Over the past year, Americans have come to understand the important role that semiconductors play in our everyday lives. The COVID pandemic created short supply and high demand across many industries, including semiconductors.
While the private sector still has work to do to sort out their supply chains, we have seen several encouraging announcements on semiconductors:
- Last week, Intel announced plans to build what could be the largest semiconductor facility in the world, investing $20 billion and creating more than 10,000 jobs.
- I was thrilled to join President Biden at the White House and Governor DeWine in Ohio to announce this investment alongside Intel CEO Pat Gelsinger.
- Ford and Global Foundries announced a partnership to identify ways to work together to innovate on future chips. This is crucial as electric vehicles require as many as 2,000 semiconductors—dramatically more than vehicles with internal combustion engines.
- GM recently announced a similar partnership with 7 different semiconductor producers.
These announcements demonstrate that chip consumers and producers are coming together to solve their supply chain issues. This is great news for auto workers and American consumers.
We are glad that the companies have been looking for creative solutions, because the private sector is best positioned to address bottlenecks.
But the semiconductor supply chain remains fragile and it is essential that Congress move swiftly to pass the President’s proposed $52 billion in chips funding as soon as possible.
While we don’t expect long-term supply chain disruptions because of Omicron, any disruption has ripple effects.
In 2021, auto prices drove one-third of all inflation, primarily because we don’t have enough chips.
Automakers produced nearly 8 million fewer cars last year than expected, which some analysts believe resulted in more than $210 billion in lost revenue.
It is both an economic and national security imperative to solve this crisis.
Last year, the Department of Commerce issued a voluntary Request for Information to help us identify the bottlenecks in the global chips supply chain.
Today, we’re identifying some key findings:
- More than 150 companies responded, including nearly all the major semiconductor producers and the major automakers. We are extremely appreciative for their participation.
- Demand for chips is incredibly high, running as much as 20% in excess of 2019 demand. Industry expects demand to exceed supply for the next six months.
- The vast majority of fabs are running at more than 90% utilization, meaning we need to get more fabs up and running.
- The median inventory of chips has fallen from 40 days in 2019 to less than five days. These inventories are even smaller in key industries. That means if a COVID outbreak, a natural disaster, or political instability disrupts a foreign semiconductor facility for even just a few weeks, it has the potential shut down a manufacturing facility in the U.S., putting American workers and their families at risk.
We learned that the bottlenecks are concentrated in a few specific kinds of semiconductor inputs and applications:
- Legacy logic chips used in automobiles, medical devices and other products are facing the most acute shortages.
- Analog chips used in power management, image sensors, radio frequency and other applications are in extremely high demand and short supply.
- The supply of substrates, along with diodes, capacitors and other components that are used along with chips to assemble electronic devices, are all facing significant challenges.
- Some firms mentioned unusually high prices for semiconductors sold through brokers. The Department of Commerce is looking into this issue.
- We also heard about wafer production capacity, which does not have any apparent short-term solutions.
This is why domestic semiconductor funding is extremely urgent. The House of Representatives is preparing to introduce its version of the U.S. Innovation and Competition Act (USICA), which includes $52 billion in domestic semiconductor funding to help us create long-term solutions. The Senate has already passed its version of the bill with strong bipartisan support.
I have been engaged daily with members on both sides of the aisle to get this done.
Every day we wait is a day we fall further behind. But if we pass this bill and address this problem, we can create good jobs, rebuild American manufacturing, and strengthen our supply chains here at home for decades to come.
Go to Source