U.S. says chip shortage will persist, but needs to be resolved

The Department of Commerce seal is pictured in Washington, D.C. U.S. March 10, 2017. REUTERS Eric Thayer

WASHINGTON, Jan 25, Reuters - The U.S. Commerce Department said Tuesday that a global survey of semiconductor chip producers shows a shortage will persist, mainly due to wafer production capacity constraints.

The voluntary survey of 150 companies last fall confirmed there was a significant mismatch in supply and demand for chips, and respondents did not see the problem going away in the next six months. Commerce Secretary Gina Raimondo told reporters that the department didn't really get what we needed and that they're going to go company by company and get what we need. In November, Raimondo said that she had spoken to all the CEOs in the supply chain - including Samsung 005930. KS -- and all of the CEOs have pledged to me that they will be submitting robust and complete data flows to us. Some companies in Asia and governments expressed concern about the data request. Raimondo stated that the department could invoke its legal authority to get responses.

Taiwan's Economy Ministry, responding to the survey, reiterated that Taiwanese companies are working hard to produce chips and coordinate with important international business partners to strengthen supply chains.

The Ministry of Economic Affairs and our country's chip makers attach great importance to cooperation with like-minded partners and will continue to work together to build a safe, trustworthy and resilient supply chain, which should be able to reduce market growth demand over the next few years. TSMC, Asia's most valuable listed firm and the largest contract chipmaker, didn't say anything.

Foreign semiconductor firms with U.S. operations must answer detailed questions about the chips market, according to the U.S.

Raimondo didn't say who did or did not comply on Tuesday. The department said it was sharing its findings with foreign governments.

The department said it had seen some unusually high prices among chips used by automakers and medical device manufacturers.

The department will engage industry on node-specific problem solving in the coming weeks. We will look into claims about unusually high prices in these nodes. Demand for chips is high. Demand is now 20% above 2019 levels, Raimondo said. She said there was not a lot of good news in this survey.

Raimondo said the survey did not show evidence of hoarding.

The median inventory for key chips has fallen from 40 days in 2019 to less than 5 days in 2021, according to the department.

There were five days of inventory. Raimondo said there was no room for error. This supply chain is fragile, and that tells you how fragile it is. House Democrats are expected to introduce legislation that will increase the US's competitiveness with China and spend $52 billion on semiconductor production and research as early as Tuesday, sources told Reuters after the Senate approved funding in June.

President Joe Biden has been pressing Congress to approve more funds to boost chip production in the United States, as shortages of key components in the key components used in cars and computers have exacerbated supply chain bottlenecks.

Intel Corp plans to invest $20 billion and build two new chip plants in Ohio, while Samsung Electronics 005930. Taylor, Texas was chosen by KS as the new $17 billion plant to make advanced chips.