufacturing and distribution“.

For semiconductors, there are seven broad policy areas with 34 recommendations including fully funding the CHIPS Act. Semiconductors are arguably the area where additional funding may make the most difference without the need for wider infrastructure spending and where there is a more widespread impact on the economy at large.

The challenges for supply chains can already be seen in the surging demand for both semiconductors and related products. Panjiva’s data shows that U.S. imports of semiconductors jumped by 38.3% in April versus April 2019 having fallen by 0.4% in February versus February 2019. Imports of computers and phones meanwhile increased by 29.4% and 17.7% in April 2021 versus April 2019.

Semiconductor imports surging, products less so

Chart segments change in U.S. imports by product. Source: Panjiva

The growth in semiconductor imports was outstripped by that of  large-capacity batteries for automotive applications, which increased by 79.6% year over year in April and by 82.5% compared to 2019. That’s the result of the ramp-up of new model production by several major manufacturers but represented a markedly slower rate of growth than seen in prior months. 

Shipments of pharmaceutical active ingredients declined by 1.7% year over year after surging 53.7% higher a month earlier, potentially disrupting the  manufacturing of COVID-19 vaccines. 

Imports of critical minerals, meanwhile, only rose by 1.0% year over year and dropped by 20.5% compared to 2019, likely reflecting continued international competition for access to rare earth minerals (mainly from China) and lithium (from Chile and Argentina). Solving critical minerals sourcing will depend most on cooperation with overseas allies. 

Supplies of minerals, pharmaceutical ingredients slowing

Chart segments change in U.S. imports by product. Source: Panjiva

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