US Warns Chip Shortage Could Lead to Factory Shutdowns

The supply of chips for computers in U.S has fallen to alarmingly low levels, leading to factory closures, the Commerce Department said.

Companies that use semiconductors have less than five days of inventory, a sharp drop from 40 days in 2019, according to a department survey of 150 companies. Chips used in the production of cars and medical devices are especially scarce.

Microprocessor demand increased 17% last year compared to the 2019 level, the department added.

Citing the results, the administration of President Joe Biden asked Congress to pass a bill that would provide $52 billion for domestic chip production.

“The supply chain The semiconductor industry remains fragile and it is essential that Congress approve chip financing as soon as possible,” Commerce Secretary Gina Raimondo said in a statement. “With skyrocketing demand and full utilization of existing manufacturing facilities, it is clear that the only long-term solution to solving this crisis is to rebuild our domestic manufacturing capabilities.”

The chip shortage has disrupted auto production and pushed up vehicle prices, contributing significantly to a 7% year-over-year rise in consumer prices last month, the highest inflation in four decades. Still, semiconductor factories take years to get up and running.