US manufacturing faces critical shortage of semiconductors, says Department of Commerce
Industry has less than 5 days of supplies, compared with 40 in 2019
The US Department of Commerce has warned of a critical shortage of semiconductors.
The federal agency says that the country holds only 5 days worth of inventory, compared with 40 in 2019. This follows a government study into supply chain issues published in September.
The Department has raised this issue now in an effort to push legislation through Congress, which would release billions of dollars of support for the domestic semi-conductor manufacturing market.
Even prior to the pandemic, semiconductor supplies to US industry were already dangerously low, the Department of Commerce assesses, with industry experiencing shortages of semiconductor manufacturing equipment and components used in electronic assembly such as diodes, capacitors and substrates. At the same time, demand for these supplies grew, including for 5G equipment and electric vehicles.
Among the study's findings were:
- Median demand for chips highlighted by buyers was as much as 17 per cent higher in 2021 than 2019.
- The median inventory of semiconductor products was less than 5 days in 2021, and even smaller in some key industries.
- The primary bottleneck across the board appears to be wafer production capacity, which requires a longer-term solution.
In the event of a shock, such as a surge in Covid cases, a natural disaster or political disorder further disrupting the semiconductor supply chain, could force some US manufacturers to pause production and lay off employees, the report warns.
Secretary of Commerce Gina Raimondo urged Congress to pass the US Innovation and Competition Act (USICA), which includes $52 billion to fund the domestic semiconductor industry, as soon as possible. The bill has bipartisan support and was approved by the Senate in June but amendments are being considered in the House of Representatives.
"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 Raimondo in a statement.
"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. 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."
There is currently a global shortage of semiconductors and components caused by extreme weather events, factory fires and increased demand, with analysts and industry insiders predicting the situation will not improve until 2023 or 2024.