The Biden Administration Can Help Fix America’s Manufacturing Woes
By John Mitchell, IPC president and CEO
100 days into office, the Biden administration has downplayed its ambitious and expansive efforts to revitalize American manufacturing in the wake of the coronavirus pandemic and other shocks to the global supply chain. To appreciate the goals of the President’s supply chain initiative, it is important to understand how U.S. manufacturing got to where it is today.
The global chip shortage currently undermining the production of consumer goods provides an instructive example of the consequences of inadequate supply chain attention. In recent months, the shortage has stalled auto factories in North America and Europe and impacted other devices, like game consoles and 5G smartphones, which have been unable to get the chips they need to produce their products. Despite the desperate need, there simply hasn’t been a lever the U.S. government can flip to get production moving again.
Displacement is one underlying problem. Today, Asia produces more than 70 percent of all electronics manufactured globally. Only four of the top 20 electronics manufacturing services providers are in the United States. Relying on non-domestic sources increases the amount of uncertainty in production, as supply chains become longer and more complicated, and more susceptible to changes in domestic policies such as tax changes or tariffs.
Even with two decades of data, the United States is still coming to terms with a dramatically weakened industrial base and its own culpability for its decline. The government response has been one of triage—focusing federal support on the most strategically crucial manufacturing sector segments in isolation. The electronics industry has been a case-in-point, as billions of dollars in much-needed investment in semiconductors and broader microelectronics industries stand in for long-term, sustainable solutions.
But now is the time for the U.S. to move beyond triage to a more strategic vision for technological innovation and leadership. That vision will require the U.S. to take a more holistic approach to bolster the U.S. electronics industry, including those segments that manufacture printed circuit boards and printed circuit assemblies. The future of U.S. leadership will hinge on cultivating an ecosystem where industries can succeed more broadly, not just survive crises.
While there is increasingly reason to believe that President Biden appreciates the importance of manufacturing ecosystems, more work remains to be done. His latest executive order on supply chains examines semiconductor manufacturing, giving only a nod to the rest of the supply chain. This is short-sighted. Whenever there is a kink in any supply chain, all other parts of the ecosystem become constrained. Yet the recent issue of notice from the Department of Commerce’s Bureau of Industry and Security seeking comment on risks from semiconductor manufacturing supply chains reflects that this holistic thinking hasn’t taken hold. While semiconductor manufacturing may be the problem of the day, putting out that particular fire won’t fix the system.
The Biden administration needs to fix structural challenges to the supply chain – ensuring the domestic availability of affordable rare minerals and raw materials, strengthening the industrial base, investing in innovation and factories of the future – rather than tinkering with the resulting consequences. America, which boasts the most sophisticated electronics manufacturing system globally, has ignored the parts and materials needed for our systems to function for far too long. We must start thinking of manufacturing as a whole ecosystem that needs investment and policy attention.
The Biden administration’s goal should be clear: make America a more attractive place to support and grow business and bolster manufacturing through technological innovation and smart trade policy. President Biden and his team must recognize that a robust manufacturing strategy needs dependable and localized accessibility to materials, components and parts to achieve these goals. This will require rebuilding an electronics manufacturing ecosystem that is secure and cohesive instead of vulnerable and piecemeal.
The Biden administration has been willing to reimagine how government supports industries in pursuit of the greater good. That same spirit should be brought to bear on manufacturing where officials and policymakers can complement the financial investment band-aids with much-needed manufacturing policy stitches that could fully and effectively close the wound suffered by domestic manufacturing.
John Mitchell is president and CEO of IPC, the global trade association representing the electronics manufacturing industry.