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Office politics: president Joe Biden and vice-president Kamala Harris meet with a bipartisan group of House and Senate members on US supply chains in February


Manufacturers ofnewtechnologies withUSpat- ents could also find it attractive to reshore. Some of the same problems regarding cost


and time to market also apply to semiconduc- tor production. The automobile industry — hit by a shortage of both chips and electric batter- ies — was among 17 leading industry associa- tions to sign a joint letter applauding Mr Biden’s executive order. The list included the Semiconductor


Industry Association. Once the global leader in chipmaking, the US share today is just 12%. The industry blames this on the substantial subsi- dies offered to foreign competitors, while the CHIPS for America Act,which grants investment tax credits to USmakers, remains unfunded.


Protecting vulnerable supply chains Robert Handfield, a professor of supply chain management at North Carolina State University, agrees that vulnerabilities in the supply chain need to be addressed. But he is sceptical aboutwhetherMr Biden’s plan will be effective, saying: “Mr Biden’s statement reveals a profound naïveté of supply chains.” MrHandfield notes that healthcare vendors


buy on the basis of cost,mostly fromproducers in Asia. He questions who will fund the capital investment and take the risk to produce in the US where labour and capital costs will be higher, and whether government procurement programmes — which are now based on cost — will reimburse themfor higher prices. “I think itwould be difficult not to hurt cor-


porate profits without some guarantees,” Mr Handfield comments. “There will have to be


April/May 2021 www.fDiIntelligence.com


incentives like a guaranteed contract or a change in regulations. They would have to break down the cost of capital and determine a fair price based on that determination — and that gets to be very political.” Mr Handfield thinks that Mr Biden’s strat-


egy will also increase automation, especially related to the Internet of Things.Andhe believes that creating the right kind of incentives could encourage foreign investment, especially since somemultinationals are starting to askwhether they need to be closer to their markets. In contrast to the view that cost is king, Mr


Biden’s emphasis on resilience delights Vedat Verter, supply chain management department chair at Michigan State University. “The main issue is not aboutcompany profits—it is supply chain resilience,” Mr Verter says. While acknowledging that profits may fall in the short term, he adds that increasing resiliency enables redundancy, geographic diversification and flexibility in company supply chains, which will help companies manage abnormal events such as the Covid-19 pandemic and sur- vive the next catastrophe. “When youare so lean and cost-effective you


increase your dependence on suppliers because you go to the cheapest place and youmake your supply chain more fragile,” Mr Verter says. While incentives may be needed to encour-


age resilience, he says they should be specific and targeted, and not leave loopholes in the implementation phase. Meanwhile, thoseweighing plans to reshore


supply chains await the administration’s rec- ommendations with interest.■


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