US Semi Conductor Supplies Hit Critical Levels

The US desperately needs to develop domestic production capacity of semi conductors, said the US Department of Commerce earlier this week as it issued a stark warning over availability of critical chip supplies.

Semi conductors, also called chips, are an essential component in electronic products and are used in everything from iphones, laptops and cars through to medical devices.

According to analysis by the Department of Commerce, the inventory of chips held by American manufacturing companies has fallen from an average of 40 days in 2019 to less than 5 days in 2021.

That leaves factories at risk of shutdown if any disruption occurs to supply chains.  

Last year, several major car companies, including Toyota, GM and Ford, shut down or slowed production because of chip shortages.

Semi conductors have been in short supply over the past 18 months. Consumer demand for electronics surged during the start of the COVID-19 pandemic and an increasing number of companies – most notably in the automotive sector – have incorporated semi conductors into their product offerings.

Increasing demand collided with pandemic related shutdowns and supply chain problems. The result is record low supply of semi conductors.

“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 US Secretary of Commerce Gina M. Raimondo.

“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.”

It will not be an easy task. The manufacture of semi conductors is incredibly specialized and complex. The process requires extremely skilled technicians and the margins for errors are incredibly thin. Further, the equipment required is extremely expensive.

Amid the soaring demand, American chip giant Intel announced last week that it would spend $20 billion USD on a new semi conductor site outside of Colmbus, Ohio. The factory is expected to begin production in 2025 and will create an anticipated 3,000 jobs.