After about a year of analysis, the Biden administration has concluded that the global semiconductor shortage will almost certainly not let up this year. The U.S. Department of Commerce released a report Tuesday summarizing its findings. Here’s the long and the short of it: Things will be bleak for the foreseeable future.
The report makes it clear that most of the solutions for the ongoing crisis will need to be provided by private companies, given that they have the most resources at their disposal to do so. The administration recognizes that it needs to step in as much as possible too, though. General oversight is needed at the top.
Amongst the most troubling of the administration’s findings: Buyers’ inventories of semiconductors have fallen from approximately 40 days in 2019 to just 5 days in 2021. The average company only has enough supply at any given time to create its products for less than a week, in other words.
Our first deep look —
We know the semiconductor shortage is bad. We’ve known that for a long time now. And not just because PS5s have been in such short supply; just about every industry has been impacted by supply chain issues.
Until now we only really saw shortages on a company-by-company basis. Large-scale data just hadn’t been gathered yet. So the feds put out a call for detailed supply reports, along with a 45-day ultimatum.
Enough companies seem to have complied that we now have a fuller look at the supply chain picture. It’s not the kind of picture you’d want to hang in your living room — more so the kind you’d see in a noir film or perhaps a horror flick.
The report highlights wafer production as a significant bottleneck in the supply chain. Across the board, the Department of Commerce wants to use its knowledge of specific pain points to create more targeted solutions.
One piece of better news: The report finds that companies are not actually hoarding any chips. This was previously floated as one reason for the supply crisis.
And some suggestions —
The semiconductor shortage isn’t just affecting electronics production. It’s also a significant driver of inflation, the new report concludes, which means it affects Americans’ ability to, you know, live on their paychecks.
Besides providing some insight into how bad the situation really is, the Department of Commerce’s report doesn’t really provide much hope for solutions in the near future. As far as what the Biden administration can do to help, the report is basically just one big shrug emoji. There’s nothing it can really do to solve bottlenecking issues.
What the administration does suggest is that Congress pass legislation encouraging chip manufacturers to create new facilities in the United States. Some companies, like Intel, are already in the process of doing so.
Even if legislation does pass through Congress — which would take a significant amount of time in itself — companies will then have to secure federal funds, make plans, and actually construct new facilities. Those will undoubtedly help in preventing such a long supply crisis in the future. For our current crisis, though, the administration seems certain there’s nothing much it can do.
