US survey of firms finds ‘alarming’ chip shortages

Commerce chief calls on Congress to back legislation to boost domestic output

WASHINGTON — The United States is facing an “alarming” shortage of semiconductors, a government survey of more than 150 companies that make and buy chips found; the situation is threatening U.S. factory production and helping to fuel inflation, Gina Raimondo, the commerce secretary, said.

She said the findings showed a critical need to support domestic manufacturing and called on Congress to pass legislation aimed at bolstering U.S. competitiveness with China by enabling more American production.

“It’s alarming, really, the situation we’re in as a country, and how urgently we need to move to increase our domestic capacity,” Raimondo said Monday.

The findings show demand for the chips that power cars, electronics, medical devices and other products far outstripping supply, even as global chipmakers approach their maximum production capacity.

While demand for semiconductors has increased 17% from 2019 to 2021, there was no commensurate increase in supply. A vast majority of semiconductor fabrication plants are using about 90% of their capacity to manufacture chips, meaning they have little immediate ability to increase their output, according to the data that the Commerce Department compiled.

Chip shortages have forced some factories that rely on the components to make their products, like those of U.S. carmakers, to slow or suspend production. That has dented U.S. economic growth and led to higher car prices, a big driver of the soaring inflation in the United States. The price of a used car grew 37% last year, helping to push inflation to a 40-year high in December.

The Commerce Department sent out a request for information in September to global chipmakers and consumers to gather information about inventories, production capacity and backlogs in an effort to understand where bottlenecks exist in the industry and how to alleviate them.

The results of that survey, which the Commerce Department published Tuesday, reveal how scarce global supplies of chips have become.

The median inventory among buyers had fallen to fewer than five days from 40 days pre-pandemic, meaning that any hiccup in chip production — because of a winter storm, for example, or another coronavirus outbreak — could cause shortages that would shut down U.S. factories and once again destabilize supply chains, Raimondo said.

“We have no room for error,” she added. To help address the issue, Biden administration officials have coalesced behind a sprawling bill that the Senate passed in June as an answer to some of the nation’s supply chain woes.

The bill, known in the Senate as the U.S. Innovation and Competition Act, would pour nearly $250 billion into scientific research and development to bolster competitiveness against China and prop up semiconductor makers by providing $52 billion in emergency subsidies.