RFI Confirms ‘Major’ Semiconductor Supply/Demand ‘Mismatch’: Commerce

More than 150 companies responded to the Commerce Department’s Sept. 24 request for information on the global semiconductor shortage (see 2109230038), and the RFI found the chips supply chain “remains fragile,” blogged Commerce Secretary Gina Raimondo Tuesday. The findings confirmed it’s “essential that Congress move swiftly” to pass the U.S. Innovation and Competition Act (S-1260) to authorize the $52 billion in funding for semiconductor production and R&D under the Chips Act, said Raimondo.

The RFI found semiconductor demand “continues to far outstrip supply,” reported Commerce Tuesday. “Median demand for chips highlighted by buyers was as much as 17% higher in 2021 than 2019, and buyers aren’t seeing commensurate increases in the supply they receive,” it said. “This is a major supply and demand mismatch.” The secretaries of Commerce and Homeland Security are expected to file a report with the White House on the semiconductor shortage and issues within the wider information and communications technology industry by the one-year anniversary of President Joe Biden's Feb. 24 executive order on supply chains.

RFI respondents "shared their qualitative perspectives on the semiconductor shortage from 2019 through 2021 and on what they anticipated for the shortage in early 2022," said Commerce. "Two of the biggest themes were that semiconductor demand has been higher than originally forecasted and that external factors, particularly COVID-19-related shutdowns of production, caused significant issues."

The median inventory of semiconductor products highlighted by buyers fell to fewer than five days in 2021 from 40 days in 2019, said Commerce. Inventories are even smaller in “key industries,” like broadband, medical and automotive, it said. “The RFI allowed us to pinpoint specific nodes where the supply and demand mismatch is most acute, and we will target our efforts moving forward on collaborating with industry to resolve bottlenecks in these nodes.” Wafer production capacity is the “primary bottleneck across the board,” and relieving that constraint will require “a longer-term solution,” it said.

Since the semiconductor shortage started in 2020, semiconductor companies “have significantly increased the utilization of their existing capacity,” the RFI found. From Q2 2020 through Q4 2021, “semiconductor fabs operated at over 90% utilization, which is incredibly high for a production process that requires regular maintenance and very high amounts of energy,” said the report.

Semiconductor companies have put more money, “quicker than ever before, into expanding their capacity,” said Commerce. “It is important to note these investments will take time to translate into increased production. Some investments previously announced are expected to come online as early as the second half of 2022.” Chipmakers also are partnering with their customers “in new and creative ways like never before” to ease the supply crunch, said Commerce, citing the example of the Ford-GlobalFoundries alliance, announced days after RFI comments came due, to identify ways of working together to innovate on future chips and meet future demand for vehicles (see 2111180016).

Commerce will “capitalize” on the data gleaned from the RFI “to engage industry on node-specific problem-solving in the coming weeks,” said the report. The RFI identified three categories of products that are “the most disruptive” to the supply chain, meaning they have the most “significant semiconductor supply and demand mismatches. The categories highlighted: (1) Microcontrollers primarily made of “legacy logic chips” in 40-, 90-, 150-, 180- and 250-nanometer nodes; (2) Analog chips at 40-, 130-, 160-, 180- and 800-nanometer nodes; and (3) Optoelectronics chips at 65-, 110- and 180-nanometer nodes.

Commerce also is “engaging with companies that did not respond to the RFI, and those companies whose responses were not as comprehensive as their peers, to ensure we have the most accurate picture of what is driving supply chain bottlenecks,” it said. “We believe we will get the information we need. We will continue to use the tools at our disposal to increase transparency in the supply chain and ensure companies are not taking advantage of the shortage.”

Comments are due March 25 in docket DOC–2021–0010 in Commerce's RFI with its National Institute of Standards and Technology to help the “planning and design” of “potential programs” authorized under the 2021 National Defense Authorization Act to promote investment in U.S. semiconductor manufacturing and R&D, said a notice in Monday’s Federal Register. In a detailed, five-page RFI, Commerce wants to know how incentives written into NDAA Section 9902 can “be designed and deployed to encourage additional and new private capital investment in the semiconductor ecosystem.” It seeks input on how federal funds can “incentivize the creation of a broad semiconductor ecosystem that includes producers of semiconductor manufacturing equipment and other upstream suppliers.”

The NDAA's Section 9906 would establish a National Semiconductor Technology Center as “a hub (or multiple hubs) of talent, knowledge, investment, equipment, and toolsets,” said the notice. Commerce wants to know “what attributes or capabilities of the NSTC would make it attractive and beneficial for companies, universities, and other agencies to want to send employees for assignments” there. It also wants to know what types of research and training opportunities should be made available at the NSTC “for students and early career staff.”