Commerce Dept warns factories vulnerable to shutdowns over computer chip shortage

The Commerce Department in a report issued Tuesday highlighted the severity of the computer chip shortage, saying the current supply shortage could lead to closures at manufacturing facilities if not properly addressed.

The department delivered results from a Request for Information (RFI) survey that provided insight from semiconductor producers and companies on the status of the computer chip supply chain.

“For the semiconductor products that present the greatest challenge to acquire, the median inventory for consumers who responded to the RFI has fallen from 40 days in 2019 to less than 5 days in 2021,” the department said in a summary of its findings, noting that supply may be even smaller in key industries.

“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 department added.

The Commerce Department noted there was a “major supply and demand mismatch” because companies were not seeing a growth in supply for computer chips, while median demand could be as much as 17 percent higher in 2021 than it was in 2019. 

“The main bottleneck identified is the need for additional fab capacity. In addition, companies identified material and assembly, test, and packaging capacity as bottlenecks,” the department noted.

Companies said they have experienced supply chain issues with analog chips, used in devices such as radios; legacy logic chips, used in cars and medical decides; and optoelectronics chips, used for things such as switches and sensors.

Commerce Secretary Gina Raimondo took the opportunity to push Congress for billions of dollars in funding to tackle semiconductor production.

“The semiconductor supply chain remains fragile, and it is essential that Congress pass chips funding as soon as possible,” Raimondo said in a statement. “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.”

“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,” she added.