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A “Major Supply and Demand Mismatch” Is Keeping the Global Chip Shortage Going

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In September, the Biden administration launched a request for information on the global semiconductor supply crisis, eventually receiving over 150 responses from nearly every major semiconductor manufacturer.

Now, the Commerce Department has released a report of the responses, finding the semiconductor supply chain remains fragile, driven by demand far outstripping supply.

Some highlights:

The report found median demand for chips among respondent companies was as much as 17% higher in 2021 than in 2019 (i.e., before the pandemic), a “major supply and demand mismatch,” according to the Commerce Department.

At the same time, median inventory held by companies has fallen from 40 days worth in 2019 to under 5 days in 2021. The report found the inventories are even smaller in “key industries.”

Looking ahead:

The report closed by saying the Biden administration will continue to push President Biden’s proposed $52 billion for domestic semiconductor production in the $250 billion U.S. Innovation and Competition Act. The bill passed the Senate in a 62-38 vote in June.

On Tuesday, the day after the report was published, the House debuted its responding version of the Senate bill, cutting $200 billion from it but keeping Biden’s $52 billion for domestic production. The House is expected to vote on the bill by March, with Senate negotiations to follow, before sending the final version to Biden’s desk for his signature.

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