US chip inventory falls to under 5 days

US chip inventory falls to under 5 days

Business news |
Results from Semiconductor Supply Chain Request for Information (RFI) show inventory in the US falling from 19 days to under 5 and potential profiteering a a result
By Nick Flaherty

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The semiconductor shortage has been described as due to a “perfect storm” of factors. Difficulties in obtaining semiconductor manufacturing equipment used to make older varieties of chips and components used in electronic assembly such as diodes, capacitors, and substrates, coupled with an underlying growth in demand for chips as industries shifted to more semiconductor-intensive products such as electric vehicles and 5G have led to higher demand.

The US Administration says it has worked with industry to improve supply chain transparency and establish long-term partnerships. But it says the semiconductor supply chain remains fragile. Demand continues to far outstrip supply. It is also looking at the higher prices charged by brokers for chips in short supply.

The Department of Commerce launched a Request for Information (RFI) in September that has given new insight into the global semiconductor supply chain. The Department received 160 responses from nearly every major semiconductor producer and from companies in multiple industries.

This showed inventory of semiconductor products highlighted by buyers has fallen from 40 days in 2019 to less than 5 days in 2021. These inventories are even smaller in key industries.

Demand for chips highlighted by buyers was as much as 17% higher in 2021 than 2019, and buyers aren’t seeing commensurate increases in the supply they receive. This is a major supply and demand mismatch.

The primary bottleneck across the board appears to be wafer production capacity, which requires a longer-term solution.

The US Department of Commerce is now calling for information that will guide programs designed to support the regional semiconductor industry, including research and packging centre to support fabs.

“The United States faces both an immediate supply shortage that’s driving up prices and a long-term threat to America’s economic and national security if we don’t increase domestic supply of chips,” said Secretary of Commerce Gina Raimondo. “As demand for semiconductors will only increase, we need smart, strategic investments to shore up our domestic supply chain – and we need it now. Not only to address current shortage and supply chain issues but to help position America to lead globally by investing in our semiconductor manufacturing and R&D and enhance American competitiveness.”

The RFI confirmed that there is a significant, persistent mismatch in supply and demand for chips, and respondents did not see the problem going away in the next six months.

The process highlighted that bottlenecks are concentrated in a few specific kinds of semiconductor inputs and applications, from the legacy logic chips used in automobiles, medical devices and other products are facing the most acute shortages to analog chips used in power management, image sensors, radio frequency and other applications that are in extremely high demand and short supply.

The supply of substrates, along with diodes, capacitors and other components that are used along with chips to assemble electronic devices, are all facing significant challenges.

Some firms mentioned unusually high prices for semiconductors sold through brokers. The Department of Commerce says it is looking into this issue.

www.commerce.gov

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