Manufacturers reliant on silicon wafers, including automakers and computer part fabricators, are facing rapidly dwindling inventories, according to a recent survey by the United States Department of Commerce.
According to the department's survey of over 150 wafer-reliant companies, the median inventory held by manufacturers had fallen to less than five days. Secretary of Commerce Gina M. Raimondo warned that the ongoing supply drought leaves manufacturers at the razor's edge, with "no room for error."
"It's alarming, really, the situation we're in as a country, and how urgently we need to move to increase our domestic capacity," Raimondo said.
The desperate supply situation was best illustrated by the rolling factory shutdowns of 2021. Facing continual interruptions to their supply chains, many auto manufacturers such as Stellantis (NYSE: STLA) shuttered factories for weeks at a time to endure low supplies of silicon chips. With inventories even thinner, the possibility for rolling shutdowns to continue seems likely.
Some manufacturers have managed to endure the prolonged shortage and some, like Nvidia (NASDAQ: NVDA), managed even to deliver solid quarterly results. For most manufacturers, though, the shortage has only continued to get worse, with relief still far from sight.
The only way "to solve this crisis in the long-term," according to Raimondo, "is to rebuild our domestic manufacturing capabilities." Currently, the Biden administration is attempting to negotiate a stalled rescue bill through Congress. However, the stalling of that bill is continuing to have a profound impact, warned Raimondo. "Every day we wait on this funding is a day we fall further behind."
The shortage has revealed glaring flaws in US manufacturing, due in part to over-dependence on Chinese and Taiwanese-produced chips. While Intel (NASDAQ: INTC) is set to open four new fabs in the United States, it will take years to complete the plants, leaving any domestically produced chips a far-off solution.