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The Chip Supply Conundrum Continues with No End in Sight

The Chip Supply Conundrum Continues with No End in Sight
Published
October 20, 2021
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As the semiconductor chip shortage drags on, allegations and concerns continue to surface about chip stockpiling.  The Biden administration continues to face resistance from lawmakers and executives in Taiwan and South Korea, further complicating efforts to resolve bottlenecks in the global chip supply that continues to plague industries from automobiles to consumer electronics.

Are chips being hoarded and stockpiled?  

The Taiwan Semiconductor Manufacturing Company, TSMC, identified complications causing more problems due to companies “stockpiling more chips than actually needed, out of fear of lacking inventory and missing out on future profits.” In a Time Magazine interview, TSMC Chairman Mark Liu deflected accusations from automakers blaming TSMC for the shortage, and talked about discovering the stockpiling issue and what the company is doing to prevent it.

In late September, The U.S. Commerce Department asked companies across all aspects of the semiconductor supply chain to voluntarily complete Requests For Information (RFIs) by Nov. 8th to investigate potential hoarding claims and gather more details to understand specific circumstances surrounding the chip shortage.

The U.S. Commerce Secretary Gina Raimondo has been vocal about challenges and uncovering issues stating there is “probably some over-ordering going on,” and “there are bottlenecks across the economy, mostly due to COVID. There’s disruption in the supply chain. Some of it will work itself out naturally but others like semiconductors will require investments so we make chips in America again.  We have to make investments now so that never happens again.”

{Read more: Keep your money, 3 million work devices prove old hardware isn’t the problem}

While Raimondo seeks to improve trust and promote transparency within the chip shortage supply chain and is optimistic about incremental progress, many chipmakers have voiced concerns about protecting private business information and customer confidentiality, while others have declined to comment.

TSMC’s General counsel, Sylvia Fang told reporters “TSMC absolutely will not hand over sensitive information, particularly client data,” and “TSMC is still assessing how to respond.”  Three of TSMC’s top five customers are American, with the largest, Apple Inc. accounting for a quarter of total sales.

What’s in the questionnaire?

Chipmakers were asked to comment on inventories, backlogs, delivery time, procurement practices and what they were doing to increase output. Commerce is also requesting information on each product’s top customers. But the department has come to realize that many are struggling with the questionnaire, and it is preparing an FAQ to help companies respond, TSMC’s Fang said.

As chip delays continue to reach record delays with no sign of improving, Raimondo has issued warnings that the U.S. Government might invoke the Defense Production Act or other tools to force their hands if they don’t respond.

https://www.nexthink.com/wp-content/uploads/2021/10/chip-shortage-chart.png

Source: https://finance.yahoo.com/news/white-house-weighs-invoking-defense-205259743.html

This chart by Bloomberg and the Susquehanna Financial Group reflects the gap between putting in a semiconductor order and taking delivery — a process which extended for the ninth month in a row to an average of 21.7 weeks in September, the longest since the firm began tracking the data in 2017.

Raimondo has also said the U.S. “took our eyes off the ball” as manufacturing slowly moved to Asia and “now we find ourselves in a vulnerable position with no leading-edge chips being made in America.”

As the demand for semiconductors continues to skyrocket, Intel is forging ahead – pun intended – with two new chip factories in Chandler, Arizona, a $20 billion expansion project, the largest private-sector investment in Arizona’s history. This strategic plan helps boost domestic chip manufacturing in the United States and balances geographical demand in the global supply chain.

And while these new facilities will not help with the current shortage until they are operational in 2024, they will help remove dependency from foundries concentrated in Asia, and help the U.S. regain leadership in the semiconductor industry to meet the tremendous surge in demand while securing both economic and national security.

As we suggested in a previous article, rather than wait for the supply chain to return to normalcy, IT can stabilize its asset plans right now by reclaiming much of their existing hardware.

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Mary Anne Cacciola is a Senior Product Marketing Manager at Nexthink.Learn More

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