Semiconductor Data Confirms Need for Funding to Boost U.S. Production, Commerce Says

Trade Update • JANUARY 25, 2021

Some American manufacturers that depend on computer chips have just a few days’ worth of inventory, a U.S. government investigation into the ongoing semiconductor supply shortage has found.

After surveying “nearly every major semiconductor producer” and major customers in key industries to understand the scale of the problem, the U.S. Commerce Department said the semiconductor supply chain “remains fragile,” while “demand continues to far outstrip supply.”

Commerce found that the median supply of chips held by manufacturers has dropped from 40 days’ worth in 2019 to less than five days’ worth last year.

The limited supply, particularly in “key industries,” means that disruptions to production overseas — such as those from severe weather events or new Covid-19 outbreaks — could again lead to factory shutdowns and worker layoffs in the U.S., according to the report.

Specific products were found to have more critical supply chain issues than others:

• Microcontrollers that are primarily made of legacy logic chips (e.g., 40, 90, 150, 180, and 250 nm nodes) such as those used in automobiles, medical devices, and other products.
• Analog chips (e.g., 40, 130, 160, 180, and 800 nm nodes) used in power management, image sensors, radio-frequency and other applications; and
• Optoelectronics chips (e.g., 65, 110, and 180 nm nodes).

Wafer production was an issue across the board, “which requires a longer-term solution,” Commerce said.

The report highlights the limited options available to the Biden administration as it tries to respond to the crisis. Even so, Commerce Secretary Gina Raimondo used the findings to bolster a push for the $52 billion in domestic semiconductor funding included in the U.S. Innovation and Competition Act. The Act was passed by the Senate last year, and also included $190 billion for technology and research funding.

This week, House Democrats introduced their version of the bill, calling it the America Competes Act. It drops the funding, but retains the chip incentives in addition to $45 billion directed at supporting supply chain resilience and manufacturing of critical goods, industrial equipment, and manufacturing technology.