Global chip shortage to continue through 2022: Report

It is no news that the Covid-19 pandemic has impacted the silicon industry causing a global chip shortage. The impact of this global chip shortage can be witnessed across sectors including smartphone manufacturing and automotive industries. Now, a new report highlights that the chip shortage is expected to continue through 2022.

According to a report by the US Department of Commerce the global chip shortage will not end anytime soon and the issue lies in the factories manufacturing them. As per the report, the median inventory held in stock by smartphone makers, carmakers and medical device makers has decreased from 40 days in 2019 to less than five days in 2021. “If a COVID outbreak, a natural disaster, or political instability disrupts a foreign semiconductor facility for even just a few weeks, it has the potential to shut down a manufacturing facility in the US,” the report says.

The report also says that the demand for semiconductors is 17% higher in 2021 than it was in 2019. Furthermore, the report says that the bottlenecks are most concentrated in a specific semiconductor inputs and applications, including legacy logic chips that used in automobiles, medical devices, and other devices, analog chips that are used in power management, image sensors, and radio frequency, and optoelectronics chips, which includes sensors and switches.

To cater to this demand, a majority of semiconductor manufacturing facilities are operating at or above 90% capacity. Simply put, production of chips cannot increase without building new semiconductor manufacturing facilities.

Additionally, semiconductor producers are partnering with semiconductor customers in new ways. For instance, Ford and Global Foundries recently announced a partnership to identify ways they can work together to innovate on future chips and GM announced a similar partnership with seven different semiconductor producers back in November last year.

Apart from this, the semiconductor industry is also increasing investments for setting up new plants. The report says that the semiconductor Industry Association forecasted semiconductor industry capital expenditure would reach close to $150 billion in 2021 and over $150 billion in 2022, which is significantly higher than the $115 billion annual capex prior to 2021. For instance, Samsung has announced plans to build a $17 billion semiconductor plant in Texas. But that isn’t expected to be operational until late 2024.

“With sky-rocketing demand and full utilisation 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,” Secretary of Commerce Gina M Raimondo said in the report.

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