(Bloomberg) — President Joe Biden’s top economic adviser, Brian Deese, has sought the Taiwanese government’s help resolving a global semiconductor shortage that’s idling U.S. car manufacturing plants, according to a letter reviewed by Bloomberg News.
In the letter, Deese thanked Taiwan’s minister of economic affairs, Wang Mei-hua, for her personal engagement on the microchips shortage and relayed concerns from U.S. automotive companies.
Deese’s letter shows that top White House officials have become involved in trying to resolve the shortage, which has presented an early challenge to Biden’s administration. Deese, the director of the National Economic Council, as well as National Security Adviser Jake Sullivan are both personally engaged in the effort to address bottlenecks in auto companies’ supply chains, a White House spokesperson said.
The spokesperson asked not to be identified by name because the talks have been private. Wang told reporters Thursday that she hasn’t received a letter from Deese and reiterated that Taiwan’s chipmakers are trying to resolve the supply constraints.
The administration is engaging with international partners and allies to encourage them to take steps to address the shortage, but all sides recognize it’s not a short-term crisis, the White House spokesperson said. More will have to be done to prevent similar shortages in the future, the spokesperson added.
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Taiwan is home to the largest semiconductor manufacturing industry in the world, and also relies on U.S. weapons to defend against China, which views the island as part of its territory and has threatened to use force if Taipei moves toward formal independence.
The Biden administration has also asked U.S. embassies around the world to identify how foreign countries and companies that produce chips can help address the global shortage and to map the steps taken to date, the spokesperson said.
The formal outreach to Taiwan follows meetings between Deese and Sullivan and U.S. auto companies and their suppliers. The auto industry is leaning on the White House to pressure foreign chipmakers and their governments to allocate supplies to the U.S.
“We think those are reasonable things for the government to ask,” said Matt Blunt, president of the American Automotive Policy Council, which lobbies for Ford Motor Co., General Motors Co. and Stellantis (formerly Fiat Chrysler Automobiles). “This is going to be a problem for the first half of the year.”
Administration officials in the State and Commerce departments have previously sought meetings with Taiwanese government and industry officials to press them to ramp up the supply of semiconductors.
Thousands of American autoworkers could face cuts to their hours and wages as plants halt production while awaiting new shipments of automotive-grade semiconductors from Taiwan and South Korea — chips that won’t even be manufactured for three to four months. Companies have provided the White House with the job impact data, people familiar with the matter said.
That prospect threatens to undermine Biden’s efforts to energize a sputtering economic recovery, hitting hardest in political battleground Michigan, as well as Texas and Kentucky.
IHS Markit estimated this week that nearly 1 million fewer light vehicles will be produced in the first quarter of 2021 because of the semiconductor shortage. The projection was a revision of an earlier estimate of 672,000 fewer cars coming off production lines in the first quarter that was issued by the group on Jan. 29.
The chip shortage first hit the auto industry in December, coinciding with a tumultuous transition of power, an impeachment trial, the ongoing pandemic and the urgent push for an economic stimulus. By the time Biden was sworn in, former President Donald Trump’s administration had only made preliminary efforts to fix the problem.
Senior Biden administration officials have identified semiconductors as one of the strategic areas for domestic investment to compete with China and ensure the U.S. is no longer dependent on other countries. Biden plans to sign an executive order in the coming weeks to demand a review of supply chains, though no imminent action is expected to result from it.
Leaders across the globe are realizing just how dependent they’ve become on the island democracy of Taiwan, which is being courted for its capacity to make leading-edge computer chips. That’s mostly due to Taiwan Semiconductor Manufacturing Co., the world’s largest foundry and go-to producer of chips for Apple Inc. smartphones, artificial intelligence and high-performance computing.
Taiwan’s role in the global economy was largely below the radar before the auto industry suffered shortfalls in chips used for everything from parking sensors to reducing emissions. With carmakers including Germany’s Volkswagen AG, Ford and Japan’s Toyota Motor Corp. forced to halt production and idle plants, Taiwan’s importance has suddenly become too big to ignore.
But there’s a question about how effective cooperation can be in a time when every allied country wants to move away from its dependence on China and build their own capacity at home.
U.S., European and Japanese automakers are lobbying their governments for help, with Taiwan and TSMC being asked to step in. German Chancellor Angela Merkel and French President Emmanuel Macron discussed the potential for shortages last year and agreed on the need to accelerate Europe’s push to develop its own chip industry, according to a French official with knowledge of the matter.
Exacerbating the U.S. shortages, power failures caused by brutally cold weather in Texas have shuttered semiconductor plants clustered around Austin.NXP Semiconductor NV, one of the largest makers of chips used by auto companies, has idled two plants in the Austin area, the company said early Wednesday. Samsung Electronics Co., the world’s second largest semiconductor maker, also closed down production at its Austin site, the South Korean company said. Infineon Technologies AG, another large supplier of chips to the automotive industry, said its Austin plant has been shut down because the power was turned off.
(Updates with comment from Taiwan minister in fourth paragraph)
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