U.S. Factories That Use Computer Chips Face Shutdowns As Inventory at Critical Levels

The dangerously low supply of computer chips used in hundreds of products from cars to laptops and gaming consoles could lead to the temporary shutdown of U.S. factories if they don't have the materials they need to continue manufacturing, the Commerce Department announced Tuesday.

The statement from the department urged Congress to pass the $52 billion in funding to spark the manufacturing of the semiconductor chips on U.S. soil rather than importing them to ensure the factories are not as dependent on foreign production to continue operating.

The Commerce Department's review of the semiconductor supply found that the median inventory held by companies that use the semiconductors in their production of products like cars and pacemakers has fallen from about 40 days of inventory in 2019 to just five days of inventory in 2021.

That low supply means if a foreign facility producing the semiconductors shuts down for as little as a few weeks because of an incident like COVID outbreaks or political unrest, it could lead to U.S. factories being unable to continue production as they wouldn't have a vital part of their production process, the department said Tuesday.

"The semiconductor supply chain remains fragile, and it is essential that Congress pass chips funding as soon as possible," Secretary of Commerce Gina Raimondo said in the statement. "With sky-rocketing demand and full utilization of existing manufacturing facilities, it's clear the only solution to solve this crisis in the long-term is to rebuild our domestic manufacturing capabilities."

Gina Raimondo Computer Chips Semiconductor Shortages
Secretary of Commerce Gina Raimondo's Commerce Department said Tuesday the supply of semiconductor chips is dangerously low, urging Congress to pass funding to motivate domestic production of the chips. Above, Raimondo speaks during the daily White House briefing Nov. 9, 2021, in Washington, DC. Win McNamee/Getty Images

The Senate has passed the bill containing $52 billion in funding to motivate increased domestic production of the semiconductors, and House Speaker Nancy Pelosi said a version of the bill will be discussed in the House soon, according to Fortune.

The announcement from Pelosi came hours after computer chip manufacturer Intel announced a $20 billion investment to build two production plants in Ohio with the potential to expand the project to up to a $100 billion factory if Congress passes the federal funding plan, according to The Columbus Dispatch.

The Dispatch also reported that the CEO of Intel informed Governor Mike DeWine of the company's decision on Christmas Day in a letter that stated Intel's hopes that the Ohio facility could become the largest semiconductor production plant in the world.

However, any new plants like the one proposed by Intel motivated by the federal funding would take several years to be built and begin production to contribute to the supply chain and alleviate the shortage, according to the Associated Press.

In December, executives from dozens of companies including Apple and Google's parent company Alphabet signed a letter to House leadership urging the chamber to pass the $52 billion in funding.

"As you know, semiconductors are essential to virtually all sectors of the economy – including aerospace, automobiles, communications, clean energy, information technology, and medical devices," the letter states. "Unfortunately, demand for these critical components has outstripped supply, creating a global chip shortage and resulting in lost growth and jobs in the economy. The shortage has exposed vulnerabilities in the semiconductor supply chain and highlighted the need for increased domestic manufacturing capacity."

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Intel Senior Vice President and General Manager Client Computing Group Gregory Bryant display an Ice Lake chip during an Intel press event for CES 2019 at the Mandalay Bay Convention Center on January 7, 2019, in Las Vegas, Nevada. Photo by David Becker/Getty Images