OPEN APP
Home / Technology / News /  Chip shortage leaves US companies dangerously low on semiconductors, report says

US manufacturers and other companies that use semiconductors are down to less than five days of inventory for key chips, the Commerce Department said Tuesday, citing the results of a new survey.

In 2019, companies typically maintained 40 days of inventory for key chips, according to the Commerce Department report. Now for the same chips—defined as 160 products that companies identified as being the most challenging to acquire—companies are operating with fewer than five days of inventory, the report said.

Commerce Secretary Gina Raimondo said the survey results show the urgency for Congress to approve the U.S. Innovation and Competition Act, which includes $52 billion to boost domestic chip production.

“We aren’t even close to being out of the woods as it relates to the supply problems with semiconductors," Ms. Raimondo told reporters Tuesday. “The semiconductor supply chain is very fragile, and it is going to remain that way until we can increase chip production."

Since September, the Commerce Department has sought detailed industry data from the major companies in the semiconductor supply chain. Its report was based on a survey of companies, including material and equipment providers; semiconductor manufacturers; and automotive, industrial and healthcare companies that need chips for their products.

The thin inventories are a source of particular concern because of how a single shutdown can then ripple through the supply chain. With these wafer-thin inventories, a closure of an overseas factory earlier in a company’s supply chain, for more than a few days, can cause it to exhaust its inventories.

“This means a disruption overseas, which might shut down a semiconductor plant for 2-3 weeks, has the potential to disable a manufacturing facility and furlough workers in the United States if that facility only has 3-5 days of inventory," the Commerce Department report said.

The Commerce Department released its findings as part of a push to revive the U.S. Innovation and Competition Act.

The Senate passed its version of the $250 billion measure to boost high-tech research and manufacturing on a bipartisan vote last year, including $52 billion for expanding domestic chip production.

Similar legislation was stalled for months in the House, but late Tuesday backers released details of their package, titled the America Competes Act. The bill is roughly comparable to the Senate package, with some differences.

The House bill focuses strongly on supply-chain issues, authorizing $45 billion for grants and loans to support supply-chain resilience and manufacturing of critical goods. It also takes a number of steps to combat climate change that aren’t included in the Senate version, setting up potential conflict with congressional Republicans.

President Biden has often highlighted the shortage of semiconductors in efforts to control supply-chain problems and inflation. While the focus has largely been on their use in automobiles and resulting production slowdowns, the president has noted their use in a variety of products, from refrigerators to hospital equipment.

“America invented these chips," Mr. Biden said at an event last week touting Intel Corp.’s plan to invest at least $20 billion in new chip-making capacity in Ohio. Over the years, more chip production moved overseas, mainly to lower-cost countries in Asia.

The White House, citing industry data, says chip companies have announced nearly $80 billion in new investments in the U.S. that should unfold through 2025. “We are going to stamp everything we can ‘Made in America,’ especially these computer chips," Mr. Biden said.

John Neuffer, president of the Semiconductor Industry Association, said that the U.S. is in danger of falling behind other countries that are working to boost their domestic chip production.

“The U.S. simply must level the global playing field to ensure more of the chips our country needs are researched, designed, and manufactured on U.S. soil," he said.

The Commerce Department’s summary of its information highlighted particular chips—certain nodes of microcontrollers, analog chips and optoelectronic chips—that are suffering from a particularly acute supply shortage.

In a briefing with reporters, officials said they had not uncovered evidence that the shortages were resulting from companies hoarding chips. Some suppliers had speculated last year that hoarding could be a partial explanation for the shortages.

The data showed that these chips typically had a lead time—the time from start to delivery of the product—of between 84 and 182 days. By late 2021, that had doubled for some key products, and the lead time had stretched to 103-365 days.

The Commerce Department said it would also take further steps to increase transparency of the supply chain, noting that the industry is so complex that producers at the beginning of the supply chain are far removed from the end users and thus don’t always have an ability to see how much demand there will be for certain products, while chip consumers “don’t always know where the chips they need originate."

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.
Close
Recommended For You
×
Edit Profile
Get alerts on WhatsApp
Set Preferences My ReadsFeedbackRedeem a Gift CardLogout