EO 14017
On 2/25/21 we noted that President Biden had issued Executive Order #14017 which commenced a 100 day review of the US Supply Chain in relation to Semiconductor manufacturing and advanced packaging, high capacity batteries, critical materials (rare earths), along with pharmaceuticals and their ingredients. The agencies involved have one year to submit full reports on how to strengthen the US manufacturing base and make it less dependent on supplies from ‘foreign adversaries’ and how the US could expand its reach in a number of areas ranging from cybersecurity to agricultural commodities, but were to summarize their thinking in this ‘preliminary’ report..
The White House has released that 100 day review, with detail provided by the Department of Commerce, the DOD, the DOE, and Health & Human Services, and the 250 page report, “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth”, includes reviews of the defense, public health and biological preparedness industrial base, the information and communications, energy, transportation industrial base, and supply chains for production of agricultural commodities and food products, with a more detailed look next February.
Since we the US taxpayers are paying for the report, we thought it necessary to see what our dollars were buying, so we took on the task of wading through the governmental gobbledygook and overburdened detail to summarize the report, starting with a broad description of the report’s focus (the “What”), which are quotes from the report as to critical points in the four key focus areas, followed by the reasons why the government is all up-in-arms over these topics (the “Why”), and the report’s ‘solutions (the “How”), and our short rant on the report.
We have tried to cut much of the fat out of the 6 page Executive Summary below and have not burdened investors with the next 200+ pages of detail on pretty much anything relating to the four main topics in order for folks to get a picture as to the What, How, and Why the government is spending money and time once again to evaluate situations that have been evaluated so many time before. Ours is not to reason why, or is it?
The “What”
Semiconductor & Advanced Packaging – “The US share of global semiconductor production has dropped from 37% in 1990 to 12% today and is expected to decline further without a comprehensive US strategy to support the industry.”[1]
Large Capacity Batteries – “Global demand for EV batteries is projected to grow from approximately 747 gigawatt hours (GWh) in 2020 to 2,492 gigawatt hours by 2025[2]. Absent policy intervention, U.S. production capacity is expected to increase to only 224 GWh during that period, but U.S. annual demand for passenger EVs will exceed that capacity”.[3]
Critical Minerals & Materials – “China was estimated to control 55 percent of global rare earths mining capacity in 2020 and 85 percent of rare earths refining”.[4]
Pharmaceuticals & Active Pharmaceutical Ingredients – “Thanks to the work by both government and the private sector, in less than a year the United States dramatically increased its capacity for vaccine production. But shortages of critical generic drugs and APIs have plagued the United States for years. 87 percent of generic API facilities are located overseas which has helped reduce costs by trillions of dollars in the past decade, but has left the U.S. health care system vulnerable to shortages of essential medicines.”[5]
The “Why” (Self-Explanatory)
Of course, those involved will say to wait for the full report after one year, and that in governmental terms this 250 page report was put together overnight, but we wonder why such recommendations are not made to the President and Congress on a regular basis? Does everything relating to the highly identifiable issues in the report have to be restudied every time a new administration is elected? Yes, we understand that every administration has their biases and goals, which taint and slant the practicality of actually implementing programs that would continually upgrade these areas of contention in the US supply chain, but since we pay for all of this crap, shouldn’t we be able to expect that the agencies involved are providing such details and recommendations on a regular basis, regardless of what administration or bias is in vogue?
Maybe after reading the report our naiveté as to how the government ‘works’ is showing through, but if this was a report sent to the Board of Director of a company, aside from keeping the staff busy, it is far too general to mean anything, and by the time the full report comes out, bills are introduced, and negotiations between parties begins, it will be election time, with the next administration likely to assign its new agency heads to compile a report detailing solutions for the same or similar topics and the cycle begins again. “Where’s the Beef?”
[1] Antonio Varas, Raj Varadarajan, Jimmy Goodrich, and Falan Yinug, “Government Incentives and U.S. Competitiveness in Semiconductor Manufacturing,” September, 2020, Boston Consulting Group and Semiconductor Industry Association, (https://www.semiconductors.org/wp-content/uploads/2020/09/Government-Incentives-andUS-Competitiveness-in-Semiconductor-Manufacturing-Sep-2020.pdf).
[2] 5 “Lithium-Ion Battery Megafactory Assessment,” Benchmark Mineral Intelligence, March 2021, (https://www.benchmarkminerals.com/megafactories/)
[3] Alice Yu and Mitzi Sumangil, “Top Electric Vehicle Markets Dominate Lithium-Ion Battery Capacity Growth,” February 16, 2021, (https://www.spglobal.com/marketintelligence/en/news-insights/blog/top-electric-vehiclemarkets-dominate-lithium-ion-battery-capacity-growth).
[4] Carl A. Williams, “China Continues Dominance of Rare Earths Markets to 2030, says Roskill,” February 26, 2021, Mining.Com, (https://www.mining.com/china-continues-dominance-of-rare-earths-markets-to-2030-says-roskill).
[5] Food and Drug Administration, Testimony before the House Committee on Energy and Commerce, Subcommittee on Health regarding “Safeguarding Pharmaceutical Supply Chains in a Global Economy,” October 30, 2019, (https://www.fda.gov/news-events/congressional-testimony/safeguarding-pharmaceutical-supply-chains-globaleconomy-10302019).
The White House has released that 100 day review, with detail provided by the Department of Commerce, the DOD, the DOE, and Health & Human Services, and the 250 page report, “Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth”, includes reviews of the defense, public health and biological preparedness industrial base, the information and communications, energy, transportation industrial base, and supply chains for production of agricultural commodities and food products, with a more detailed look next February.
Since we the US taxpayers are paying for the report, we thought it necessary to see what our dollars were buying, so we took on the task of wading through the governmental gobbledygook and overburdened detail to summarize the report, starting with a broad description of the report’s focus (the “What”), which are quotes from the report as to critical points in the four key focus areas, followed by the reasons why the government is all up-in-arms over these topics (the “Why”), and the report’s ‘solutions (the “How”), and our short rant on the report.
We have tried to cut much of the fat out of the 6 page Executive Summary below and have not burdened investors with the next 200+ pages of detail on pretty much anything relating to the four main topics in order for folks to get a picture as to the What, How, and Why the government is spending money and time once again to evaluate situations that have been evaluated so many time before. Ours is not to reason why, or is it?
The “What”
Semiconductor & Advanced Packaging – “The US share of global semiconductor production has dropped from 37% in 1990 to 12% today and is expected to decline further without a comprehensive US strategy to support the industry.”[1]
Large Capacity Batteries – “Global demand for EV batteries is projected to grow from approximately 747 gigawatt hours (GWh) in 2020 to 2,492 gigawatt hours by 2025[2]. Absent policy intervention, U.S. production capacity is expected to increase to only 224 GWh during that period, but U.S. annual demand for passenger EVs will exceed that capacity”.[3]
Critical Minerals & Materials – “China was estimated to control 55 percent of global rare earths mining capacity in 2020 and 85 percent of rare earths refining”.[4]
Pharmaceuticals & Active Pharmaceutical Ingredients – “Thanks to the work by both government and the private sector, in less than a year the United States dramatically increased its capacity for vaccine production. But shortages of critical generic drugs and APIs have plagued the United States for years. 87 percent of generic API facilities are located overseas which has helped reduce costs by trillions of dollars in the past decade, but has left the U.S. health care system vulnerable to shortages of essential medicines.”[5]
The “Why” (Self-Explanatory)
- Insufficient US Manufacturing Capacity
- Misaligned Incentives & Short-termism in Private Markets
- Industrial Policies Adopted by Allied, Partner, and Competitor Nations
- Geographic Concentration in Global Sourcing
- Limited International Coordination
- Provide Direct Funding for Semiconductor Manufacturing & R&D – The report recommends at least $50b in investments to advance domestic manufacturing of leading edge semiconductors; expand capacity in mature node and memory production to 13 support critical manufacturing, industrial, and defense applications; and promote R&D.
- Provide Consumer Rebates & Tax Incentives to Spur Adoption of EVs – The report recommends $5b be spent to electrify the federal fleet with US made EVs and $13b in infrastructure investment to build a national charging infrastructure.
- Provide Financing Across the Full Battery Supply Chain – The report recommends new incentives to support battery cell and pack manufacturing in the United States, including grant programs that can help entrepreneurs who do not have the ability to access tax credits in the short run and the use of the $17b loan authority attached to the DOE, to review applications from critical material and mineral refining and processing facilities and to re-equip, expand, or establish facilities for manufacturing advanced technology vehicle battery cells and packs
- Establish a New Supply Chain Resilience Program – The report recommends the enactment of the proposed Supply Chain Resilience Program (DOC) and back it with $50b in funding.
- Deploy Defense Production Act – Establish a new interagency DPA Action Group to recommend ways to leverage the authorities of the DPA to strengthen supply chain resilience to the extent permitted by law (their words).
- Invest in the Development of Next Generation Batteries – The report recommends that the United States should focus on: (1) reducing or eliminating critical or scarce materials needed for EV or stationary storage, including cobalt and nickel; (2) accelerating battery technology advances including next generation lithium ion and lithium metal batteries and solid state design, and (3) developing innovative methods and processes to profitably recover “spent” lithium batteries, reclaim key materials, and re-introduce those materials to the battery supply chain.
- Invest in the Development of New Pharmaceutical Manufacturing & Processes – The report recommends that US agencies s increase their funding of advanced manufacturing technologies to advance continuous manufacturing and the biomanufacturing of APIs by using American Rescue funds to increase production of key pharmaceuticals and ingredients, including using both traditional manufacturing techniques and accelerating on-demand manufacturing capabilities
- Work with Industry & Labor to Create Pathways to Quality Jobs – The report recommends using Employment & Training Administration funds to support sector-based pathways to jobs through industry, labor, community colleges, and non-profit partnerships.
- Support Small, Medium, and Disadvantaged Businesses in Critical Supply Chains – The report recommends that the SBA should support the above who are in or seeking to enter the four targeted industries through long-term equity investment and SBIR programs.
- Create 21st Century Standards for the Extraction & Processing of Critical Minerals – The report recommends the development and adoption of comprehensive sustainability standards for essential minerals, such as lithium, cobalt, nickel, copper, and to establish an interagency team with expertise in mine permitting and environmental law to identify gaps in statutes and regulations that may need to be updated
- Identify Potential US Production & Processing Locations for Critical Minerals – The report recommends the establishment of working group comprised of agencies such as the Department of Agriculture, the Environmental Protection Agency, and others to identify potential sites where critical minerals could be sustainably and responsibly produced and processed in the United States while adhering to the highest environmental, labor, community engagement, and sustainability standards.
- Improve Transparency Throughout the Pharmaceutical Supply Chain – The report recommends that HHS should encourage Congress to give it new powers to track production and provide same on labeling for all pharmaceuticals sold in the US, particularly with generic drugs, which represent 90% of all pharmaceuticals consumed in the US.
- Create a Data Hub – The report recommends that the Commerce Department create a data hub to coordinate data from across the federal government to track supply and demand disruptions and improve information sharing
Of course, those involved will say to wait for the full report after one year, and that in governmental terms this 250 page report was put together overnight, but we wonder why such recommendations are not made to the President and Congress on a regular basis? Does everything relating to the highly identifiable issues in the report have to be restudied every time a new administration is elected? Yes, we understand that every administration has their biases and goals, which taint and slant the practicality of actually implementing programs that would continually upgrade these areas of contention in the US supply chain, but since we pay for all of this crap, shouldn’t we be able to expect that the agencies involved are providing such details and recommendations on a regular basis, regardless of what administration or bias is in vogue?
Maybe after reading the report our naiveté as to how the government ‘works’ is showing through, but if this was a report sent to the Board of Director of a company, aside from keeping the staff busy, it is far too general to mean anything, and by the time the full report comes out, bills are introduced, and negotiations between parties begins, it will be election time, with the next administration likely to assign its new agency heads to compile a report detailing solutions for the same or similar topics and the cycle begins again. “Where’s the Beef?”
[1] Antonio Varas, Raj Varadarajan, Jimmy Goodrich, and Falan Yinug, “Government Incentives and U.S. Competitiveness in Semiconductor Manufacturing,” September, 2020, Boston Consulting Group and Semiconductor Industry Association, (https://www.semiconductors.org/wp-content/uploads/2020/09/Government-Incentives-andUS-Competitiveness-in-Semiconductor-Manufacturing-Sep-2020.pdf).
[2] 5 “Lithium-Ion Battery Megafactory Assessment,” Benchmark Mineral Intelligence, March 2021, (https://www.benchmarkminerals.com/megafactories/)
[3] Alice Yu and Mitzi Sumangil, “Top Electric Vehicle Markets Dominate Lithium-Ion Battery Capacity Growth,” February 16, 2021, (https://www.spglobal.com/marketintelligence/en/news-insights/blog/top-electric-vehiclemarkets-dominate-lithium-ion-battery-capacity-growth).
[4] Carl A. Williams, “China Continues Dominance of Rare Earths Markets to 2030, says Roskill,” February 26, 2021, Mining.Com, (https://www.mining.com/china-continues-dominance-of-rare-earths-markets-to-2030-says-roskill).
[5] Food and Drug Administration, Testimony before the House Committee on Energy and Commerce, Subcommittee on Health regarding “Safeguarding Pharmaceutical Supply Chains in a Global Economy,” October 30, 2019, (https://www.fda.gov/news-events/congressional-testimony/safeguarding-pharmaceutical-supply-chains-globaleconomy-10302019).
Wendy's Ad Campaign - 1984 - Source: CNY News
RSS Feed