The United States has initiated investigations into the impact of semiconductor and pharmaceutical imports on national security. The unconventional move highlights a growing concern over the country’s reliance on overseas suppliers. It particularly highlights the importance of critical raw materials and active pharmaceutical ingredients. The Department of Commerce is at the forefront of this initiative, analyzing how imports from nations like Taiwan, South Korea, India, and China affect the nation’s economic and strategic interests.
Although the US is indeed a big player in semiconductor production, the US’s capabilities are limited and very specialized. For instance, Taiwan Semiconductor Manufacturing Corp. is increasing its US investments in new semiconductor manufacturing facilities to ramp up domestic production. Experts caution that reshuffling supply chains will be an uphill climb. That process could take years and millions of dollars, which begs the question—what’s in the pipeline to fill these critical gaps in the meantime?
At an alarming rate Right now, more than 70 percent of active pharmaceutical ingredients used in US medicines come from foreign countries. India, the E.U., and China are our three largest suppliers of critical healthcare commodities. This has laid bare the fragility of the US healthcare system to supply chain shocks abroad. The world’s reliance on these countries extends to vital pharmaceutical components. This heavy reliance therefore makes the domestic production push more urgent than ever.
The semiconductor industry faces similar challenges. Taiwan makes 92% of the world’s advanced logic chip fabrication capacity, with South Korea at 8%. The US depends on these nations for specific types of advanced chips that are integral to everyday products such as cars, smartphones, and refrigerators. Last year, laptops and smartphones combined accounted for almost $174 billion in imports from China. The announcement of this enormous number increased concern over our dependence on their supply chain.
In response to the outbreak of COVID-19, US Commerce Secretary Howard Lutnick cited the need for domestic production of pharmaceuticals and the same for semiconductors.
“We need to make medicine in this country. We need to make semiconductors.” – US Commerce Secretary Howard Lutnick
This is an initiative that President Trump has been very supportive of, even stating that we need to be self-sufficient in all critical industries.
“We’re doing it because we want to make our own drugs.” – President Trump
The Department of Commerce’s investigation will explore the impact of these specific foreign imports on our national security. These important findings, if acted on by policymakers, would increase efforts to reduce our economy’s dependence on international suppliers and bolster our domestic manufacturing capabilities.
The implications of these investigations are far-reaching. In fact, the US produces only 20% of all pharmaceuticals manufactured around the world while consuming about 45% of the world’s pharmaceutical production. This gap highlights our nation’s reliance on foreign manufacturers to supply the health care needs of this country.
As the geopolitical world order changes, the US government is increasingly emphasizing national security interests in its economic efforts. It looks at the vulnerabilities with its supply chains. This proactive approach is meant to mitigate risks from foreign dependence while bolstering its own manufacturing base.
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