Commerce Department survey finds chip shortages ‘alarming’

WASHINGTON – The United States is facing an “alarming” shortage of semiconductors, a government survey of more than 150 chip-making and buying companies found; The situation is threatening the production of factories in the US and helps fuel inflationGina M. Raimondo, commerce secretary, said in an interview on Monday.

She said the findings showed an important need to support domestic production and called on Congress to pass it legislation aimed at enhancing US competitiveness with China by allowing more production in the US.

“It is really alarming, the situation we are in as a country, and how urgently we need to move to enhance our domestic capacity,” Ms. Raimondo said.

The findings show that demand for chips that power cars, electronics, medical devices and other products is outstripping supply, even as global chipmakers access energy their maximum productive force.

While demand for semiconductors grew 17% from 2019 to 2021, supply has not seen a commensurate increase. According to data compiled by the Commerce Department, the majority of semiconductor factories are using about 90 percent of their capacity to make chips, meaning they have little ability to increase output immediately.

Demand for chips is expected to grow as technologies that use large amounts of semiconductors, such as 5G and electric vehicles, become more common.

The combination of soaring demand for consumer products that contain chips and pandemic-related production disruptions have led to shortages and skyrocketing semiconductor prices over the past two years.

Chip shortages have forced some factories to rely on components to make their products, like those of American car manufacturer, to slow down or suspend production. That has slowing down US economic growth and lead to higher car prices, a big factor in Inflation soars in U.S.A. The price of a used car increased by 37% last year, helping push inflation to 40-year high in December.

The Commerce Department sent a request for information in September to chipmakers and global consumers to gather information on inventories, production capacity and backlogs to find out where they are. location of bottlenecks in the industry and how to solve them.

The the results of that surveywhich the Commerce Department announced Tuesday morning, revealed how the global supply of chips has become scarce.

Average inventory among buyers has dropped to less than five days from 40 days before the pandemic, meaning any hiccups in chip production – a winter storm or an outbreak, for example. other coronavirus – could cause shortages that shut factories in the US. and once again destabilizing the supply chain, Ms. Raimondo said.

“We have no room for error,” she added.

To help address the issue, Biden administration officials have been linked behind a bill the Senate passed in June as an answer to some of the nation’s supply chain problems.

The bill, known in the Senate as the U.S. Competition and Innovation Act, would pour nearly a quarter of a trillion dollars into scientific research and development to strengthen competitiveness against China and support semiconductor manufacturers by providing $52 billion in emergency subsidies.

Momentum on the legislation has stalled amid ideological disputes between the House and Senate over how to direct funding. In June, House lawmakers passed a narrower billavoiding the Senate’s focus on developing technology to finance basic research.

But administration officials, led by Ms Raimondo, have begun urging lawmakers behind the scenes to work to help narrow their differences to quickly pass the bill, underscoring the urgency of getting the bill through. quickly sign the solution into law.

“There is no such thing as this. There is no other solution,” said Ms. Raimondo. “We need more facilities.”

On Tuesday night, House Democrats revealed a bill 2,900 pages long which lawmakers said they hope will be the starting point for negotiations with the Senate, in a bid to eventually pass the manufacturing and supply chain bill into law. In a statement minutes after the bill’s text was made public, President Biden praised both proposals and encouraged “rapid action to get this to my table as soon as possible.”

The Commerce Department survey found that in some cases it took companies twice as long to purchase certain chips on demand, sometimes as long as a year. Survey respondents also said they do not see the supply-demand mismatch in the industry disappearing over the next six months.

The shortage has affected the larger legacy chips, which are essential to car manufacturing, as well as the most advanced chips needed to power technologies like artificial intelligence.

Ms Raimondo said she spent “a huge amount of time” talking about the shortage with executives, some of whom have personally hunted around the world for a small number of children. chips important to their supply chain.

She added that the survey also shows a worrying extent to which the US depends on Taiwan for its most advanced chips. Taiwan Semiconductor Manufacturing Company has become the contract manufacturer of choice for many companies, which may design their chips in the United States but move to Asia to manufacture them.

China considers its claim to Taiwan non-negotiable, and it has been taking an increasingly aggressive military posture towards the island, potentially puts America’s supply of advanced chips at risk.

During a press conference with reporters on Tuesday, Ms. Raimondo said that the survey also found unusually high prices for semiconductors sold through brokers and that the Commerce Department would regulate them. check those activities.

The Biden administration has established an early warning system to notify government and industry of impending chip shortages and summons company leaders to try to resolve the issue, along with actions to take. other motion. It also welcomed investment in the industry, acknowledging that any new construction of chip facilities in the United States would take several years and would not provide an immediate fix for the shortfall.

On Friday, Intel announced that it will invest $20 billion in a facility in Ohio, which includes two chip factories and directly employs 3,000 people. Intel says construction of the first two plants is expected to begin this year, but production won’t begin until 2025.