“Friend-shoring”— It’s National Security
Lithium, Batteries, Chips, and the Supply Chain
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Vladimir Putin made headlines last week. The invasion of Ukraine overshadowed, but also highlighted, another dramatic piece of news. It was a US government admission that doing business with rivals and competitors can be problematic.
You may have missed the White House (WH) announcement that will radically change the country’s economic supply chain and whom we do business with. This will have a huge effect on our transportation transformation from chemicals and batteries for electric vehicles, to computer chips, and much more.
PROBLEMATIC GLOBALIZATION
The WH plan is a repudiation of elements of the globalization of our economy over the past four decades that has been driven by US trade law and corporations. Some call it the offshoring of jobs and supplies. The Biden Administration report claims that supply chains, “and the growth of industrial bases have largely been considered the domain of the private sector.”
President Joe Biden test drives the Hummer EV during a tour of the General Motors Factory ZERO electric vehicle assembly plant, Wednesday, November 17, 2021, in Detroit. (Credit: White House/ Adam Schultz)
That, the WH argues, has to change because we have now seen how fragile those private sector supply chains are and put the country at risk. “It is now clear that the U.S. government must work to address these threats to our economic resilience and national security,” the plan states.
MADE IN AMERICA
One of the most direct lines in the WH plan is this, “make more things in America.” It sounds a bit like Biden on the campaign trail, with the report saying, “expand production capacity in the United States; diversify away from single- or sole-sources, which create fragile supply chains; and reinvest in America’s research and development prowess.”
The White House Economic Council claims "historic progress" has been made in the past year since the President signed an Executive Order on supply chains.
High tech Li-ion batteries being produced by an automated machine in Shanghai, China. (Credit: Getty Images)
That is only part of this effort. The big picture is the WH wants to move supply chains from our adversaries to our friends. The WH has created a new term to explain this change. “We must reduce our dependence on China and other geopolitical competitors for key products, a “friend-shoring” approach to supply chains both strengthens U.S. resilience and ensures the resilience of allied and partner supply chains as well,” the report says.
TRANSPORTATION TRANSFORMATION
So what does this have to do with electric vehicles, automation, space, and aviation? A lot. The Biden report highlights, “semiconductors and large-capacity batteries as critical products to target for onshoring."
President Biden speaking about semiconductor investment on January 21, 2022 (Credit: White House)
I’ve written about the computer chip shortage. It continues to plague carmakers. The WH report says demand for semiconductors, “was as much as 17 percent higher in 2021 than it was in 2019.” The WH says the shortage has been responsible for a quarter of the core inflation the country is suffering. The WH highlights that chip manufacturers announced $80 billion in US investments. But Biden wants more. Congress has not yet agreed on $50 billion in government incentives and investment. Separate bills have passed in both houses.
THE RARE EARTHS
Then, there are minerals to make the batteries that will power all those electric vehicles Biden wants in the US by 2030. The WH admits the picture has been grim. “The upstream section of the supply chain – materials, battery components, and cells – have mostly been built outside of the United States,” the report says.
President Biden speaking about domestic mining and processing of rare earth minerals on February 22, 2022. (Credit: White House)
The move to change the chain has involved several government departments including the Department of Defense (DOD). “DOD has made investments to re-shore production and processing of rare earth elements, reducing dependence on China,” the report says. The WH claims that effort will result in an additional half billion dollar private sector investment to produce these key battery elements.
The Department of Energy has $7 billion that it will spend, “to accelerate innovations and facilities across the battery supply chain, from battery materials refining, processing and manufacturing; to battery manufacturing, including components; to battery recycling and reuse.” (More on this in the coming weeks)
FRIEND-SHORING
The WH recently touted the “buy-America” investment to build up to 30,000 charging stations by Tritium in Tennessee. Tritium is not American, it is an Australian company. But it fits the Biden effort to “friend-shore.”
From @POTUS Twitter account the day of the Tritium announcement. (Credit: @POTUS)
“Many of the recently announced U.S. investments in semiconductors and new battery production involve companies and technology based in America’s allies as well as American companies,” the WH says.
With changing global power dynamics, the WH plan claims the private sector couldn’t get it completely right when it comes to supply chains. So the government is stepping in on National Security grounds. “Friend-shoring” is underway.
(Cover photo credit: Getty Images)