Semiconductor supply chain problems are ‘going to take a long time to fix’: Commerce Secretary

·3-min read

Don’t expect the semiconductor shortage to be solved anytime soon.

“The semiconductor situation is going to take a long time to fix,” Secretary of Commerce Gina Raimondo said at the Milken Institute Global Conference this week. “This is one I feel confident saying it's not going to be fixed in a month or two, or six, or 12 months.”

Raimondo has been at the center of the government’s efforts to help semiconductor companies work through their bottlenecks, hosting multiple gatherings at the White House in recent months.

A recent Morgan Stanley survey of semiconductor companies found many agreeing with Raimondo. The September survey of distributors found that a majority of these companies now expect the shortage to persist “deep into 2022,” with 32% of respondents going even further saying they will last into 2023.

The report also found that “shortages have intensified [in the third quarter of 2021] due to multiple avenues of disruption.”

The shortage of semiconductors, which had impacted 92% of companies Morgan Stanley surveyed, has delayed production on everything from new cars to computers to a host of other consumer electronics which require the tiny chips to operate.

Improvement ‘over the next six to 12 months’

Raimondo said she expects improvements as bottlenecks slowly get ironed out, especially with manufacturing capacity in places like Malaysia.

“I think we'll see great improvement over the next six to 12 months as we increase transparency in the supply chain, and as we just catch up,” she said.

U.S. Commerce Secretary Gina Raimondo joins White House Press Secretary Jen Psaki for the daily press briefing at the White House in Washington, U.S. July 22, 2021.  REUTERS/Jonathan Ernst
U.S. Commerce Secretary Gina Raimondo joins White House Press Secretary Jen Psaki for the daily press briefing at the White House in Washington in July. (REUTERS/Jonathan Ernst)

Transparency in the industry has been a focus for Raimondo, who said a root cause of some of our larger supply chain woes is when “suppliers wonder who's hoarding, who's stockpiling [and] consumers wonder are businesses really pushing to the maximum limit of supply.” The Commerce Secretary sees a key part of the government’s role in enabling transparency and to “just be a partner to business as they work through this.”

In September, the Commerce Department announced an effort to gather information from “all parts of the supply chain” about things like inventories, demand, and delivery dynamics to identify the bottlenecks. The deadline for the businesses to respond is still a few weeks away.

‘This requires a long-term fix’

While the short-term problems will ease, the permanent solution is to “make more semiconductors in America,” Raimondo said.

In 1990, the U.S. controlled nearly 40% of the world’s semiconductor chip manufacturing capacity. Now that figure is just 12%, according to the Semiconductor Industry Association.

One reason for the decline, according to a recent report from the association, is because Asian governments have outpaced the U.S. in offering incentives to manufacturers. It costs a U.S. manufacturer 25-50% more to manufacture in the U.S. compared with locations abroad.

Congress has moved to try and lessen that gap with a bill called the CHIPS for America Act that passed the Senate in June and is currently awaiting a vote in the House. The bill includes $52 billion in federal stimulus for semiconductor companies to do business within the United States.

Raimondo has been a big proponent of the bill and noted Wednesday, “we are pressing to make sure it's passed before the end of this year."

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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