Semiconductor shortage was observed even before the pandemic, COVID-19 further exacerbated the problem.
Almost every digital electronic device today operates on semiconductors containing silicon, which are required to create microchips. Cars use chips for simple things like digital displays, entertainment systems, and more complex functions like emergency braking. Semiconductor chips are also part of household appliances and gadgets.
Currently, there is a shortage of them in the world. The problem is not only caused by a pandemic. According to investment firm TS Lombard, the acceleration of IoT deployment was one of the reasons that "forever put semiconductors ahead of oil as the world's primary feedstock for growth."
The shortage in the supply of semiconductors has hit the auto industry sharply. Since the first half of 2020, overall consumer demand for cars has fallen. This has forced chipmakers to focus on other areas, such as computing hardware and mobile devices, for which demand has increased due to the increase in the number of working remotely. However, meeting the demand of automakers is more difficult. In part, this is because the return on investment does not prompt billion-dollar new foundries to be built, and the process drags on for years.
How markets react
It is estimated that 169 industries have been affected by the global chip shortage. Global smartphone shipments fell 6% in the third quarter, according to Ben Stanton, chief analyst at Canalys. Apple has cut iPad production in half and recycles old iPhone parts for iPhone 13. Nintendo is slashing production of its OLED Switch consoles by 20%. The company has cut its forecast for Nintendo Switch sales by 1.5 million per year. Sony expects to produce a smaller PS5. The company initially predicted that it could assemble 16 million consoles in the current fiscal year (which ends in March), but now it is about 15 million.
But most of all, the shortage of chips hit the automotive industry. According to the consulting company AlixPartners, in 2021 it will cost the global auto industry $ 210 billion and 7.7 million units will be lost.
There are reactions both at the level of enterprise management and at the level of government. So, the US Senate in June 2021 passed one of the largest industrial bills in American history, which, in particular, provides for spending $ 54 billion to increase production and research of semiconductors. Samsung recently announced the construction of a $ 17 billion chip factory in Texas. Texas Instruments also plans to build four new $ 30 billion semiconductor plants in Texas. Construction of the first two factories should begin in 2022, and production of 300mm wafers by 2025. Intel is going to invest $ 20 billion in the construction of two new factories in Arizona,
When will the global shortage of microcircuits end and will it affect prices?
Consumers should prepare for higher prices for smartphones, tablets or PCs next year as chip makers increase manufacturing costs. Nikkei Asia said the rise in chip costs will have a "noticeable" impact on retail prices for devices such as smartphones and computers, as they tend to use more components. In addition, TSMC, the world's largest chip maker, is gearing up for massive price increases over the past 10 years. Over the long term, industry analysts argue that a surplus of chips, on the contrary, will drive prices down. Also, one of the inevitable consequences of the global shortage of chips is an increase in the number of counterfeit products.
Forrester said it expects a chip shortage by 2023. The JPMorgan say the situation may improve from mid-2022, as the expected increase in supply on the Internet. JPMorgan attributed its optimism about the chip situation to two factors. First, on a global scale, disruptions continue in high-end computing systems that were previously highly monolithic but are now fragmented as more companies enter the space.
For example, tech giants such as Apple, Amazon, Meta, Tesla, and Baidu shy away from established chipmakers and contribute to certain aspects of their design. The second factor is Chinese semiconductor companies that focus on outdated, long-lived technologies. These companies manufacture various less advanced ICs in areas such as power management, microcontrollers, sensors, and other consumer segments.
Almost every digital electronic device today operates on semiconductors containing silicon, which are required to create microchips. Cars use chips for simple things like digital displays, entertainment systems, and more complex functions like emergency braking. Semiconductor chips are also part of household appliances and gadgets.
Currently, there is a shortage of them in the world. The problem is not only caused by a pandemic. According to investment firm TS Lombard, the acceleration of IoT deployment was one of the reasons that "forever put semiconductors ahead of oil as the world's primary feedstock for growth."
The shortage in the supply of semiconductors has hit the auto industry sharply. Since the first half of 2020, overall consumer demand for cars has fallen. This has forced chipmakers to focus on other areas, such as computing hardware and mobile devices, for which demand has increased due to the increase in the number of working remotely. However, meeting the demand of automakers is more difficult. In part, this is because the return on investment does not prompt billion-dollar new foundries to be built, and the process drags on for years.
How markets react
It is estimated that 169 industries have been affected by the global chip shortage. Global smartphone shipments fell 6% in the third quarter, according to Ben Stanton, chief analyst at Canalys. Apple has cut iPad production in half and recycles old iPhone parts for iPhone 13. Nintendo is slashing production of its OLED Switch consoles by 20%. The company has cut its forecast for Nintendo Switch sales by 1.5 million per year. Sony expects to produce a smaller PS5. The company initially predicted that it could assemble 16 million consoles in the current fiscal year (which ends in March), but now it is about 15 million.
But most of all, the shortage of chips hit the automotive industry. According to the consulting company AlixPartners, in 2021 it will cost the global auto industry $ 210 billion and 7.7 million units will be lost.
There are reactions both at the level of enterprise management and at the level of government. So, the US Senate in June 2021 passed one of the largest industrial bills in American history, which, in particular, provides for spending $ 54 billion to increase production and research of semiconductors. Samsung recently announced the construction of a $ 17 billion chip factory in Texas. Texas Instruments also plans to build four new $ 30 billion semiconductor plants in Texas. Construction of the first two factories should begin in 2022, and production of 300mm wafers by 2025. Intel is going to invest $ 20 billion in the construction of two new factories in Arizona,
When will the global shortage of microcircuits end and will it affect prices?
Consumers should prepare for higher prices for smartphones, tablets or PCs next year as chip makers increase manufacturing costs. Nikkei Asia said the rise in chip costs will have a "noticeable" impact on retail prices for devices such as smartphones and computers, as they tend to use more components. In addition, TSMC, the world's largest chip maker, is gearing up for massive price increases over the past 10 years. Over the long term, industry analysts argue that a surplus of chips, on the contrary, will drive prices down. Also, one of the inevitable consequences of the global shortage of chips is an increase in the number of counterfeit products.
Forrester said it expects a chip shortage by 2023. The JPMorgan say the situation may improve from mid-2022, as the expected increase in supply on the Internet. JPMorgan attributed its optimism about the chip situation to two factors. First, on a global scale, disruptions continue in high-end computing systems that were previously highly monolithic but are now fragmented as more companies enter the space.
For example, tech giants such as Apple, Amazon, Meta, Tesla, and Baidu shy away from established chipmakers and contribute to certain aspects of their design. The second factor is Chinese semiconductor companies that focus on outdated, long-lived technologies. These companies manufacture various less advanced ICs in areas such as power management, microcontrollers, sensors, and other consumer segments.
