Chip inventories held by manufacturers have fallen to just five days on average as global semiconductor shortages continue to ravage the industry, the US Commerce Department warned.
According to the department’s survey of about 150 companies worldwide, manufacturers’ average chip inventory has fallen from 40 days of delivery in 2019 to about five days late last year.
US Commerce Secretary Gina Raimondo warned on Tuesday that US companies remain vulnerable to the weakened supply chain, adding that some may be forced to temporarily close and furlough workers in the event of even minor disruptions.
“It shows you how fragile this supply chain is,” Raimondo said. “Five days of inventory, no room for error . . . what does that mean? A Covid outbreak, a storm, a natural disaster, political instability, an equipment issue — really, anything that disrupts a facility anywhere in the world — we will feel the impact here in the United States.”
Global chip shortages were triggered by a surge in demand for consumer electronics during the pandemic and exacerbated in the US by sanctions on major suppliers in China.
The crisis has also revealed the extent to which parts of the US manufacturing base are dependent on other foreign chipmakers such as Taiwan’s TSMC, the world’s largest foundry and a supplier to the likes of Apple and Volkswagen.
“Right now, we’re not making state-of-the-art semiconductor chips in the United States,” Raimondo said. “We buy almost all from Taiwan. These are the chips needed in sophisticated military equipment.”
Raimondo on Tuesday urged Congress to pass the Chips Act, which would unlock $52 billion in subsidies to encourage domestic chip manufacturing in the United States. Though the Senate passed the measure, it has stalled in the House of Representatives.
According to the Department of Commerce survey, mean demand for chips among respondents in 2021 was 17 percent higher than in 2019. Chips based on older technology and those used by companies such as automakers were particularly scarce.
Respondents, who were anonymous, also said they don’t see an end to the chip shortage in the next six months.
The chip crisis has hit automakers particularly hard, as manufacturers have diverted shipments to consumer electronics customers who pay more for semiconductors during the pandemic. Several automakers, including General Motors and Ford, had to shut down production at US plants last year because they couldn’t buy enough chips.
Biden administration officials began urging semiconductor companies for “more transparency” about their supply chains last September.