Raimondo Warns Chip Shortage Not Resolved

Semiconductor Supply Crunch: Findings from a US Department of Commerce Survey

The United States Department of Commerce has recently published the results of a survey conducted among 150 companies. The aim of this investigation was to gain a more comprehensive understanding of the current extent of the supply chain difficulties impacting the semiconductor market.

Impact on Key Industries

The automotive and medical sectors have experienced a disproportionately severe impact from the ongoing chip shortage. Disruptions in these industries have been particularly noticeable.

Ongoing Challenges

During a press conference related to the survey’s findings, Commerce Secretary Gina Raimondo characterized the situation with urgency. She stated that a resolution to the semiconductor supply problems is not currently within reach.

Raimondo projected that these constraints are likely to continue well into the latter half of the year, and potentially even longer.

Call for Legislative Action

Secretary Raimondo appealed to Congress to approve the U.S. Innovation and Competition Act (USICA). She highlighted the bill’s provision of $52 billion in funding, which is intended to bolster domestic semiconductor production capabilities.

Demand and Inventory Trends

The study revealed a 17% increase in demand for semiconductors between 2019 and 2021. Further growth in demand is anticipated in the coming years.

Current profit margins are described as being exceptionally tight, creating a vulnerability to disruptions. An unforeseen event could have significant negative consequences.

Inventory Levels and Risk Factors

The median inventory holding period for chips has decreased dramatically, falling from 40 days in 2019 to less than five days currently. Inventory levels are even lower within critical industries.

A disruption at a foreign semiconductor facility – whether due to a COVID-19 outbreak, a natural disaster, or geopolitical instability – could potentially halt production at a U.S. manufacturing plant. This poses a risk to American jobs and families.

Production Capacity and Future Investments

The report indicates that the majority of fabrication facilities are operating at over 90% capacity. Increasing production further necessitates the construction of new facilities.

Intel has announced substantial investments in two new plants in Ohio, however, the first facility is not expected to be operational until 2025. Current efforts are largely focused on preventing future shortages.

Supply Chain Complexity

The Department of Commerce (DoC) report emphasizes that, “Despite the progress made since early 2021, the semiconductor shortage persists.”

This persistence is attributed, in part, to the intricate nature of the semiconductor supply chain. Producers often lack a clear understanding of actual demand, while consumers of chips frequently are unaware of the origin of the components they require.

These obstacles hinder the development of effective solutions.