Chip shortage continues: ‘Little good news’

The survey of 150 companies in the chip supply chain confirmed, according to the ministry, that there is “a significant, ongoing mismatch in the supply and demand of chips”. The companies also believe that the problem will not go away in the next six months.

The shortage is mainly caused by limitations in the production capacity of wafers, the thin slices of material from which semiconductors are ultimately made.

In September, the ministry asked companies to complete questionnaires to get more information about the shortage. Although the request was voluntary, Commerce Secretary Gina Raimondo warned that she could force foreign chip companies with US operations to answer the questions.

Taiwan and South Korea

Washington’s request sparked criticism in Taiwan and South Korea, where it was feared companies would have to hand over trade secrets. Minister Raimondo recently stated that she has spoken with “all the top executives in the supply chain”, including those from South Korea’s Samsung and Taiwan’s TSMC. The ministry also said it has shared the findings of the investigation with foreign governments.

‘Unusually high prices’

According to Raimondo, the investigation contains “little good news”. “The demand for chips is high and it is getting higher,” said the minister, noting that the demand for chips is now about 20 percent above the level of 2019.

The investigation further revealed no evidence of chip hoarding. However, the ministry is further investigating some unusually high prices observed for some chips used by car and medical device manufacturers.

Also, the average inventory of key chips has fallen from 40 days in 2019 to less than five days in 2021. “Five days of inventory leaves no room for error. That shows how fragile this supply chain is,” said Raimondo.

Subsidies

President Joe Biden has urged Congress to approve more funding to boost chip manufacturing in the United States.

The European Union also wants to stimulate chip production in Europe with mega subsidies.

Longer delivery times

Global chip shortages arose in 2020 due to the corona pandemic. Many gadget and car manufacturers are still struggling with longer delivery times.

At the beginning of this year, several manufacturers had to stop production of cars. Later, some cars were delivered without certain parts for which chips were not available.