Sat, Sep 25, 2021 page10

• US weighs using defense law to obtain chip data

  LIMITED OPTIONS: Washington is ready to invoke a Cold War security law to reduce vehicle production bottlenecks if suppliers do not disclose their chip supplies voluntarily

  • Bloomberg
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  The administration of US President Joe Biden is considering invoking a Cold War-era national security law to force companies in the semiconductor supply chain to provide information on inventory and sales of chips, US Secretary of Commerce Gina Raimondo said on Thursday.

  The goal is to alleviate bottlenecks that have idled US car production and caused shortages of consumer electronics, and to identify possible hoarding, she said.

  Her team for months has sought clarity into how companies allocate their semiconductor supply. However, previous meetings that convened firms from different industrial sectors have not led to increased transparency and many companies have refused to hand over business data to the government.

  

  US Secretary of Commerce Gina Raimondo speaks in Washington on Thursday.

  Photo: Reuters

  The US Department of Commerce is now asking companies to fill out questionnaires to provide supply chain information within 45 days. The request is voluntary, but Raimondo said she warned industry representatives that she might invoke the Defense Production Act or other tools to force their hands if they do not respond.

  “What I told them is, ‘I don’t want to have to do anything compulsory,’ but if they don’t comply, then they’ll leave me no choice,” she said. “I said we’re evaluating all of our options right now, all the tools. I hope not to go there but we need to see some progress and we definitely need compliance.”

  The production act gives the president broad authority to direct industrial production in crises. The Trump and Biden administrations each invoked it to hasten the production and distribution of COVID-19 vaccines and other pandemic-related medical supplies.

  It is not clear precisely how Raimondo might use the law to obtain information from semiconductor manufacturers or their customers, and she did not name any specific companies.

  A global shortage of chips that power everything from laptops to automobiles has continued to affect production in many industries, and finding solutions has been a priority since Biden took office.

  US officials have repeatedly emphasized that the private sector must step up and provide more transparency if the government is to successfully address the shortage.

  The commerce chief and National Economic Council Director Brian Deese held meetings with companies on Thursday to stress that point again. Raimondo said the first session “went very well” and participants were “extremely constructive.”

  The information request — and potential enforcement through the act or other means — is necessary because there is a lack of trust among companies in the supply chain, she said.

  “There’s allegations of certain consuming companies buying two or three times what they need and stockpiling,” Raimondo said. “So suppliers say, ‘We can’t get a handle on an accurate demand signal because consumers are stockpiling, so we don’t know what the accurate demand is.’ Some consumers are saying ‘We can’t get straight answers from suppliers, how come I was told I could have X and now I’m being told I can only have half of X?’”

  Forcing companies to reveal details of their stockpiles would be of interest to investors. One of the biggest concerns about the industry’s massive run-up in revenue and earnings is that chip users are panic-buying more than they need, and that the resulting accumulation of unused inventory will cause a crash.

  The issues facing the supply chain now largely center around the spread of the Delta variant of SARS-CoV-2 in Southeast Asian countries like Malaysia and Vietnam, where semiconductor plants had to shut down because of outbreaks and are now operating at reduced capacity.
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