US Commerce Dept Warns Of Severe Chip Shortages

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Some manufacturers have less than 5 days supply of computer chips, putting US manufacturing at shutdown risk, warns federal agency

The US Department of Commerce has released data that shows the worrying state of the semiconductor supply chain, and how little inventory manufacturers current have.

The results from the Risks in the Semiconductor Supply Chain Request for Information (RFI) shows that the median inventory held by chips consumers has fallen from 40 days in 2019 to less than 5 days in 2021.

Indeed, so serious is the chip shortage currently, that the Commerce Department has warned that any further disruption to the chip supply chain could result in the shutdown of US manufacturing facilities, “putting American workers and their families at risk.”

Semiconductor RFI

The US Department of Commerce said that its Request for Information (RFI) about chip supply chain highlighted the ongoing semiconductor shortage, and underscored the need for the President’s proposed $52 billion in domestic semiconductor production.

In May last year, bipartisan legislation (part of a broader China competition bill) sought to approve $52 billion to bolster American semiconductor chip production and research over five years.

But now the Commerce Department has published its data to show why action, such as the upcoming legislation, is needed as soon as possible.

“The RFI showed that median inventory held by chips consumers (including automakers or medical device manufacturers, as examples) has fallen from 40 days in 2019 to less than 5 days in 2021,” said the US government agency.

“If a Covid outbreak, a natural disaster, or political instability disrupts a foreign semiconductor facility for even just a few weeks, it has the potential to shut down a manufacturing facility in the US, putting American workers and their families at risk,” the department stated.

“The semiconductor supply chain remains fragile, and it is essential that Congress pass chips funding as soon as possible,” said Secretary of Commerce Gina M. Raimondo.

“With sky-rocketing demand and full utilization of existing manufacturing facilities, it’s clear the only solution to solve this crisis in the long-term is to rebuild our domestic manufacturing capabilities,” said Secretary Raimondo.

“President Biden has proposed $52 billion to revitalize our domestic semiconductor industry, and every day we wait on this funding is a day we fall further behind,” said Secretary Raimondo. “But if we address this problem, we can create good jobs, rebuild American manufacturing, and strengthen our supply chains here at home for years ahead.”

The other key findings of the Commerce RFI were are follows:

  • Demand for semiconductors is as much as 17 percent higher in 2021 than it was in 2019, and consumers aren’t seeing commensurate increases in the available supply.
  • The majority of semiconductor manufacturing facilities are operating at or above 90 percent utilisation, meaning there is limited additional supply to bring online without building new facilities.
  • Bottlenecks are most concentrated in a specific semiconductor inputs and applications, including legacy logic chips (used in automobiles, medical devices, and other products), analog chips (used in power management, image sensors, and radio frequency), and optoelectronics chips (including for sensors and switches).
  • The main bottleneck that respondents identified is the need for additional fab capacity. Additional bottlenecks that respondents identified include a lack of raw material inputs for both semiconductors and the other components paired with semiconductors to assemble sub-parts for electric devices.

The RFI apparently asked all parts of the semiconductor supply chain – producers, consumers, and intermediaries – to voluntarily share information about inventories, demand, and delivery dynamics. It gathered 150 responses from around the world.

The Commerce Department pointed out that the chip shortage has saw car prices drive one-third of all inflation during 2021, primarily because the world does not have enough chips.

And car makers apparently produced nearly 8 million fewer cars last year than expected, which some analysts believe resulted in more than $210 billion in lost revenue.

This is why domestic semiconductor funding is extremely urgent, said Secretary Raimondo.

The House of Representatives is preparing to introduce its version of the US Innovation and Competition Act (USICA), which includes $52 billion in domestic semiconductor funding to help us create long-term solutions.

The Senate has already passed its version of the bill with strong bipartisan support.