Chip shortage to persist through 2022

27 January 2022

The U.S. Commerce Department took a global survey of semiconductor chip producers, discovering the semiconductor shortage will persist throughout 2022 due to wafer production capacity constraints.

According to a report from Reuters, the survey consisted of 150 companies that confirmed the supply chain problems, with demand for chips remaining high compared to supply, and the problem won’t be going away in the next six months.

Gina Raimondo, U.S. Commerce Secretary, said more investigation is needed but she had spoken to all CEOs in the supply chain including Samsung, Taiwan Semiconductor Manufacturing Co., SK Hynix and more that will submit complete data flows to the government.

While supply and demand are an issue, the Commerce Department is also seeing unusually high prices among some chips used by automakers and medical device manufacturers. The government plans to investigate the high prices in the coming weeks to identify potential solutions and reasons why.

"Demand for chips is high. It is getting higher," Raimondo said. "There is not a lot of good news."

Other results from the chip survey include:

  • No evidence of chip hoarding.
  • Median inventory for consumers for key chips has fallen from 40 days in 2019 to less than 5 days in 2021.

"Five days of inventory. No room for error," Raimondo said. "That tells you how fragile this supply chain is."

Congress is working on pushing through the U.S. Innovation and Competition Act (USICA), which includes funding for Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act, a bill that would help to increase U.S. domestic semiconductor manufacturing.

The Senate has already passed the bill and the House of Representatives is expected to bring its version of the bill to the floor in the coming days.

Funding of the CHIPS for America Act would include $52 billion in federal investments for domestic semiconductor research, design and manufacturing provisions.

Automakers continue to struggle

This week, Toyota has announced additional suspension of domestic plant production for completed vehicles and revised its production plan for February.

Toyota blamed the suspension on a shortage of parts in the supply chain due to the outbreak of COVID-19 and increasing demand for semiconductors across all the electronics industry.

The suspension will include 20 lines in 12 plants out of 28 lines in 14 plants toward the end of January. In February, some plants and lines originally scheduled to be suspended in the month will now operate using some of the parts that were scheduled to be used during the January suspension.

This mirrors Toyota’s moves during the summer of last year where the company along with American and European motor companies were forced to suspend operations due to the chip shortage.

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