Commerce Secretary Gina Raimondo said the government wants Big Tech in the semiconductor supply chain to provide information on inventory and sales of chips.
The idea is that the government can intervene to eliminate bottlenecks that have been strangling US car production and caused shortages of consumer electronics and to identify possible hoarding.
Big Tech has consistently thwarted the government requests about their semiconductor supply because it has a lot of money and owns lobbies rather a lot of politicians.
Some companies are making fortunes from the chip shortage and meetings that convened firms from different industrial sectors haven’t led to increased transparency and many companies have refused to hand over business data to the government.
Some “unnamed companies” bought two or three times what they need and stockpiled it. Raimondo said suppliers were saying “We can’t get a handle on an accurate demand signal because consumers are stockpiling, so we don’t know what the accurate demand is”.
Some consumers are saying ‘We can’t get straight answers from suppliers, how come I was told I could have X and now I’m being told I can only have half of X?”
The Commerce Department is now asking companies to fill out questionnaires within 45 days providing supply chain information. The request is voluntary, but Raimondo said she warned industry representatives that she might invoke the Défense Production Act or other tools to force their hands if they don’t respond.
“What I told them is, ‘I don’t want to have to do anything compulsory but if they don’t comply, then they’ll leave me no choice’”, she said.
“I said today we’re evaluating all of our options right now, all the tools. I hope not to go there but we need to see some progress and we definitely need compliance.”
The production act gives the president broad authority to direct industrial production in crises. The Trump and Biden administrations each invoked it to hasten the production and distribution of coronavirus vaccines and other pandemic-related medical supplies.
The information request -- and potential enforcement through DPA or other means -- is necessary because there’s a lack of trust among companies in the supply chain, she said.
“There’s allegations of certain consuming companies buying two or three times what they need and stockpiling”, Raimondo said. “So suppliers say, ‘We can’t get a handle on an accurate demand signal because consumers are stockpiling, so we don’t know what the accurate demand is.’ Some consumers are saying ‘We can’t get straight answers from suppliers, how come I was told I could have X and now I’m being told I can only have half of X?’”
Forcing companies to reveal details of their stockpiles would be of interest to investors. One of the biggest concerns about the industry’s massive run-up in revenue and earnings is that chip users are panic buying more than they need and that the resulting accumulation of unused inventory will cause a crash.
