Semiconductor Shortages, Is There an End?

From the outset of COVID-19 we have seen disruptions and shortages in global supply chains. While the severe semiconductor shortages of the past two years have eased, shortages continue for certain key components especially in the automotive industry.  

The semiconductor supply chain in particular has been impacted by several factors since COVID-19 began. From material shortages caused by Russia’s war on Ukraine to natural disasters, drought, inflation, flux in market demand and tensions between the U.S., China, and Taiwan the industry has been struggling to stabilize and meet production demands.   

Volkswagen recently stated that they are expecting chip shortage to last past 2023, and that the company is preparing for a ‘new normal’ in supply-chain crisis.  

Last week, Toyota announced that it will produce 100,000 less cars in October due to semiconductor shortages. Ford Motors also announced last week that they have over 40,000 vehicles sitting on the production lines, awaiting for components and Honda announced that it has cut its vehicle production by 40% in Japan due to chip shortages.  

NXP's automotive chip production capacity has been unable to meet the demand for orders causing price hikes and production delays and, TSMC has advised customers to build buffer stock for automotive related IC projects. 

Beyond the automotive industry, chip shortages continue to impact other industries as well. The chief executive of Raytheon Technologies, the second largest defense firm in the U.S. recently said that microchips will continue to be scarce beyond mid-2023 and the US Commerce Secretary Raimondo recently stated: “I do not, unfortunately, see the chip shortage abating in any meaningful way any time in the next year.”  

With Vladimir Putin announcing that the war in Ukraine is entering a new phase and threatening the use of nuclear weapons and China accusing the United States of sending “very wrong, dangerous signals”, the threat of continued geopolitical supply chain disruptions seems imminent. Adding to the instability of the global financial markets, material, and energy shortages and the overall volatility of the semiconductor supply chain.  

Current market shortages

Current market shortages vary based on technology nodes and utilization, for example, demand for mature process nodes including 55/65nm and 90nm have started to loosen but, demand for 40nm, 28nm, 22/20nm and 16/14nm remain high. 

Here are some current lead-time trends according to industry reports: 

supply of industrial CPUs and microcontrollers (MCU) remain tight, with lead times reaching more than 50 weeks. Microcontroller and USB Hub controller series are among products experiencing longer lead times, with all orders not expected to arrive until 2023.   

Microchip and STMicro are experiencing increased demand for EEPROM components, pushing lead times to 52 weeks. MOSFET lead times have stretched from 70 weeks to 110 weeks. Allocation is decreasing as lead times extend. 

Critical shortages continue to impact Xilinx, with lead times over 50 weeks on average and Due to unstable FPGA supply from Xilinx and Intel, Lattice experienced a sudden influx of demand causing their lead times to be past 99 weeks.  

Market predictions

Despite news of slowdown of consumer demand, the World Semiconductor Trade Statistics (WSTS) released its new semiconductor market forecast in August. They predict that the semiconductor market will increase nearly 14% in 2022 with a forecast of $633 billion in revenue and continue to grow by 4.6 percent in 2023. 

The growth is projected to be in various regions especially in the Asia Pacific, Americas, Europe, and Japan and strong demand in Logic and Analog ICs, and Sensors with Optoelectronics being the weakest category in the forecast. 

Growth prediction have been released in reports by MarketWatch and McKinsey recently release a report stating that the global semiconductor industry is projected to become a trillion-dollar industry by 2030 with 70% of growth to be driven by the automotive, computation, data storage, and wireless industries.  

What does this mean?

While there has been slowdown of demand for certain types of semiconductors, the market will continue to grow as semiconductors are essential to our everyday lives, innovation, national defense, and global net zero carbon emission initiatives 

Geopolitics, natural disasters, the global economy, and consumer demand continue to create volatility and shortages in the semiconductor supply chain.  

Risk mitigation and supply chain management are at the forefront of many company’s initiatives to help bring resiliency to their operation.  

Improving supply chain visibility and flexibility can help companies who are struggling to meet semiconductor demands.  

Multi-sourcing and diversifying your suppliers will reduce geographical and supplier dependencies. Using tools to monitor changes in your procurement and receiving alerts on the impact of natural disasters or geopolitical events on your supply chain will help you mitigate disruptions and chip shortages quickly and strategically.