US Government Report Says Chip Shortages Will Continue into 2022, Supply Chains ‘Fragile’

The U.S. Department of Commerce has released the results of a report it commissioned on the shortage of semiconductors that is currently roiling many global industries. The TLDR is this: it’s not going to be ending any time soon. The report is based on input gathered from over 150 companies involved in the semiconductor supply chain, as the government sought their ideas on how to improve the current situation. Predictably, the report paints a grim picture of an industry running at full capacity with zero room for increasing production or tolerance for disruptions of any kind.

The government issued the results of its market study in blog form, highlighting its major findings. The most notable is a big mismatch between supply and demand for semiconductors. The report states that the current demand for chips is up to 20 percent higher than it was in 2019 (median is 17 percent), with no easy methods available to boost production. This has led to the median inventory of chips to fall to just five days of supply, whereas it used to be 40 days. Given these tight constraints, if something were to happen in a foreign country where the chips are made, such as a natural disaster or COVID-19 outbreak, it could lead to the US factories that need those chips also shutting down while they wait for more chips to arrive. The report also notes that the silicon fabs it asked for information reported they were running at “more than 90 percent utilization,” so there is not much room to increase production in the short term, regardless of financial incentives.

The report states it zeroed in on the industries and specific chips that have been most disrupted by the shortage, and the industries include medical devices, broadband, and autos. As far as which chips are in dire need, they are described as “legacy logic chips” and include the following:

• Microcontrollers that are primarily made of legacy logic chips, including, for example, at 40, 90, 150, 180, and 250 nm nodes
• Analog chips including, for example, at 40, 130, 160, 180, and 800 nm nodes
• Optoelectronics chips including, for example, at 65, 110, and 180 nm nodes.

The report identifies the root cause of the problem, which is wafer production capacity. It adds there is no short-term solution to increase silicon wafer production without building new facilities, which could take years to come online. Perhaps it’s timely then that Intel just announced a new silicon fab in Ohio a few days ago, as we reported on previously. The facility is a first of its kind for the “heartland” of America, as Intel’s other fabs are located in Arizona currently. The report mentions Intel’s new fab as a move in the right direction, but somberly notes it won’t be churning out new chips until 2025 at the earliest, so it will not help the current situation. Though the report also states, “The private sector is best positioned to address the near-term challenge posed by the current shortage,” it notes the government is waiting for Congress to fund the U.S. Innovation and Competition Act, which has $52 billion earmarked for silicon fab expansion in the US. The bill already passed the Senate in June of last year with bipartisan support, and has seemingly stalled in the House of Representatives while they try to modify the bill for final passage.

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