The chip shortage cut US GDP by 1% last year © sinology via Getty Images
The chip shortage cut US GDP by 1% last year © sinology via Getty Images

How chipmakers made an extra $117bn in 2021

24 January 2022

Chipmakers have seen profits balloon to record levels amid booming demand and crippling global shortages.

Worldwide semiconductor revenue increased 25.1% in 2021 to $583.5bn, crossing the $500bn threshold for the first time, according to technology consultancy Gartner. This is up from $466.2bn in 2020. 

Andrew Norwood, research vice president at Gartner, said: “As the global economy bounced back in 2021, shortages appeared throughout the semiconductor supply chain, particularly in the automotive industry.

“The resulting combination of strong demand as well as logistics and raw material price increases drove semiconductors’ average selling price higher, contributing to overall revenue growth in 2021.”

Demand for 5G smartphones helped drive semiconductor revenue, with unit production more than doubling to reach 555m in 2021, compared to 250m in 2020. 

Samsung Electronics overtook Intel to become the world’s leading chipmaker, increasing its market growth by 31.6% in 2021 compared to 2020, with a revenue of $75.9bn in 2021 compared to $57.7bn in 2020.

HiSilicon, Huawei’s chip subsidiary, saw its revenue decline from $8.2bn in 2020 to around $1bn in 2021, following US sanctions placed on Huawei under former president Donald Trump. 

Meanwhile, Intel announced it was investing $20bn to build two new semiconductor factories in Ohio, which US president Joe Biden hailed “a historic investment”.

The announcement means the semiconductor industry has committed nearly $80bn in new investments in the US during 2021-25 to strengthen supply chains, according to the Semiconductor Industry Association.

The Intel factories will span nearly 1,000 acres and create 3,000 Intel jobs and 7,000 construction jobs over the course of the build. 

Planning for the factories will start immediately, while the factories are aiming to commence chip production by 2025.

Speaking about the investment, Biden said the US contribution to global semiconductor production has fallen from 37% to just 12% over the last 30 years.

Biden said: “Today 75% of semiconductor production takes place in East Asia. 90% of the most advanced chips are made in Taiwan. China is doing everything it can to take over the global market so they can try to out compete the rest of us.”

He continued: “Historic as today's announcement is, this is just the beginning.”

Pat Gelsinger, CEO of Intel, said the move looked to “restore US semiconductor manufacturing leadership”.

Gelsinger said: “Intel’s actions will help build a more resilient supply chain and ensure reliable access to advanced semiconductors for years to come.

"Intel is bringing leading capability and capacity back to the United States to strengthen the global semiconductor industry.

"These factories will create a new epicenter for advanced chipmaking in the US that will bolster Intel’s domestic lab-to-fab pipeline.”

The White House said experts estimated the global chip shortage knocked off a full percentage point from US gross domestic product last year. 

It added one-third of annual price increases in the core consumer price index last year were due to high car prices caused by semiconductor shortages. 

Global supply chains have been rocked by semiconductor shortages, after lockdowns increased demand for electronic devices but cut production capacity.

The shortages forced General Motors to close half of its North America plants, and Toyota to cut its September production by 40%. 

It was estimated 7.7m fewer cars were built in 2021, costing the auto industry £159bn.

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