Small Parts, Big Disruptions: Is Semiconductor Shortage Spreading?
The automotive industry has been hit by a semiconductor shortage. The world's leading chip maker, Qualcomm, now says the issue is spreading across industries.
- Shortage sparked by increased chip demands across industries
- Where do most of the world's semiconductors originate?
- Looking to Taiwan
- The shortage may extend into 2022
Update, Feb. 12: According to The Hill, U.S. President Biden will sign an executive order with semiconductors designated as "one of the central motivations." Additionally, the order will involve a "comprehensive review of supply chains for critical goods." The pending order comes on the heels of a letter sent to Biden from the Semiconductor Industry Association--a group made up of leading chipmakers such as Intel, IBM, and Qualcomm--which urged the president to increase research and manufacturing of semiconductors.
First, it was the automotive industry. General Motors had to shut down 3 North American factories, while a factory in South Korea will only operate at half capacity.
Other automotive producers—such as Volkswagen, Toyota, Subaru, Ford, and Nissan—have also had to cut production due to the semiconductor shortage.
Yet the reach of the shortage continues to expand.
The world's largest smartphone chip manufacturer, Qualcomm, has now issued a warning: it is struggling to meet demand. Newly appointed Chief Executive Officer, Cristiano Amon, warned about the spread of the semiconductor shortage, "The shortage in the semiconductor industry is across the board."
And evidence of the shortage extending from automotive to consumer electronics is confirmed by Apple Inc. (a Qualcomm customer), which stated that iPhone 12 sales were limited by an insufficient supply of components.
Perhaps the shortage's spread to consumer electronics should come as no surprise.
Since the onset of COVID-19, semiconductor manufacturers have struggled to meet the meteoric rise in demand for all things IoT (internet of things). New smartphones, laptops, desktops, gaming systems, TVs, entertainment centers, etc., continue to rise in demand due to the pandemic's effect on daily life.
Quarantines, social restrictions, and increased remote work mean people now spend 90% of their time at home.
People are bored.
And what do bored people do? They purchase electronic items to entertain themselves and their families.
While consumer demand certainly acts as a catalyst, the true root of the shortage lies at the heart of every electronics company: the supply chain. Qualcomm and other chip makers rely on a small number of Asian factories to produce their necessary semiconductors.
Using Z2Data's Supply Chain Watch, we can examine where the largest concentration of semiconductor suppliers and manufacturers are located.
And the information doesn't end with simple blips on a map. Each icon represents a semiconductor supplier or manufacturer with data that is accessible through a simple 'click.'
Improving supply chain visibility and flexibility can help companies who are struggling to meet semiconductor demands. One company might use the tool to find additional supplier sites for semiconductors. Another company might take a more cautious approach and use the tool to ensure their current supplier sites do not have additional risks (like natural disasters or geopolitical events) that can further restrict an already scarce supply of semiconductors.
Taiwan's Efforts to Combat the Semiconductor Shortage
If you look northwest of the Philippine Sea, you can see a country covered in starred icons. Geography enthusiasts may note that the country is the small nation of Taiwan—a semiconductor manufacturing powerhouse relied on by global electronics businesses (i.e. Qualcomm).
Taiwan has recently met with high-ranking U.S. officials to discuss semiconductor manufacturing capacities. The officials from the U.S. were reported to have thanked Taiwan for its efforts to help resolve the chip shortages.
The Taiwanese government has also urged its chipmakers—including Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract chip manufacturer—to boost semiconductor production and help resolve the shortage.
When Will the Electronics Shortage End?
Semiconductor manufacturers take as long as six to nine months to realign their production. With this, the shortage is expected to last late into 2021.
On the other hand, industry experts like Vivek Arya—a semiconductor stocks analyst for BofA Securities—"...expect semiconductor industry supply constraints on both wafers and substrates to only partially ease in second-half 2021, with some leading-edge (computing, 5G chips) tightness to extend into 2022."
Michael Hogan, a senior VP at GlobalFoundries, says the timeline for the shortage isn't so clear: as it can take anywhere from twenty to twenty-five weeks for new chip orders to be placed, produced, and reach the final product.
Yet as the shortage continues, companies are taking extra measures to ensure another shortage cannot occur. Along with using comprehensive supply chain data to increase the visibility of suppliers, companies are also investing in new production capacity for semiconductor makers.
As the semiconductor supply continues to tighten, only time will tell when the shortage ends.
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