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Chip shortages to last into second half of 2022, says US Department of Commerce

  • January 26, 2022

The US Department of Commerce (DOC) launched a Request for Information (RFI) in September 2021 to gather data about the ongoing global chip shortage. It just posted its findings, and the news doesn’t look good for anyone hoping to see shortages ease within the next six months. 

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According to the RFI’s findings, the world currently finds itself in the midst of an ongoing chip drought thanks to a “perfect storm” of factors. Among them are an increasing level of demand that already existed as early as 2020; a further spike in demand caused by COVID-19’s influence on increasing sales of electronics and other items; and a “series of black swan events such as factory fires, winter storms, energy shortages, and COVID-19-related shutdowns.” 

Unfortunately, all of the research indicates that these factors will persist until at least the second half of 2022, when some previously announced investments in the manufacturing space “come online.” 

The 150 respondents that contributed to the report included “nearly every major semiconductor producer,” and “companies in multiple consuming industries.” These contributors provided data to the DOC, which indicated a 17% rise in chip demand between 2019 and 2021. 

This increased demand has not been met by any equivalent surge in supply, with median inventory times (the average amount of time a chip will spend in a warehouse or on a shelf before being purchased by an end consumer) dropping from 40 days to less than 5 days over the same period. The DOC noted some median inventory times in “key industries” are even shorter. 

The DOC also points at inadequate wafer production capacity as being a major chokepoint. This is despite the agency’s data showing that existing semiconductor fabs have been operating at over 90% utilization since Q2 2020 — an extremely high output figure for an industry that was below 80% in early 2019, according to the department’s research. 

As for specific chip categories that are feeling this shortage most keenly, respondents pointed to legacy logic chips used in medical devices and cars; analog chips used in power management, image sensors, and RF applications; and optoelectronics chips used in various types of sensors and switches. Meanwhile, the industries reportedly suffering the most were, unsurprisingly, automotive manufacturing, medical device makers, and broadband network hardware

The report notes how vital continued semiconductor supplies are not just to the health of global commerce, but also to US national security. For both reasons, the Department of Commerce promised that the collected data will be used to help it take action regarding “pandemic-related disruptions to the supply chain.” It also plans to continue attempting to engage with related companies that did not respond to the RFI and querying “companies whose responses were not as comprehensive as their peers” for more information. 

The report closes by touting the potential additive impact of the Biden Administration’s “U.S. Innovation and Competition Act.” It notes that $52 billion within that proposal has been earmarked specifically for increasing domestic semiconductor production across the country. 

Despite this hint at potential government help over the long term, the report admits that the “private sector is best positioned to address the near-term challenge posed by the current shortage, via increased production, supply chain management to minimize disruption, and product design to optimize the use of semiconductors.”

The full report can be read at the Department of Commerce website. 

Article source: https://www.zdnet.com/article/chip-shortages-to-last-into-second-half-of-2022-says-us-department-of-commerce-report/#ftag=RSSbaffb68

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