Nihon Keizai Shimbun Reports Biden Administration to Sign Presidential Executive Order Soon
[Asia Economy Reporter Kwon Jae-hee] The U.S. Biden administration is set to strengthen supply chains for critical components and raw materials such as semiconductors and electric vehicle batteries by coordinating with allied countries. This move aims to reduce dependence on China, where a significant portion of raw materials and key components are concentrated.
According to a draft obtained by the Nihon Keizai Shimbun on the 24th, President Biden is expected to sign an executive order to establish a national strategy for the supply chains of critical components and raw materials. The key components include semiconductors, electric vehicle batteries, rare earth elements, and medical supplies. Semiconductors are expected to be linked with Taiwan, which has friendly relations with the U.S., as well as Japan and South Korea. The Nihon Keizai Shimbun reported that cooperation on rare earth elements is anticipated with Australia and various Asian countries.
Specifically, there are plans to share information on supply chains of major products with allied countries. In addition to mutually complementary measures among production items, a structure for rapid procurement among allies in emergencies is also under consideration. There is also a possibility that requests will be made to reduce transactions with China.
This major restructuring of the supply chain for key components by the Biden administration comes as the semiconductor shortage, which became apparent earlier this year, has dealt a direct blow to U.S. automobile companies and others.
In particular, China’s semiconductor production capacity is expected to account for 24% of the global total by 2030, becoming the largest in the world. The Biden administration’s plan is based on the concern that reliance on China in the supply chain poses security risks and that pressure can be applied through trade regulations. China has previously regulated rare earth exports to Japan, with which it has a conflict over the Senkaku Islands (Chinese name Diaoyu Islands). In fact, the U.S. imports about 80% of its rare earth elements from China.
However, it remains uncertain whether countries and companies will respond positively to this plan. The Nihon Keizai Shimbun stated, “Leading semiconductor makers worldwide will decide whether to align with the U.S. Biden administration based on their own judgments,” adding, “Building a new supply chain is likely to take considerable time in the future.”
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