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Commerce Department warns that computer chip shortage could shut down factories

Gina Raimondo, commerce secretary
Posted at 1:51 PM, Jan 26, 2022

WASHINGTON — The U.S. supply of computer chips has fallen to alarmingly low levels, raising the prospect of factory shutdowns, according to the Commerce Department.

On Tuesday, the department said companies that use semiconductors are down to less than five days of inventory.

The department cited its survey of 150 companies that found chip inventories had dropped sharply from an inventory of 40 days in 2019.

The report implied that if labor shortages or weather resulted in lengthy shipping delays, it could result in factory shutdowns across the country.

"The semiconductor supply chain remains fragile, and it is essential that Congress pass chips funding as soon as possible," Secretary of Commerce Gina M. Raimondo said in a 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."

The department added that demand for chips was up 17% last year from 2019 and that chips used in the production of automobiles and medical devices are especially scarce.

Companies that create computer chips and semiconductors are still struggling to meet demand from shutdowns caused by the COVID-19 pandemic. The lack of chips has led to supply chain bottlenecks as factories assemble products that can't go off the line without computer chips.

Computer chip shortages led to the temporary shutdown of several North American General Motors plants last year, according to CNN.