In-Depth | The Semiconductor Shortage: What caused the supply crunch and how long will it last?

© Ruchira Kondepudi In-Depth | The Semiconductor Shortage: What caused the supply crunch and how long will it last?

World leaders and executives at multinational corporations are worried about the global scarcity of semiconductors, which has hit manufacturing and sales in numerous countries and no early solution is in sight.

Since the initial months of the pandemic, a number of companies across sectors have highlighted their concerns about the problem. Demand for chips is exceeding supply, and many automobile manufacturers and consumer electronics companies across the world have said that production will be affected.

The unforeseen situation is not expected to improve anytime soon, and supply constraints could potentially continue into 2023. Though companies are on a war footing to ramp up production, the problem will likely worsen before reaching a resolution.

Intel’s chief executive, Pat Gelsinger, recently warned that the worst is yet to come. He told the BBC that it will be “a year or two” before supplies return to normal.

While solving the problem is not impossible, it will be an arduous and prolonged task.

What caused the semiconductor shortage?

Semiconductors, or chips, have properties that are somewhere between conductors and insulators. Usually made of silicon, they are used to power a wide range of devices – cars, laptops, smartphones, household appliances and gaming consoles.

These tiny objects perform a host of functions such as powering displays and transferring data. So, a supply crunch has a consequent impact on sales of cars, fridges, laptops, TVs and other electronic devices.

Manufacturing cannot be increased on short notice. As a Bloomberg report points out, making chips is a complex process that takes months.

“Manufacturing a chip typically takes more than three months and involves giant factories, dust-free rooms, multi-million-dollar machines, molten tin and lasers,” the report said.

Taiwan Semiconductor Manufacturing Corporation (TSMC) is the world’s largest contract chipmaker, whose customers include Qualcomm, Nivdia and Apple. It holds 56 percent of the foundry business of manufacturing chips.

The surge in sales for electronic devices during the pandemic created a huge demand for semiconductors. But COVID-19 is not the only factor behind the shortage.

The tense relationship between the United States and China is also a factor, since many US companies do business with Chinese companies. For instance, Huawei, which supplied to American chip makers, has been blacklisted by the US government.

Gelsinger had stressed the need to “normalise” relationships with China. He added that building factories will take time.

How bad is the problem?

Since production cannot be pushed at short notice, it takes chip manufacturers a long time to catch up with demand.

A report published by Gartner in May estimates that the chip shortage across categories of devices could continue well into the second quarter of 2022.

“The semiconductor shortage will severely disrupt the supply chain and will constrain the production of many electronic equipment types in 2021. Foundries are increasing wafer prices, and in turn, chip companies are increasing device prices,” said Kanishka Chauhan, principal research analyst at Gartner.

One report by Bloomberg points out that chip lead times, or the period between ordering semiconductors and delivery, rose to a record 21 weeks in August, from six weeks in July.

Some of the top auto parts suppliers told Moneycontrol that the semiconductor shortage will begin easing from January 2022. Vikram Mohan, Managing Director, at Pricol, a Coimbatore-based Tier 1 parts manufacturer said the supply crunch had worsened at the start of this year.

“From January 2021, the problem only got worse. Right now, probably, we are at the peak, in terms of shortages and loss of production. We believe Q2 and Q3 are going to be pretty difficult for the industry. We believe, from January, the pressure will ease off a little bit with further easing happening in August-September next year,” said Mohan.

Automobile production takes a hit

Some domestic and global automobile manufacturers have had to cut output and/or temporarily halt production due to the semiconductor shortage.

This has only added to the automobile industry’s troubles, which was already bruised by COVID-induced disruptions. The consequent production disruptions will only delay the recovery of the industry.

According to data from Society of Indian Automobile Manufacturers (SIAM), automobile wholesales in India declined 11 percent year-on-year in August.

Maruti Suzuki, India’s largest carmaker, will see a 60 percent cut in production in September due to shortage in supply of semiconductors.

Mahindra and Mahindra M&M said it would cut output by 20-25 percent in September due to the semiconductor shortage. The automaker will observe seven “no production days” at its automotive plants during the month.

Kenichi Ayukawa, the President of the SIAM recently said while the chip shortage is challenging, it does provide an opportunity for the Indian automobile industry.

Ayukawa is also the Managing Director and CEO of Maruti Suzuki India.

“While the semiconductor shortage appears to be a challenge, it also brings in an opportunity. Of course, semiconductor manufacturing requires very huge investments. The Indian automobile industry alone cannot assure the full viability of such an investment in semiconductor projects. Hence, there is a need for consolidation across sectors,” Ayukawa said, as quoted by PTI.

There is a strong likelihood that the semiconductor shortage will impact sales during the upcoming festive season in India.

Electric vehicles (EV) maker Tesla had in August announced that it is developing a “Dojo” chip to train artificial intelligence networks in data centres. Tesla CEO Elon Musk said the Dojo chips should be operational next year.

It remains to be seen whether other automakers will also eventually develop and/or manufacture their own chips.

Impact on production of electronics

Production of laptops, tablets, smartphones and other electronic devices has been impacted by the shortage of semiconductors.

During a post-earnings call with analysts, Apple CEO Tim Cook had said that “supply constraints will hurt sales of iPads and iPhones. Cook said the shortage is not in high-powered processors, but “legacy nodes,” or chips that perform functions like driving displays or decoding audio, which can be manufactured using older equipment.

Cisco’s new President for India and SAARC, Daisy Chittilapilly recently told Moneycontrol that the issue of chips shortage is “very real”.

“We were one of the early companies which started putting out warnings, as early as the beginning of the year, saying that the semiconductor issue is very real and it will be a while before we come out of it,” Chittilapilly said.

“We tell our partners and customers very transparently that we are heading into trouble. So the industry is in trouble because of this issue,” she said.

South Korea’s largest conglomerate Samsung Group had in August said it would invest 240 trillion won ($206 billion) in the next three years to expand its footprint in biopharmaceuticals, artificial intelligence, semiconductors and robotics.

The company also addressed the significance of the chip industry in the South Korean economy.

“The chip industry is the safety plate of the Korean economy…Our aggressive investment is a survival strategy in a sense that once we lose our competitiveness, it is almost impossible to make a comeback,” Samsung Electronics said in a statement.

Many tech companies have begun developing their own chips, a move that will not only alleviate the current supply concerns but will likely help the industry in the long-run.

Apple is using its own M1 chip in its new iPads and Macs. A report by Nikkei Asia suggests that Google is developing its own central processors that will be used in CPUs of its Chromebook laptop from 2023.

Governments come to the rescue

The chip shortage has now become a talking point not just between companies and governments, but also between leaders of countries. Western countries have expressed a need to shift manufacturing within their countries and become self-reliant.

Prime Minister Narendra Modi met Qualcomm CEO Cristiano Amon on September 23, during the former’s ongoing visit to the US. Amon tweeted that they discussed 5G, vRAN, digital transformation, and the importance of semiconductors and a reliable geo-diversified supply chain.

A statement from the Prime Minister’s Office said they discussed investment opportunities in India’s telecommunications and electronics sector, including the production-linked incentive scheme (PLI) scheme. PM Modi and Amon also spoke about developments in the semiconductor supply chain in India.

Qualcomm supports India’s transition to #5G and transformation into a digitally empowered society. We look forward to working with the government, @investindia and local industry to help realize the vast growth opportunities for the technology sector and startup community.

— Cristiano R. Amon (@cristianoamon) September 23, 2021

The Ministry of Electronics and Information Technology (MeITy) has already drawn up the Scheme for Promotion of manufacturing of Electronic Components and Semiconductors (SPECS).

In the US, the Biden administration’s $2 trillion infrastructure investment package includes $50 billion for the semiconductor industry.

US President Joe Biden had in April met the CEOs of AT&T, Dell, Ford, General Motors, Stellantis (formerly Fiat Chrysler), Intel, Northrop Grumman, and others. He stressed the need for the US Government to push investment in the industry to stay ahead of competition.

The South Korean government has announced a massive $451 billion investment to help companies boost production of semiconductors.

Internet Explorer Channel Network
News Related

OTHER NEWS

Expo 2020 Dubai: Emirati astronauts to showcase wonders of the cosmos at Space Week

© Provided by Khaleej Times Expo 2020 Dubai: Emirati astronauts to showcase wonders of the cosmos at Space Week Some of the brightest stars in space research and exploration will ... Read more »

Paediatric emergency services to be moved from Latifa, Dubai hospitals to Al Jalila

© Provided by Khaleej Times Paediatric emergency services to be moved from Latifa, Dubai hospitals to Al Jalila Paediatric emergency services at Latifa Hospital for Women and Children and Dubai ... Read more »

Chinese property executives ask regulators for 'appropriate loosening' of restrictions - report

© Reuters/THOMAS PETER A man rides a scooter past apartment highrises that are under construction near the new stadium in Zhengzhou SHANGHAI (Reuters) – Representatives from 10 Chinese property companies ... Read more »

Soldier dies during exercise on Salisbury Plain

An investigation has been launched after a soldier died during a military exercise on Salisbury Plain. The 23-year-old was part of a crew operating an armoured vehicle in a training ... Read more »

Could the West do a deal with Putin to keep the lights on this winter?

Power in his hands: Vladimir Putin denies Russia is using its gas supplies as a ‘weapon’ over the West – AFP The message was delivered with the kind of knowing ... Read more »

When is Rishi Sunak's autumn Budget 2021?

Chancellor Rishi Sunak outside 11 Downing Street (Victoria Jones/PA) (PA Archive) Rishi Sunak will announce the conclusions of the 2021 Spending Review in an autumn Budget on October 27. The ... Read more »

Annotated solutions for Prize 28,572

Across 1 appropriate double def 9 abridge BRIDGE next to A 10 shut-eye EYE after SHUT 11 close call CLOSE (sticky) + CALL 12 rains (b)RAINS or teems (hom) 13 ... Read more »

Cristiano Ronaldo's Manchester United vs Leicester City EPL 2021 Live Streaming: Man United vs Leicester City When and where to watch, TV timings

© Provided by Zee News Marcus Rashford underwent shoulder surgery in August and has not played since England`s Euro 2020 final defeat by Italy in July, but he could make ... Read more »

T20 World Cup: CSK coach Stephen Fleming joins New Zealand squad for few days to help team prepare

Former New Zealand captain Stephen Fleming joined the New Zealand camp to help prepare Kane Williamson’s team for the T20 World Cup in the UAE. Fleming was seen sporting BlackCaps ... Read more »

Sardar Udham movie review: Vicky Kaushal and Shoojit Sircar's historical biopic is an extreme test of patience but rewards those who make it through

© Provided by BollywoodLife.com Movie: Sardar Udham Sardar Udham Cast: Vicky Kaushal, Shaun Scott, Stephen Hogan, Banita Sandhu, Kirsty Averton, Amol Parashar (cameo) Sardar Udham Director: Shoojit Sircar Where to ... Read more »

No Raphinha, Dallas dropped & Bielsa starts 22 y/o: Predicted Leeds XI vs Southampton - opinion

© Provided by Football FanCast Marcelo Bielsa shouting (2) After tasting their first win of the Premier League season against Watford last time out, Leeds United will be hoping to ... Read more »

Chargers coach Brandon Staley on NFL's taunting emphasis: It's tough on these players

© Provided by NBC Sports Chargers head coach Brandon Staley saw the costly taunting penalty against the Eagles on Thursday Night Football and was reminded of how tough it is ... Read more »

A Waffle House employee pulled a gun on a customer during a dispute over eggs, according to Atlanta police reports

© Getty Images The incident occurred at a Waffle House restaurant in Atlanta, police say. Getty Images A Waffle House employee pulled a gun on a customer over a food ... Read more »

The Latest: Russia's daily virus death toll passes 1,000

MOSCOW — Russia’s daily death toll from COVID-19 has exceeded 1,000 for the first time as the country faces a sustained wave of rising infections. © Provided by Associated Press ... Read more »

'Amazing', 'Desperately need him' - Many NUFC fans delighted as 'pretty big news' emerges

© Provided by This is Futbol Callum Wilson Newcastle United fans have been reacting to injury news surrounding Callum Wilson ahead of this weekend’s game. There has been plenty of ... Read more »

‘It's undignifying'- Woman slams site for having to provide medical evidence in order to get accessible gig tickets

A woman who had to show proof of her disability to get accessible tickets to a gig through Ticketmaster said the process was “undignifying”. Catherine Gallagher (24), from Achill, Co ... Read more »

Wilshere admits 'surprise' that Tierney is Arsenal's fastest player

© Provided by Daily Mail MailOnline logo Former Arsenal midfielder Jack Wilshere admits he has been left ‘surprised’ after discovering Kieran Tierney is the fastest player at the club. Free ... Read more »

3 reasons China in the 2020s could start slowing dramatically like Japan in the 1990s

© Jade Gao/Getty Images China’s bubbly property sector is in trouble. Jade Gao/Getty Images Japan was the prime threat to the US’s economic dominance in the 1980s, but then things ... Read more »

‘Made such a difference' – Many West Brom fans highlight ‘beast' for praise in Birmingham win

© Provided by Football League World Matt Clarke n West Bromwich Albion beat local rivals Birmingham City 1-0 at the Hawthorns last night and many Baggies fans have picked out ... Read more »

William and Kate share personal statement after tragic attack

© Pool/Samir Hussein – Getty Images The royal couple sent their “thoughts and prayers” to the family of MP David Amess The Duke and Duchess of Cambridge have shared a ... Read more »

As Erdogan set for another tour, Turkey deepens ties with Africa

© Provided by Al Jazeera Erdogan visited Somalia in 2016 to open Turkish-sponsored projects, including health facilities and the largest Turkish embassy in the world [File: Mohamed Abdiwahab/ AFP] East ... Read more »

Russia exceeds 1,000 daily COVID deaths for first time

© Provided by Al Jazeera The surging outbreak has come with just 31 percent of Russians fully inoculated as of Saturday [File: Tatyana Makeyeva/Reuters] Russia has reported more than 1,000 ... Read more »

'Nihangs attacked me with swords, my hand is of no use now: Man recalls assault in April at Singhu

Lakhbir Singh’s lynching is not the first instance of attack by members of the Nihang community at Singhu border. India Today has learnt that Nihangs assaulted another person with swords ... Read more »

Watch: Sakshi dances with joy as MS Dhoni-led Chennai Super Kings win IPL 2021, video goes viral

© Provided by DNA Chennai Super Kings (CSK), in a thrilling IPL 2021 final, defeated Kolkata Knight Riders (KKR) and became the champions for the fourth time. Before this, CSK ... Read more »

Sean Penn's wife Leila George files for divorce after a year of marriage

© Provided by WION Actor Sean Penn and Leila George marriage is coming to an end. Reportedly, Australian actress Leila has filed for divorce after just over one year of marriage. As ... Read more »

Democratic incumbents bolster fundraising advantage in key Senate races

Democratic senators waging tight reelection bids saw a windfall in fundraising in the third quarter of 2021, beefing up their war chests ahead of what are expected to be brutal ... Read more »

Op-Ed: Biden's death penalty hypocrisy

Dzhokhar Tsarnaev was sentenced to death for the Boston Marathon bombing in April 2013 that killed three people and injured more than 260. (FBI) The Biden administration is hypocritical in ... Read more »

Martin Lewis provides useful update for Britons worried about Warm Home Discount

Martin Lewis, Money Saving Expert, offers guidance on a wide range of financial issues, and this week was no different as he took to his Money Show on ITV. An ... Read more »

This is how I'm reclaiming Black History Month to make sure it's full of joy – not trauma

Black History Month in the UK has been celebrated since October 1987, to commemorate the achievements, culture, and heritage of Black people. © Provided by The Independent ‘I do not ... Read more »

Waffle House waitress pulled gun over food complaint, Atlanta customer claims

At the moment, it’s a case of “he said, she said,” at a Waffle House restaurant in Atlanta. Police are investigating a Waffle House customer’s claim that a waitress pulled ... Read more »

Russia's daily Covid deaths hit 1,000 landmark

Russia on Saturday recorded 1,000 Covid-related deaths in a single day for the first time since the pandemic began. © Reuters A patient is taken to a specialist hospital for ... Read more »

WHO did not specify any vaccine that needs a third dose –DOH

© Leo Udtohan A nurse in Tagbilaran City, Bohol inoculates a resident against COVID-19 in one of the vaccination sites. Photo by Leo Udtohan The World Health Organization (DOH) did ... Read more »

How to watch Apple's October event live without leaving your couch

Apple’s Macs are about to get an upgrade. On Oct. 18, Apple is expected to announce its next generation of computers, powered by its rumored M1X Apple silicon chips. The ... Read more »

IATF OKs Comelec request to simulate voting amid pandemic

© Danny Pata Poll clerks at a designated precinct at the Manuel Araullo High School along United Nations Avenue in Manila on Wednesday, May 8, 2019 conduct final tests of ... Read more »

Once again we must ask if our MPs are adequately protected after death of Sir David Amess

Watch: Peter Bottomley pays tribute to friend David Amess Since the turn of the century, attacks on MPs have taken place with alarming regularity. The attack on Sir David Amess, ... Read more »

Army investigating after soldier, 26, found dead in latest in string of unexplained deaths at Fort Hood barracks

Army investigating after 26-year-old Maxwell Hockin found dead at Fort Hood barracks (US Army) The US army has launched an investigation after a 26-year-old soldier was found dead behind his ... Read more »

'Chala Hava Yeu Dya' Host Nilesh Sabale's Love Story is Nothing Short of Bollywood Film

© Provided by News18 Marathi television show ‘Chala Hava Yeu Dya’ has made the entire Maharashtra laugh for over seven years now. The last and the eighth season of the show, ... Read more »

India will have the edge in clash with Pakistan in ICC T20 World Cup: Azhar Mahmood

© Provided by The Statesman India will have the edge in clash with Pakistan in ICC T20 World Cup: Azhar Mahmood Despite the “age-old cliche of any team can win,” ... Read more »

World Food Day: Nehha Pendse Loves Mumbai Delicacies, Shrenu Parikh Enjoys Gujarati Dishes

© Provided by News18 Saturday marks World Food Day. India is known for its diversity, not just in culture and tradition but also in cuisines. Every region has its unique ... Read more »

Daisy Shah Gives Festive Vibes In Pink Floral Lehenga, Take A Look At Her Gorgeous Pics

Daisy Shah looks elegant in a floral lehenga. (Image: Instagram) Daisy Shah accessorises her look with jewels from Millennium Silver. (Image: Instagram) Daisy Shah flaunts her gorgeous back in the ... Read more »