The United States Department of Commerce Tuesday released results from a survey of 150 companies, aimed at getting a better picture of just how widespread of a supply crunch is currently plaguing the semiconductor market. The automotive and medical industries have been disproportionately impacted by the shortage.
In a press briefing accompanying the findings, Commerce Secretary Gina Raimondo described the issue in stark terms, noting, “We aren’t even close to being out of the woods as it relates to the supply problems with semiconductors.” She added that the crunch is likely to last into the second half of the year — if not longer.
Raimondo urged Congress to pass the U.S. Innovation and Competition Act (USICA) currently being drafted by the House, citing its inclusion of $52 billion in funding to ramp up domestic semiconductor production.
The study notes that demand increased 17% from 2019 to 2021 — a number that’s only going to grow. It goes on to describe thin margins that could have catastrophic results in the face of an unexpected event.
The median inventory of chips has fallen from 40 days in 2019 to less than five days. These inventories are even smaller in key industries. That means 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 U.S., putting American workers and their families at risk.
Most fabrication facilities, it notes, are currently running at north of 90% capacity, making it impossible to further increase production without opening more factories. Intel, notably, announced a large investment in two Ohio plants — though the first one isn’t set to come online until 2025. Presumably much of the action being taken now is targeted at avoiding future shortages.
“Despite the progress made since early 2021, the semiconductor shortage persists,” the DoC report adds. “That’s due in part to the complexity of the semiconductor supply chain. Producers don’t always have a clear sense of demand, and chip consumers don’t always know where the chips they need originate. These barriers make it harder to develop solutions.”