(WMBD) — The U.S. Department of Commerce reported Tuesday the country’s supply of semiconductors is alarmingly low.
According to the report, another global supply chain disruption (such as another COVID-19 outbreak, natural disaster, etc.) could lead to factory closures in the United States. This is because the country’s inventory would run out within days if the production of more semiconductors halts.
Daniel Stanton, a Professor of Supply Chain Management at Bradley University in Peoria, said most of the computer chips come from Asia.
He said factories that make semiconductors, called “fabs,” are very expensive facilities that take a long time to build.
“So many factories and so many of the things that we buy rely on semiconductors,” he said. “And if there is any kind of disruption, we need to resolve it quickly. Otherwise, it could affect just a whole range of things that we depend on in our day-to-day lives.”
The report stated, “The majority of semiconductor manufacturing facilities are operating at or above 90 percent utilization, meaning there is limited additional supply to bring online without building new facilities.”
“In this last year, we’ve had a bunch of supply chain issues that have slowed down shipments, caused factories to shut down, caused ships to get stuck out on the ocean,” Stanton said. “That has interfered with the flow of the semiconductors out of those fabs, and it’s interfered with the flow of the raw materials into those fabs.”
As the supply dwindles, the demand for semiconductors continues to climb. Demand is up 17% last year from 2019, according to the Department of Commerce.
Stanton said if it comes to a point where our supply does run out, there will be questions about priorities.
“Do we need to focus on giving first priority to medical devices and healthcare equipment?” he said. “Or, do we need to give higher priority to the automotive sector because we need vehicles to support the economy, and we need to keep the workers in the automotive plants working?”
Findings from the report underscored the need for legislation, called the U.S. Innovation and Competition Act. In it, the president proposed $52 billion in domestic semiconductor production.
Stanton said the shortage will affect Central Illinois in different ways, depending on the industry. A manufacturing company might need to close its doors temporarily. New equipment and service parts for electronics can be much harder to come by quickly.
“My advice to everybody right now is be patient, be understanding, look for alternatives… and be really transparent both with your customers and your suppliers about what you need so you can collaborate and set priorities,” he said.
Stanton said the problem could linger for a while as the manufacturers of the world navigate the issues in the global supply chain.