US warns of fragile semiconductor supply chain as chip inventory falls

The US Department of Commerce has warned that the semiconductor supply chain remains fragile as median inventory held by chips buyers has fallen to less than five days.

Citing the results of a government survey of more than 150 companies worldwide, the department on Tuesday said that median demand for chips increased 17 per cent from 2019 to 2021, while buyers didn't see commensurate increases in the available supply, Xinhua news agency reported.

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 survey showed.

The median inventory held by chips buyers, including automakers and medical device manufacturers, has fallen from 40 days in 2019 to less than five days in 2021, according to the survey.

"That means if a Covid outbreak, a natural disaster, or political instability disrupts a foreign semiconductor facility for even just a few weeks, it has the potential shut down a manufacturing facility in the US putting American workers and their families at risk," US Commerce Secretary, Gina Raimondo said Tuesday in a blog.

The semiconductor supply chain "remains fragile" and it is essential that US Congress move swiftly to pass the President's proposed $52 billion in chips funding "as soon as possible," Raimondo added.

The findings came after the Commerce Department in last September sent out a request for information to major chip producers, consumers and intermediaries to gather information and help identify the bottlenecks in the global semiconductor supply chain.

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

"America needs to produce more semiconductors. Congress must pass funding for domestic semiconductor production, such as the US Innovation and Competition Act, to solve our supply challenges for the long term," the department said.