Since the beginning of the epidemic, many businesses from various industries have expressed their concerns about the situation. Chip demand is outstripping supply, and several automakers and consumer electronics companies throughout the world have announced that production would be harmed.
According to reports, the automobile sector and other industries may lose a significant part of sales during the festive season due to shortage of chips, leading to shutdown of production lines and supply production remain behind demand. There is a possibility of further climbing during festive Season.
WHY ARE WE IN THIS SITUATION?
The Covid-19 pandemic, combined with a boom in demand for electronics, caused a global chip shortage. Consumers and corporations began purchasing new laptops and servers to accommodate remote workers and homeschooled children. As a result, while global semiconductor sales fell between 2018 and 2019, they increased by 6.5 percent in 2020. This strong rise has continued in 2021, with sales for May 2021 up 26% over the same period last year, according to trade group the Semiconductor Industry Association.
Aside from the pandemic, other causes contributing to the scarcity include a 50-year-long drought in Taiwan, which has left TSMC and other chipmakers struggling to obtain sufficient amounts of water, which is essential in chip fabrication. “Other occurrences, including factory fires, power outages, and the shipping blockade at the Suez Canal, have slowed supply,” said Shane Rau, a semiconductor analyst at IDC.
- Silicon is the common material used in semiconductors.
- Semiconductors are required in all modern tech devices and components, from cellphones to automobiles.
- Samsung, Taiwan Semiconductor Manufacturing Company (TSMC), Intel, Broadcom, and Nvidia are some of the most well-known semiconductor chip manufacturers.
- Semiconductor chips are the backbone of many industries.
- The United States is the market leader in chip R&D, while Taiwan is the market leader in semiconductor assembly, packaging, and testing. China produces the vast bulk of the world’s chips.
According to Soumitra Bhattacharya, MD of Bosch, the chip scarcity would influence the car market until 2022. According to Bloomberg, carmakers are increasingly omitting high-end features to cope with the chip scarcity.
Consumer goods and smartphone manufacturers, as well as the automobile industry, are under pressure to keep up with rising demand.
Samsung, a South Korean consumer electronics and durables company, recently announced that the chip shortage has impacted its television and appliance output. Apple, LG, and other Chinese electronics and smartphone manufacturers have all been impacted by the chip shortage.
Due to a global chip shortage, Apple Inc (AAPL.O) is expected to cut production of the iPhone 13 by up to 10 million devices, Bloomberg reports mentioned on 12th October 2021. According to Bloomberg, Apple aimed to build 90 million copies of the new iPhone models by the end of the year.
According to reports, Apple informed its suppliers that the number of devices would be reduced due to chip vendors like Broadcom Inc (AVGO.O) and Texas Instruments (TXN.O) having difficulty delivering components.
Now the situation is going to be a week at a time. Broadcom and Texas Instruments (TI) appear to be unable to produce sufficient components on time. Apple purchases display chip components from TI, whereas Broadcom, has been a long-time supplier of wireless components.
HOW AND WHEN WILL IT BE RESOLVED?
Semiconductor supply was expected to recover by the end of 2021, but analysts anticipate the global chip shortage would continue into the following year, maybe until 2023. According to Malcolm Penn, CEO of industry analysis firm Future Horizons, current capacity investments will not influence for some time. “CapEx is starting to materialize now,” Penn added, “but it takes a year to develop up and kick in.”
According to Penn, the last quarter of 2021 will be a major indicator of how long the chip scarcity will last. In Q4, demand tends to slow, which may allow suppliers to catch up on orders.
