Chip shortage expected to last until 2023

14 May 2021

The global semiconductor shortage is expected to persist for another two years, according to forecasts.

Carmaker Ford has said it is expecting the shortage to cause a $2.5bn hit to earnings this year.

Glenn O'Donnell, vice president, research director at advisory firm Forrester, said the firm expected the shortage to last into 2023, due to high demand and restricted supply.

In a blog O’Donnell said: “The PC surge will soften a bit in the coming year but not a lot. Data-centre spending will resume after a dismal 2020, and edge computing will be the new ‘gold rush’ in technology.

“Couple that with the unstoppable desire to instrument everything, along with continued growth in cloud computing and cryptocurrency mining, and we see nothing but boom times ahead for chip demand.”

Meanwhile, Jim Whitehurst, president of IBM, told the BBC he expected the shortage to last another two years.

Gartner said the worldwide semiconductor shortage would severely disrupt supply chains and constrain production of many electronic equipment types in 2021, adding supply was not expected to recover to normal levels until the second quarter of 2022.

The shortage started primarily with power management devices, display devices and microcontrollers, but extended to other devices, according to Gartner.

There are capacity constraints and shortages for substrates, wire bonding, passives, materials, and testing, all of which are parts of the supply chain beyond chip fabrication plants.

“These are highly commoditised industries with minimal flexibility/capacity to invest aggressively on a short notice,” Gartner said.

It added that although device shortages were expected to continue until the second quarter of 2022, substrate capacity constraints could potentially extend to the fourth quarter of 2022.

Gartner recommended OEMs who are directly or indirectly dependent on semiconductors diversify their supplier base, extend supply chain visibility, guarantee supply with companion model and/or pre-investments, and track leading shortage indicators.

Gaurav Gupta, research vice president at Gartner, said the shortage was a dynamic situation and changes needed to be understood on a continuous basis.

“Tracking leading indicators, such as capital investments, inventory index and semiconductor industry revenue growth projections as an early indicator of inventory situations, can help organisations stay updated on the issue and see how the overall industry is growing,” said Gupta.

Earlier this month the US government said it was pressuring Taiwanese semiconductor suppliers to prioritise hard-pressed carmakers. 

Ford Motor Company said it now expected to lose around 1.1m units of production this year due to the shortage.

“Accordingly, the company anticipates full-year 2021 adjusted EBIT to be between $5.5 billion and $6.5bn, including an adverse effect of about $2.5bn from the semiconductor issue,” Ford said in its quarter one results.

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