Two-thirds of medical technology companies have semiconductors in over half their products.
This article appears in The American Prospect magazine’s February 2022 special issue, “How We Broke the Supply Chain.” Subscribe here.
As the pandemic forced workplaces and schools to switch to telecommuting, demand for computers, smart home devices, and other electronics has soared, contributing to a global shortage of semiconductor chips. Made from silicon and as small as an inch in diameter, these tiny chips function as the “brain” for important tech devices and consumer products, including smartphones, cars, computers, and dishwashers.
Only a fraction of the global supply of semiconductor chips goes toward the medical technology industry, but that figure still represents a huge number of products. And disruptions in the supply chain for medtech have greater implications than making people wait for their new iPhone; they have the potential to seriously compromise patient care in the United States.
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A September 2021 study by Deloitte, which surveyed some of the largest U.S. medical technology companies, found that two-thirds of companies have semiconductors in over half of their products. Over 75 percent of companies reported delays, and over 60 percent reported reduced order quantities in their chip supply chains.
“We are hearing that equipment delivery, which historically has never been an issue, is now a concern,” Michael Schiller, senior director of supply chain at the Association for Health Care Resource & Materials Management, told the Prospect in an email. According to Schiller, product lead times have increased significantly, in some cases up to six to nine months, for defibrillators, CT scanners, and patient monitoring and telemetry equipment. Oxygen delivery systems such as CPAP and BiPap units are also becoming less available, which could potentially impact the patient discharge processes.
Semiconductor chips are just one of many products dealing with delays and disruptions in the overall medical supply chain. Currently, between 8,000 and 12,000 industrial containers filled with millions of critical medical supplies, such as gowns, syringes, and surgical gloves, are delayed by an average of 37 days at ports across the country. Hospitals have also reported supply issues with catheters, crutches, gloves, syringes, needles, tubing, suction canisters for medical waste, and urine cups. In late November, a shortage of urine collection kits forced a Minnesota hospital system to find other alternatives, including ordering individual parts to make their own makeshift kits. However, because some of the urine cups do not fit in the normal hospital tube system, hospital workers must take the urine samples to the lab themselves, diverting time and attention away from patients.
Currently, the two largest manufacturers, Taiwan Semiconductor Manufacturing Company and Samsung, hold 72 percent of the market share. Overreliance on these overseas manufacturers can make supply chains more vulnerable to market fluctuations, which, in the case of the medical supply chain, can pose serious threats to patient care.
New legislation introduced last summer aims to tackle this problem and prevent future supply chain disruptions. The Creating Helpful Incentives to Produce Semiconductors for America (CHIPS) Act allocates $52 billion in federal investments to subsidize American semiconductor manufacturing plants, and the Facilitating American-Built Semiconductors (FABS) Act offers an investment tax credit on domestic semiconductor design and manufacturing. Neither bill has made it through Congress yet, prompting 59 corporate execs to sign a letter urging Congress to pass the legislation.
“Medical devices is only a sliver of the overall chips market,” wrote AdvaMed, an American medical device trade association, in a separate public comment to the Chamber of Commerce in early November, “but it is undeniably a critical sector that supports our national security.”
