Chip Shortage Exposes Vulnerable Supply Chains



Editorial Board | Bloomberg

Hoping to address supply-chain disruptions following the pandemic, President Joe Biden on Wednesday ordered a wide-ranging review of U.S. reliance on foreign sources for critical goods such as pharmaceuticals, rare-earth metals and high-capacity batteries. On the most urgent matter — a shortage of semiconductors that has upended production at American automakers — he needs to think bigger.

Last spring, car sales collapsed as the coronavirus took hold. Expecting an extended downturn, automakers reduced orders for supplies, including parts that require semiconductors. At the same time, demand for the higher-margin chips used to make laptops, smartphones and other devices soared as much of the country began working from home. When the economy bounced back more quickly than anticipated, the result was a supply crunch for car companies. It may be months before production is back to normal.

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