US warns global chip shortage likely to last until 2022

Deepak Gupta
Deepak Gupta January 26, 2022
Updated 2022/01/26 at 2:36 AM

Don’t expect the global chip shortage to end anytime soon. Bloomberg and The Washington Post Please note that the US Department of Commerce published a semiconductor supply chain report estimating the global shortage will last until at least the second half of 2022. “We’re nowhere near being out of the woods” with supply problems, Department Secretary Gina Raimondo said.

Many companies are also particularly sensitive to problems. A customer company’s average chip inventory has dropped from 40 days in 2019 to less than five days in 2021. Even a relatively short (weeks) outage overseas could close a US factory, the Department said.

Shortages are particularly damaging to broadband companies, car makers and medical device makers, according to the report. Despite early claims, there was no evidence that hoarding contributed to the deficits. Demand was also higher, with average interest rates around 17% higher in 2021 than two years earlier. The Commerce Department study was comprehensive, obtaining supply chain data from nearly every major semiconductor company and companies in various industries.

Officials concluded that the government could not directly end the shortage. Private companies were “better positioned” to overcome challenges by increasing production, optimizing their designs and limiting the impact on their supply chains. However, Raimondo used this as an opportunity to connect President Biden’s proposed $52 billion subsidy through the US Innovation and Competition Act (USICA). The investment could help “rebuild American manufacturing” and boost domestic supply chains “for years to come,” she said.

The factories resulting from USICA money would not be ready for years, however, and the bill itself was delayed. While it passed a crucial Senate vote, the House bill is not expected to appear until this week at the earliest. It may take longer to clear the House and evolve into a final form that Biden can sign into law. For now, the tech industry needs to resolve this dilemma on its own.

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