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MARKET SITUATION Global chip shortage - outlook for 2022

From Luke James

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2021 was a tough year for us all, but a number of industries faced extra challenges in the face of a global shortage of microchips. This led to turmoil in the consumer electronics and automotive industries as manufacturers struggled to meet customer demand for everything from mobile phones to automobiles.

Several analysts have said that the chip shortage will persist well into this year but many expect the situation to slowly improve as the year progresses.
Several analysts have said that the chip shortage will persist well into this year but many expect the situation to slowly improve as the year progresses.
(Source: gemeinfrei / Pixabay)

With supply chains still in crisis and the Omicron variant of coronavirus wreaking havoc across the world, everything is pointing to yet more chip shortage-related disruption this year.

What is the chip shortage?

The global chip shortage emerged in 2020 and is an ongoing problem where the demand for integrated circuits such as computer chips is greater than supply.
This has had an impact on virtually every industry, with some faring worse than others, and has led to major price fluctuations, long lead times for products such as consumer electronics and cars, and has forced many manufacturers to push back major product launches.

To give some context of the scale of the shortage, the shortage was estimated to have cost the automotive industry over EUR90 billion by May 2021 with later estimates suggesting that the auto industry would lose USD210 billion in revenue in 2021 alone. The industry also lost a significant amount of production volume, with millions of cars going unfinished and sitting in lots waiting for chips. Of those that did ship, most were missing modern features such as parking sensors and advanced driver-assist systems.

Shortage will persist this year; but situation will improve

Several analysts have said that the chip shortage will persist well into this year but many expect the situation to slowly improve as the year progresses.

The U.S. investment bank JPMorgan expects the situation to improve from the middle of the year onwards as more suppliers become available. The bank recommended that its investors prioritize longer-term trends in the semiconductor space in areas like high-end computing. While some analysts have said that they expect the shortage to continue into 2023, JPMorgan is more hopeful. “We are not expecting 2023 to be in supply shortage — so, that is probably the first thing that we can say,” said Gokul Hariharan, co-head of Asia-Pacific technology, media, and telecom research at JPMorgan, when speaking to CNBC in November.
He went on to say that the situation this year is a little bit more tricky. While the situation could improve towards the latter half of the year as more chip production capacity comes online, the first half of the year will still see some shortages across the industry.

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    Meanwhile, a recent study by Deloitte suggests that the spread of Omicron could cause the chip shortage to continue into 2023. The Big Four firm anticipates that component lead times could be pushed into 2023 as a result.
    It’s important to remember that these predictions are just that: predictions. While a lot is being said by a lot of different people – analysts, firms, automakers – this shortage is entirely unprecedented and the truth is that nobody knows how or when it’s going to end.

    What we do know, however, is that chipmakers and governments are working hard to increase chip production capacity. All of the world’s three largest chipmakers have announced billions of dollars in spending on new facilities which will help ramp up capacity in the long term. But new facilities can’t be built overnight, so in the meantime automakers and other affected industries have got no choice but to ride the shortage out as best they can.

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