US "Semiconductor supply worsens, inventory less than 5 days... Investigating abnormal prices"

[Image source=AP Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] The U.S. Department of Commerce revealed that semiconductor chip inventory fell to less than five days' worth last year and stated that this semiconductor supply shortage will not disappear within the next six months. The department also plans to closely examine the abnormal surge in semiconductor chip prices caused by severe supply-demand mismatches.

According to the Wall Street Journal (WSJ) and others, the Department of Commerce analyzed data submitted by about 150 semiconductor manufacturing and demand companies at the end of last year and disclosed the findings on the 25th (local time).

Last year, the average demand for semiconductor chips was 17% higher than in 2019, before the COVID-19 pandemic. However, as the semiconductor chip shortage worsened, the average inventory dropped from 40 days in 2019 to less than five days. It is reported that the inventory of semiconductor chips for key industries is even lower.

The Department of Commerce explained that if semiconductor manufacturing facilities overseas shut down for 2 to 3 weeks, manufacturing facilities in the U.S. could halt, potentially leading to temporary layoffs of workers. Commerce Secretary Gina Raimondo expressed concern, saying, "The semiconductor supply chain is very fragile," and "This supply shortage will continue until chip production expands." Semiconductors are considered a core infrastructure industry in the U.S., to the extent that President Joe Biden ordered a separate review of the supply chain immediately after taking office.

The Department of Commerce judged that these supply-demand issues will not disappear within six months and announced plans to strengthen cooperation with the industry and operate an early warning system to prevent supply-demand mismatches. Additionally, a separate investigation will be conducted targeting items with abnormally soaring prices. The industry expects that chips for automobiles and medical devices will be subjects of the investigation. The department also plans to continue contacting companies that did not respond to this investigation. Previously, Korean companies such as Samsung Electronics and SK Hynix had submitted data.

Secretary Raimondo stated, "The semiconductor chip shortage is the result of a severe mismatch between demand and supply. The pandemic worsened it," citing insufficient production capacity as the biggest problem. She acknowledged that "there is not much good news," recognizing that resolving the semiconductor supply shortage is not an easy task. She also repeatedly urged Congress to promptly pass the Biden administration's $52 billion semiconductor industry funding bill.