Equipment manufacturers, hardest hit by the global semiconductor shortage, had less than five days of chip inventories last year — and should brace for supply chain problems to persist through 2022. This was announced by the US Department of Commerce.
Demand for semiconductors skyrocketed during the pandemic as people bought more PCs, laptops and tablets to work or study at home, and the cloud giants scaled their server systems to cope. However, supply chains have not been able to cope with the increased load. The average inventory of semiconductor buying companies in 2019 was 40 days. By 2021, that has dropped to less than five days for some key US sectors, the department said in a report. At the same time, the demand for chips grew by 17%.
In the first year of the pandemic, production was stopped, and shift work and quarantines were introduced. In addition, some factories were affected by natural disasters such as fires and snowstorms. But between the second quarter of 2020 and the end of 2021, businesses were running at over 90% utilization and still couldn't meet global demand. At the same time, according to Gartner, global revenues of the companies selling semiconductor products in 2021 reached record $583 billion and grew by 25.1% in comparison with 2020.
The Department of Commerce issued an official public request for information (RFI) in September 2021. Ohno received more than 150 industry responses, including from "nearly every major semiconductor manufacturer," as well as many comments from the automotive industry. Now this report has been published, and the department is positioning it as a call to become more active.
"The results of the RFI make it clear: America needs to produce more semiconductors," the report says. “Congress should decide on funding for local semiconductor manufacturing, such as in the U.S. Innovation and Competition Act, to address long-term supply issues.”
The automotive, health care and telecommunications industries have been hardest hit by the chip shortage.
Companies that purchase microcontrollers from 40 to 250 nm, analog chips from 40 to 800 nm, or chips for optoelectronics from 65 to 180 nm have been particularly hard hit. Manufacturers such as Apple and NVIDIA who need modern 7nm or smaller chips for mobile devices, servers and personal computers have also struggled.
Department experts believe that the deficit will continue throughout this year. At the same time, Deloitte predicts a decline in the global chip shortage in the second half of the year.
The Department of Commerce is currently gathering recommendations on how to strengthen the U.S. chip supply chain. On Monday, he launched another request to define new plans and develop programs to attract more investment in chip factories and increase their productivity.
“The United States will face both immediate supply shortages that drive up prices and a long-term threat to America's economic and national security if we do not increase domestic supply of chips,” Commerce Secretary Gina Raimondo said in a statement. “As the demand for semiconductors will only grow, we need smart strategic investments to strengthen our internal supply chain – and we need them now. Not only to address current shortages and supply chain issues, but to help America lead the world by investing in our semiconductor manufacturing and R&D, and improve competitiveness.”
She called on Congress to approve $52 billion in funding under the Chip Act. So, the other day Intel announced the construction of a new complex worth $20 billion in Ohio. It will include two factories and space for expansion. Construction will begin at the end of 2022. The company is counting on financial support from the government.
Commentators in the discussion point out that the situation worsened in 2021. If before that, manufacturers still had spare options in the supply chain, now these companies have also run out of stocks.
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