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CHIP SHORTAGE NEWS Global chip shortage 2022 - updates in August

Updated on 16.09.2022 From Luke James

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How are companies responding to the chip shortage and what are policymakers commenting? Here we sum up the most important events related to the global shortage of microchips.

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.
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.
(Source: Quardia Inc. - stock.adobe.com)

The chip shortage continues in 2022. While some experts believe that the situation will improve this year, others are convinced that the crisis will persist into 2023. This article is updated continuously and summarizes the most important chip shortage news in August 2022:

China IDM says it will achieve chip self-sufficiency

As the United States allocates tens of billions of dollars in funding to boost its domestic semiconductor manufacturing, other economies are following suit. The European Union announced a €43 billion (US$49 billion) funding package in February, and the Japanese government has also approved a major investment package to the tune of US$6.8 billion.

China is also taking note. “I think it’s a war for our chip industry,” said Nie Yongzhong, CEO of FATRI Group, a semiconductor company based in Quanzhou. FATRI (Future Advanced Technology Research Institute) is an integrated device manufacturer (IDM) for sensor chips. While most IDMs are based in the U.S. and EU, Nie believes that China has the potential to quickly develop more of them in a bid to become self-sufficient in chipmaking.

On August 12, the U.S. Bureau of Industry and Security announced a new export ban on EDA software for manufacturing 3nm chips and more advanced chips to China. This is an essential software used by chipmakers across the entire semiconductor value chain. While the U.S. hopes that this will damage China’s chipmaking ability, Nie believes it will strengthen it because “IDMs can create their own integrated circuit (IC) databases, which will also boost the development of EDA companies.” Nie also believes it will promote the growth of domestic chipmaking talent and help to build China’s own manufacturing facilities.

Intel announces new funding model to power huge chip project

Following the passage of the U.S. CHIPS Act, Intel is partnering with the Brookfield Infrastructure Partners subsidiary of Brookfield Asset Management (BAM) to develop a US$30 billion semiconductor fabrication project in Arizona. Called the ‘Semiconductor Co-Investment Program’ by Intel, the initiative will introduce “a new funding model to the capital-intensive semiconductor industry.” The initiative will enable Intel to draw on BAM’s capital pool to build out capacity.

Under the agreement, the two companies will jointly invest up to US$30 billion in Intel’s previously announced manufacturing expansion in Chandler, Arizona. Intel will fund 51% and Brookfield 49% of the total project cost. Intel will retain majority ownership and operating control of two new chip factories in Chandler, which will support long-term demand for its products and provide capacity for Intel Foundry Services customers.

The partnership will enable Intel to tap into a pool of valuable capital below its cost of equity while simultaneously protecting its cash and debt capacity.

Samsung promises $15 billion in new chip investments

Samsung pledged to invest US$15 billion in semiconductor development over the next six years in an announcement made on August 19, as the company broke ground on a new chip R&D facility. However, the lofty commitment comes amid widespread fears that the industry is about to experience a huge downturn following two years of rapid growth that caused the ongoing global chip shortage.

The 100,000-square foot facility at its campus in Gi Heung, South Korea, will “lead advanced research on next-generation devices and processes for memory and system semiconductors, as well as the development of innovative new technologies based on a long-term roadmap,” Samsung announced in a statement. The company plans to invest US$15 billion by 2027.

By building the new facility, Samsung says that it’s hoping to overcome the limits of semiconductor scaling and solidify its competitive edge in semiconductor technology. “Our new state-of-the-art R&D complex will become a hub for innovation where the best research talent from around the world can come and grow together,” said Samsung Electronics president and CEO Kye Hyun Kyung. “We expect this new beginning will lay the foundation for sustainable growth of our semiconductor business.”

Used car sales plummet as owners hold onto vehicles

Q2 2022 used car sales in the UK are reportedly down by more than 400,000 compared to the same period last year as buyers hold onto their vehicles.

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The Society of Motor Manufacturers and Traders (SMMT) said this was “inevitable” due to the “squeeze” on new car supplies, a problem that’s tricking down to the used car market and causing used car prices to increase. “Prices remain significantly higher than pre-pandemic as consumers are willing to pay a premium to avoid having to wait,” said Chris Knight, automotive partner at KPMG.

Industry analysts are also pointing to less disposable income as being a contributing factor, with a cost-of-living crisis in the UK causing consumers to tighten their belts. Figured released on August 10 show that between April and June, 1,759,684 used car transactions took place, down 18.8% (407,820) from the same period the year before. This was also 13.5% (274,552) down on Q2 of pre-pandemic 2019.

President Biden signs CHIPS Bill to boost U.S. manufacturing

On Tuesday, August 9, U.S. President Joe Biden signed a landmark bill that will see US$52.7 billion in subsidies be funneled to U.S. semiconductor production and research in a bid to boost efforts to make the United States more competitive against main rivals China. "The future is going to be made in America," Biden said, calling the measure "a once-in-a-generation investment in America itself."

A bipartisan initiative, some Republicans joined President Biden on the White House lawn to attend the signing of the years-in-the-making CHIPS Bill. Chip industry leaders were also in attendance, including chief executives from Micron, HP, Intel, and Advanced Micro Devices.

The White House said the bill's passage was already spurring new chip investments. It noted that Qualcomm on Monday, August 8, agreed to buy an additional US$4.2 billion in semiconductor chips from GlobalFoundries' New York factory, bringing its total commitment to $7.4 billion in purchases through 2028.

'Horror numbers' reveal the impact of chip shortage on the car market

It’s hardly a secret that automakers across the world have been hit very hard by the ongoing chip shortage. And new numbers reported by Automotive News illustrate something of a horror story.

Carmakers are expected to continue struggling to deal with strained chip inventories for a while longer yet, leading to yet more suspensions of production activity at many leading automotive companies and the shipping of more cars that are missing key, but not critical, features.

Recent data shows that North American carmakers would slash their output by no less than 100,000 vehicles in the first week of August alone. This means that North America now accounts for the most significant cut worldwide, as the global numbers point to a 180,000-unit production drop caused by the lack of semiconductors.

The data also predicts that because the chip crisis is showing no sign of easing, the numbers will grow to reach 3.8 million units by the end of the year. This news is most unwelcome given that industry analysts believed that chip inventories would begin to improve in the final months of 2022—this now seems unlikely.

China-Taiwan tensions could worsen

chip shortage

China and Taiwan are said to be closer to war than ever after a long-standing dispute over the island’s sovereignty has been hit by rising tensions.

This has got some analysts fearing that tensions could disrupt the production of semiconductors, something that could have a knock-on impact across the global consumer electronics industry. Taiwan is home to the world's biggest contract chipmaker, Taiwan Semiconductor Manufacturing Company (TSMC).

TSMC's chairman has warned that a Chinese military force or invasion would make the firm's facilities 'inoperable' because it relies on a 'real-time connection' with Europe, Japan, and the United States. Experts have said that if TSMC is unable to produce chips at its current rate, it could negatively affect the availability of many popular technology devices as soon as the end of the year.

Automakers continue slashing features to reduce delays

As the global semiconductor shortage continues to batter supply chains, automakers are continuing to cut features from their vehicles that require chips.

For example, some automakers have been delivering cars with only one key, promising to deliver the next one at a later date. Meanwhile, others are offering cars that don’t include entertainment and infotainment systems, screens, and more.

Automobile companies have also tinkered with their production patterns by making some models of cars that have fewer features, requiring fewer chips.

“We are trying to coordinate production across different variants and models. This is possible for Maruti Suzuki because we have a large number of models. You see we are producing more Alto, Spresso, wagon R instead of Ertiga, Brezza and Swift. But the downside of this is that it makes the waiting time for some variants very long,” says Shashank Srivastava, Senior Executive Officer at Tata Motors.

U.S. chipmakers hit by downturn after pandemic boom

After facing booming demand and global shortages since the start of the coronavirus pandemic, the U.S. semiconductor industry is now facing a sudden and unexpected downturn.

The sudden excess supply of memory chips, PC processors, and other semiconductors has come at a time when manufacturers in other industries, most notably automotive, are struggling to secure reliable chip supplies.

The downturn has also forced some of the biggest chipmakers in the U.S. to trim billions of dollars from their planned capital spending at the same time as lawmakers have passed a new law that subsidizes a huge increase in U.S. chip manufacturing capacity.

“I’ve never seen a time when we had excessive inventory and we had shortages,” said Dan Hutcheson, chief executive of VLSI Research who has analyzed chip cycles since the 1980s. The immediate cause of the downturn is thought to be a rapid build-up in inventory in the chip supply chain since e start of the year. In February, there were enough chips to support 1.2 months of production, but this has since jumped to the last recorded figure of 1.7 months in July according to Hutcheson.

GPU-making giant Nvidia has also reported a revenue miss, as sales of its gaming chips fell by 44 percent compared to the previous quarter.

TSMC reportedly discussed U.S. investments with visiting Congressional delegation

The ever-present military threat from China and ongoing disruptions to global supply chains in the wake of the coronavirus pandemic have brought rising international attention to the role of Taiwan Semiconductor Manufacturing Co. (TSMC) and its role in the global electronics industry.

Now, the company, which is the world’s largest chipmaker, has confirmed that it had been in discussions with the visiting Congressional delegation concerning its investments in the United States, reported Taiwan News on August 17. Senator Ed Markey and four members of the House of Representatives from both parties

met President Tsai Ing-wen and visited the Legislative Yuan Monday during their two-day visit to Taiwan.

TSMC said that a representative of its overseas investment team had exchanged views with the delegation about the company’s current projects in the United States. The chipmaker is currently building a foundry in Arizona designed to produce 5nm chips, with manufacturing expected to start in 2024.

Chip shortage continues to hit patient care

Global medical technology giant Baxter International Inc. and its suppliers have reportedly been impacted by shortages of electromechanical components, including semiconductors, that are used in a variety of its products.

Many of the company’s medtech devices such as infusion pumps, patient monitoring systems, and con tenuous renal replacement therapy systems require multiple chips per device. For example, its flagship product, the Spectrum IQ infusion system, requires 70 chips per pump.

"Healthcare providers and patients depend on Baxter's life-saving products, whether in the hospital setting, physician's office or at home," said José E. Almeida, Baxter's chairman, president and chief executive officer. "We are asking our suppliers to prioritize chip manufacturing for medical devices, given the critical role they play in patient care around the world."

The shortage is significantly impacting healthcare providers, who are having to wait longer to receive needed devices or are being turned away because the company cannot meet the strong demand for its products.

Chip shortage knocks 180,000 cars off the assembly line

With the semiconductor industry facing unprecedented levels of demand and automakers unable to get their hands on enough of them, it’s estimated that 100,000 vehicles were dropped from last week’s assembly lines in North America. Globally, this figure could have been as high as 180,000.

These figures come courtesy of AutoForecast Solutions (AFS), a private auto-market database that is providing updates on vehicle-related chip supply fluctuations. According to a recent article by Automotive News, the estimated 180,000 vehicles missing from the world’s assembly lines last week represent the largest drop in manufacturing that AFS has seen in recent history.

According to AFS, Europe was previously the most impacted manufacturing region. So far, 1.04 million vehicles have been cut from its assembly lines in 2022. With these latest figures, however, North America has taken this not-so-coveted top spot, with year-to-date new vehicle manufacturing losses now totaling 1.06 million. AFS estimates another 800,000 vehicles will be dropped from global factories before the end of 2022.

Honda increases annual profit forecast following quarterly review

Japanese motor giant Honda has raised the outlook for its full-year operating profit thanks to the weaker performance of the Japanese Yen. However, the company also warned against over-optimism as it anticipates that the chip shortage will continue.

The mixed view from Honda reflects sentiments that are held widely among Japanese automakers. Although demand is strong and recovery from COVID-19 is underway, they have yet to completely get over a variety of negative factors that continue to hinder operations.

Like most automakers, Honda’s production in the first quarter of 2022 was hit by the global semiconductor shortage and COVID-19 lockdowns in China. This impact had already been accounted for, however, when Honda said at the beginning of the fiscal year that it was aiming to sell 4.2 million automobiles.

“The lockdown in Shanghai has been lifted, and in June and July, we saw an increase in output compared to the same month a year ago, so the situation has almost normalized," Honda executive vice president Kohei Takeuchi said.

Honda raised its operating profit forecast to 830 billion yen (USD6.15 billion) from 810 billion for the year ending March 31.

Tensions between China and Taiwan could worsen the chip shortage

U.S. Speaker of the House of Representatives Nancy Pelosi made a controversial trip to Taiwan last week, ruffling the feathers of Chinese officials in the process. Citing the visit as an “open salvo of war”, the Chinese state has since sent over two dozen fighter jets into Taiwan’s airspace.

The worsening tensions between Taiwan and China are representative of more than just another geopolitical escalation in some random, remote part of the world, though. If the situation escalates further, it could cause the already damaging and delicate global chip shortage to worsen significantly, driving the shortage on for the foreseeable future and increasing the prices of electronics.

TSMC, the world’s largest contract chipmaker which supplies chips to the likes of Apple, AMD, and Nvidia, is of course based in Taiwan. The chipmaker said that escalating tensions are a “lose-lose situation” for all involved. “Nobody can control TSMC by force. If you take a military force or invasion, you will render the TSMC factory inoperable.”

Global semiconductor sales increased 13.3 % in Q2 2022 compared to Q2 2021

The Semiconductor Industry Association (SIA) has announced that worldwide sales of semiconductors totaled USD152.5 billion during the second quarter of 2022, representing an increase of 13.3 % over the second quarter of 2021 and 0.5 percent more than the first quarter of 2022.

These figures were revealed in a press release published on August 1, which also revealed that global sales for the month of June 2022 were USD50.8 billion, a decrease of 1.9 % compared to the previous month.

“Global semiconductor sales were robust during the second quarter of 2022, increasing across all major regional markets and product categories compared to the second quarter of last year,” said John Neuffer, SIA president and CEO. “Market growth has slowed somewhat in recent months, however, with year-to-year growth in June dipping below 15 % for the first time since February 2021. Sales into the Americas continued to lead all regional markets in June, increasing by 29.0 % year-to-year.”

In addition to year-on-year sales in the Americas, sales were also up in Japan (16.1 %), Europe (12.4 %), Asia Pacific/All Other (11.9 %), and China (4.7 %).

Toyota profits down in Q2 due to chip shortage

Toyota Motor Corp’s profits fell by almost 18 % in the second quarter of 2022 compared to the second quarter of 2021, as a semiconductor shortage that has gripped the auto industry worldwide hit production at Japan’s largest automaker.

Toyota reported a quarterly profit of ¥736.8 billion (USD5.49 billion) on August 4, down from ¥897.8 billion the previous year. Meanwhile, quarterly revenue increased by 7 % to ¥8.49 trillion. The favorable foreign exchange rate for the Japanese Yuan increased the company’s operating income for the quarter by ¥195 billion, the company said.

Toyota officials have apologized to customers who have been waiting for their cars after submitting orders. Some have been waiting so long, in fact, that the vehicle they’ve ordered has since gone through a model change.

Toyota sold around 2 million vehicles during the quarter, down slightly from around 2.1 million vehicles in the same period last year.

U.S. automakers cut car production by 100,000 this week due to chip shortage

Automakers in North America will cut more than 100,0000 cars from production schedules this week due to the ongoing semiconductor shortage, as automotive business website AutoNews.com reported on August 7.

Data provided by AutoForecast Solutions shows that automakers across North America have now skipped the assembly of more than 1 million vehicles since the beginning of the year. Meanwhile, the global semiconductor shortage has impacted almost 3 million vehicles this year, and by the year’s end, this is expected to increase to nearly 4 million.

"We are still looking at a bottom in Q1 2023 with the anticipation of the start of a recovery in Q2. Even then, it is expected to be gradual with peaks and valleys throughout the year," said AutoForecast Solutions CEO, Joseph McCabe.
This latest round of disruption to production in North America means that the region has now surpassed Europe as the region most affected by the semiconductor shortage worldwide.

You have missed some chip shortage news? This is what happened before:

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