Global semiconductor interruptions as giants in survival mode07.09.2021by Philippe Orphanides
Several industrial sectors, particularly the automotive industry, are facing a shortage of semiconductor microchips, causing a drop in production and delays in deliveries.
This shortage results from the conjunction of industrial factors (supply chain interruptions caused by natural catastrophes or local confinement measures), cyclical (the explosion in demand for PCs and smartphones in the health crisis with the rise of teleworking), and geopolitical (tensions between China and the United States who have pushed companies to stockpile to anticipate possible trade retaliation).
After having heavily impacted the automotive industry, the semiconductor shortage is now likely to affect the smartphone sector, causing delivery delays and rising prices. Although suppliers expect the crisis to end, analysts predict it could last for several more months, and perhaps into 2022.
Taiwanese semiconductor companies have adapted their production for the automotive industry, so the shortage of chips for automobiles is expected to be resolved soon, the downside of it being production delays for the iPhone 13.
Delays and limited sales for smartphones
If the shortage is gradually being reduced for the automotive sector, it is also because governments have made it a priority. However, these signs of recovery mask upcoming shortages in other sectors. Recently, the Smart Payment Association (SPA), an organization specializing in card and mobile payments, warned of the risk of a shortage of bank cards.
On the supply side
Semiconductor suppliers have demonstrated reassurance. ASML, one of the largest suppliers of microchips, reviewed its sales forecast upward this week due to large orders, as chip giants TSMC and Intel scramble to ramp up infrastructure and production.
US chipmaker Intel fears the semiconductor shortage will last another two years due to the time it will take to build new factories. According to its CEO, it will take a few more years before deliveries resume at full capacity. Notably, because the growing demand is also putting pressure on the supply of equipment.
The American company recently announced that it would invest $20 billion in two new factories in Arizona (central United States), spurred by a $52 billion government subsidy plan.
The giant intended to set up a mega-factory in Europe, but between competition from different states and huge demands for subsidies, the company decided to split the locations.
In the face of supply chain interruptions, the EU has been looking to gain ownership on the production of electronic chips and decided to reach 20% of global production by 2030. Currently, most of the global production is located in Taiwan, which has struggled to keep pace since the start of the pandemic.
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