There has been endless coverage of component delays and lots of theories and speculation about the causes. For reliable diagnosis and treatment, there is a shortage of information on precisely where and what is causing the bottlenecks. Commerce Secretary Gina Raimondo is trying to shine some light on these areas to hopefully alleviate the worsening crisis.
An article in Bloomberg outlined Raimondo’s request (which may come just before a not so subtle command) to provide supply chain information the administration can use to end or at least ease the chip shortage. Perhaps the fear of this knowledge getting out will be enough to encourage companies to relax their pre-emptive component purchases. The White House may even request or force companies into hording less chips.
The Commerce Department is now asking companies to fill out questionnaires within 45 days providing supply chain information. 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 don’t 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 today 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 information request — and potential enforcement through DPA or other means — is necessary because there’s 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?’”
This is a pretty bold stance, but crises in the U.S. have often been met with major asks of the people and corporations. The Defense Production Act, which is the foundation of Raimondo’s request, was initiated during the Korean War and required business to accept contracts that facilitated military readiness.
Twenty years earlier, in 1934 and on the tale end of the great depression, FDR was pulling all available levers to right the U.S. economy — he even invented some new ones like the Gold Reserve Act. In order to buoy American liquidity and use federal debt to finance his plans, the U.S. did everything they could to store enough gold to issue more cash, including making bullion ownership illegal.
On March 9 Congress passed the Emergency Banking Act which empowered the President to call all gold into the Treasury, with heavy penalties for those who disobeyed his orders. At that time $1,400,000,000 in gold was in circulation, most of it hoarded. In the next 30 days more than one-third of this was turned in to the Treasury.
This U.S. isn’t quite there with the chip shortage, but something like the Defense Production act may indeed be coming.
The lead time for components isn’t getting better, and will likely get worse before we see a turnaround. It remains to be seen if the government will do anything big to change course.
Stay tuned, but for now read the whole article over at Bloomberg.
