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Semiconductor shortage has reached 'crisis' levels, Commerce Secretary says

·Anchor, Editor-at-Large
·3-min read
In this article:
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U.S. Commerce Secretary Gina Raimondo says it's high time for lawmakers to pass legislation that helps end a crippling pandemic-fueled semiconductor shortage that has been going on for a longer than a year.

"It's a crisis," Raimondo said of the shortage on Yahoo Finance Live.

Findings from a new Commerce Department survey underscore the extent of that crisis.

The median inventory of semiconductor products highlighted by buyers has fallen from 40 days in 2019 to less than five days in 2021. Inventories in key industries are even smaller, the report contends.

"This means a disruption overseas, which might shut down a semiconductor plant for 2-3 weeks, has the potential to disable a manufacturing facility and furlough workers in the United States if that facility only has 3-5 days of inventory," the report explains.

Low levels of inventory reflect the rapid buying of semiconductors throughout the pandemic to power demand for work-from-home technologies such as PCs. Demand for chips surged 17% in 2021 from 2019, the report finds.

"What we need is to make more chips in America," Raimondo said.

To that end, it would be helpful to the cause if lawmakers pass the CHIPS for America Act.

The industry's biggest players such as Intel are now waiting for the U.S. government to do its part and pass the $52 billion CHIPS for America Act. In June 2021, the Senate signed off on the legislation — which aims to incentivize U.S. manufacturing of semiconductors. But, the bill is still being debated in the U.S. House of Representatives.

FILE - U.S. Secretary of Commerce Gina Raimondo speaks during the announcement on Friday Jan. 21, 2022 in Newark, Ohio, that Intel will invest $20 billion to build two computer chip factories on a 1,000-acre site in Licking County, Ohio, just east of Columbus.  The U.S. supply of computer chips has fallen to alarmingly low levels, raising the prospect of factory shutdowns, the Commerce Department reported Tuesday, Jan. 25.(AP Photo/Paul Vernon, FILE)
FILE - U.S. Secretary of Commerce Gina Raimondo speaks during the announcement on Friday Jan. 21, 2022 in Newark, Ohio, that Intel will invest $20 billion to build two computer chip factories on a 1,000-acre site in Licking County, Ohio, just east of Columbus. The U.S. supply of computer chips has fallen to alarmingly low levels, raising the prospect of factory shutdowns, the Commerce Department reported Tuesday, Jan. 25.(AP Photo/Paul Vernon, FILE)

Chip giant Intel isn't waiting around for lawmakers to act, however.

Intel recently broke ground on two chip-making foundries in Arizona that are projected to cost $20 billion. Intel expects both plants — dubbed Fab 52 and Fab 62 — to be completed by 2024. The company said last week it will invest $20 billion in a new chip plant in Ohio.

The investments couldn't come quick enough as everyone from automakers to smart gadget makers work overtime to source chips and avoid crushing production shortfalls.

"The chip crisis going on is probably the biggest supply shock I have seen in my career," Ford CEO Jim Farley said on Yahoo Finance Live.

In November, Ford inked a deal with chip-maker GlobalFoundries to supply it with more chips as it attempts to avoid plant downtime and delivery delays.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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