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CHIP SHORTAGE NEWS Global chip shortage 2022 - updates in December

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 December 2022:

Skip to chip shortage news in February

Toyota reports record output for November

Toyota Motor Corp. has said that its global output in November achieved a whole new record thanks to solid consumer demand. However, the company has also warned of an uncertain outlook due to the ongoing semiconductor shortage and a resurgence of coronavirus cases in China. In early November, Toyota cut its global production target for the fiscal year through March while sticking with a conservative profit outlook because of chip shortages.

Toyota, which is the world’s largest automaker, produced 833,104 vehicles in November, representing a 1.5 % increase from a year earlier. Global sales rose 2.9 % to 796,484 units, officials said in a statement released Monday, December 26.

This growth in output represents solid demand in key markets such as North America, and a big rebound from a year earlier when coronavirus infections in Southeast Asia were disrupting supply chains.

Is the chip shortage over in consumer electronics?

An oversupply of chips has turned the semiconductor shortage on its head, leading to a situation where inventories are swelling. And the cause? Reduced consumer appetite for electronics against a backdrop of rising interest rates, a falling stock market, and a looming recession.

This is great news for consumers, who can now easily get their hands on electronic products much faster and more cheaply than they could a year ago. Chip inventory levels are "well above our target level," said Sanjay Mehrotra, chief executive of Micron Technology, during earnings call in December. He announced that the company plans to cut around 10% of its workforce.

Despite the oversupply, however, the shortage is still biting in other sectors, most notably automotive, where waiting times for new cars and vehicles continue to rise, with many still being shipped without certain non-critical electronic systems.

Latest chip shortage forecasts are bad news for automakers

Automotive chip supplies are likely to remain constrained until 2024, says a recent report by DigiTimes Asia, despite instances of semiconductor oversupply in other industries such as consumer electronics.

This is exactly what many auto manufacturers, including General Motors and Ford, have said that they expected. Still, according to DigiTimes’ undisclosed supply chain sources, the semiconductors needed by automakers will continue to be in high demand until 2024.

This means that the shortage that has plagued the automotive sector for over two years now will continue and that the chip shortage is highly unlikely to come to an end this year. As a result, problems with long waiting times and vehicles being shipped without certain features are all but certain to continue.

Oyak Renault pauses production due to semiconductor shortage

French automaker Renault’s Turkey-based subsidiary, Oyak Renault, has announced that it suspended production at some of its units on December 31 due to the ongoing chip supply shortage that continues to hit the automotive sector.

Production at the company’s MM11 assembly line and the cast house department was halted temporarily before being restarted on January 2. Production is then scheduled to be paused again at the M11 assembly line on January 4, followed by the cast house department on January 5. Production will then resume at both facilities on January 9. Production at the vehicle factory directorate department and the chassis and battery assembly lines will remain paused until January 11.

This isn’t the first time that Oyak Renault’s operations have been impacted by the semiconductor shortage. The company previously suspended production between September 8 and September 15 last year.

The chip shortage is fuelling smuggling attempts into China

The China-Vietnam border has long since been the site of illicit trades. Human trafficking, drugs, and rare wildlife are just a few examples of smuggling operations in the years gone by. More recently, however, authorities have noticed that computer chips are being illegally traded with increasing frequency.

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Local authorities in the Chinese village of Aidian, one of the border’s legal crossing and trading points, announced in December that they had conducted an operation to catch a gang that had been smuggling electronic components from Vietnam.

Such smuggling attempts can be lucrative. A recent report suggested that even the simplest of automotive chips could attract prices 500 times higher than they were prior to the pandemic; tight production deadlines often encourage firms to pay a premium for chips that wouldn’t have been worth much at all prior to the crisis. This has naturally led to something of a shadow economy in China, where middlemen facilitate the delivery of scarce electronic components to manufacturers.

Recently, a woman was arrested in Zhuhai for attempting to smuggle hundreds of undeclared chips inside of a fake pregnancy bump. Earlier this year, Chinese authorities announced the seizure of 160 CPUs taped to the body of a man attempting to enter China via Macau.

Electric vehicle registrations at all-time-high in India

Electric vehicle (EV) registrations in Karnataka, India, reached an all-time high in 2022. While 2021-22 saw 44,217 EVs registered, recent data provided by the state transport department shows that 49,577 vehicles were registered in 2022-23 up to October. Officials from Karnataka’s transport department said that total two, three, and four-wheel EV registrations are likely to cross the 50,000 mark when figures up to year-end become available.

This is a dramatic increase on the year 2017-18 when only 1,822 new EV registrations were recorded, a figure which jumped by 65 % to 5,542 in 2018-19. While figures were down in 2019-20 due to the coronavirus pandemic, a 41 % jump was recorded in 2020-21, with 11,593 new EV registrations.

Transport officials pointed to the coronavirus pandemic and the ongoing chip shortage for the relatively lacklustre figure for 2020-21, which impacted EV production, supply, and registration.

TSMC’s Christmas gift to Europe

Taiwan Semiconductor Manufacturing Co. (TSMC), one of the world’s largest contract chipmaker, gave Europe an early Christmas gift on December 23, when it was announced by Nikkei Asia that the company has plans for a new production facility in the German city of Dresden—the company’s first in Europe.

TSMC reportedly believes that a plant here will help to serve European carmakers more effectively, especially as the demand in the region remains at record levels following investments in electric vehicles (EVs) and other technologically advanced vehicles.

Establishing a new plant in Europe is something known to have been on the mind of TSMC for a while. However, the company initially slowed down plans for such an expansion due to the geopolitical tensions that have been caused by the ongoing war in Ukraine. The chipmaking giant reportedly believed that the instability would affect the operations of the new plant and halted its initial review as a result, and instead focused on expanding production in other markets such as the United States.

Although nothing has been officially announced yet, it’s believed that an official announcement is all but official, and it’s only a matter of time until TSMC makes the announcement.

The rising cost of living is pushing down car sales

This time last year, new car sales were being hampered by the chip shortage and the Covid pandemic. This year, soaring inflation and the overall rising cost of living is the culprit, says Estonian news agency ERR News.

Lender Swedbank says that car leasing applications in Estonia, a popular route for purchasing a new vehicle, have fallen significantly. The lender’s leasing manager, Karin Saar, said in a recent interview, "The volume of applications has really fallen quite a bit; let's say somewhere around the 25-30 percent mark, but for as long as there is demand, vehicles are actually still being purchased and leased, and the market is not dead."

One Estonian auto dealership, Viking Motors, told news agencies that customers have been postponing purchase decisions while the microchip shortage crisis is resolved, and until after the holiday season is over, and then there’s also the issue of continued inflation. "People will see what heating and gas prices do to the consumer, and then in the spring, they will have to decide whether to exchange their existing vehicle or not," he said.

European Commission recommends actions to tackle chip industry skills shortage

SEMI Europe, working with the European Commission (EC) has announced key actions to help businesses overcome the skills shortage in Europe’s microelectronics industry.

During the partnership’s first workshop, which involved EC officials and more than 80 semiconductor industry stakeholders, participants underlined the urgent need for training facilities, STEM graduates, and a more diverse workforce, while market research firm Decision Etude and Conseil presented its recent METIS4Skills Strategy 2022 annual update. The report points to a worsening of the talent shortage in Europe since 2020.

Workshop participants discussed common roadblocks to hiring, shared the best workforce development practices, and highlighted successes of EC, national, and semiconductor industry skills initiatives.

A summary of the workshop outcomes and recommendations is expected to be published in Q1 2023, examples of which include:

  • Remove barriers to entry in the industry for top university graduates.
  • Inspire children and teenagers to pursue STEM education, recruit more STEM teachers, and attract female teenagers to STEM.
  • Remove barriers to entry in the industry for top university graduates in part by retooling immigration policies.

The microchip shortage may ease next year… but for the wrong reasons

We’ve seen some signs that the automotive industry will finally overcome the chip shortage next year, as the trend that caused it is now seeing a reversal. This has led some analysts to predict that chip supplies will improve next year.

According to AutoForecast Solutions, microchip shortages will cause fewer than 3 million vehicles to be cut out of production schedules in 2023. The figure marks a significant improvement from this year, when 4.55 million vehicles were axed from automakers’ production schedules, following 10.5 million units of lost production in 2021.

This improved outlook has been confirmed by other industry sources, which have seen increased investments in production capacity as a major contributing factor. China especially is known to be deploying a particularly aggressive plan that will dramatically accelerate the production of components.

However, there’s also another factor: a looming recession. Analysts reportedly see strong signs that a recession will hit next year. If this is to happen, it would diminish the demand for new vehicles as automakers cut down on production. This would of course alleviate current chip constraints, with the cuts likely to shadow production losses caused by component shortages.

Chip shortage to continue throughout 2023, say analysts

A new report by the Financial Times has warned that we should expect continued disruption to the global semiconductor industry in 2023, and therefore continued supply chain shortages in the automotive sector.

In an interview with the Financial Times, Hassane El-Khoury, the head of ON Semiconductor, said, "there's nothing you can do now to change 2023" and that "we will be adding capacity every quarter, every month in 2023 to meet our customer demand."

As a result of the shortage, most automakers have had to reduce their production and even shut down certain lines to some extent. In some cases, car companies have shipped vehicles without certain features due to being unable to source the semiconductors necessary. For example, General Motors recently revised its plan to build 400,000 electric vehicles by the end of 2023—delaying it by six months.

While chipmakers are working hard to increase capacity, it’s a slow process that won’t provide any relief in the short term.

The insatiable demand for chips

Semiconductors have become ubiquitous; they impact every facet of our modern lives. They’re in our pockets and in our cars, they’re helping to power the world’s leading businesses, and they’re used extensively in the manufacturing of virtually all consumer goods and services.

In early 2022, it was revealed that global semiconductor sales exceeded US$600 billion for the first time, and ASML reckons that by 2030, this figure will be in excess of US$1.3 trillion, exceeding the more conservative estimates of other analysts.

This new outlook from ASML comes at a time when many manufacturers are struggling to grapple with an ongoing semiconductor shortage, and investors fret over a potential recession.

Toyota predicts U.S. sales will recover to 15M in 2023

Japanese automaker Toyota believes that the semiconductor shortage that has plagued the global automotive industry is likely to stick around for the foreseeable future, even as sales in the U.S. continue to slowly recover. This is according to Jack Hollis, Toyota’s head of sales.

Hollis, who is a first-year executive vice president of sales for Toyota Motor North America, said that he believes the industry will finish 2022 at 14 million new U.S. vehicle sales, with a recovery in 2023 to 15 million. This prediction comes as production continues to battle through supply shortages in critical components.

“For 2023, we think we’re really going up another million vehicles, which is great, because if you look at where we’ve been so supply constrained, to see there being growth and a path to growth I think is going to be encouraging for everybody in the industry,” Hollis told Automotive News on December 1.

EU Chips Act allocates €43 billion to new European chipmaking industry

Just like the U.S., Europe could soon have its own ‘Chips Act’; a legislative effort designed to boost the European Union’s competitiveness, innovation, and security in an area that governments around the world have realized is critical amidst a long, ongoing global chip shortage.

The European Council announced early in December that it had adopted a common position to propose the new regulation, which will seek to strengthen the EU’s competitiveness in semiconductor technologies.

In contrast to the U.S. CHIPS Act, which aims to boost domestic research and manufacturing, the EU’s Chips Act will provide funding to build up a European chipmaking industry largely from the ground-up. Chips are "essential for a wide range of technological and digital products such as cars, household appliances and electronics," says the EU Council's official press release.

The Chips Act will provide a total of €43 billion in public and private investments, allocated across three different pillars: the Chips for Europe Initiative, to support technological capacity and related research and innovation; a new framework to ensure the security of supply and resilience by attracting investment; and a mechanism to monitor the semiconductor supply chain and coordinate a quick reaction in crisis situations — in other words, to ensure that a repeat of the current situation can never take place.

Infineon moves smartcard chip to 28nm to get around chip shortages

Infineon Technologies is understood to have developed a security processor for payment smartcards using TSMC’s 28nm process technology, a mature process node that has not yet been used for high-volume security and smartcard applications.

According to Infineon, the SLC26P is the world’s first security-integrated circuit built for high-volume payment applications on 28nm. The move to 28nm comes amid ongoing chip shortages which have created capacity issues at mature technologies of 90nm, 65nm, and 40nm. 28nm also increases the flexibility of sourcing the chips in volume while providing lower power consumption.

“Infineon is the first to make use of the 28 nm technology node for smart card ICs. This step emphasizes our long-term commitment to the security IC market,” said Ioannis Kabitoglou, Head of the Digital Security & Identity Business Line of Infineon.

TSMC targets 3nm production in Arizona

TSMC said last month that it’s building a possible second fab at its Arizona site that will target the 3nm process node.

The Taiwanese giant, which has already committed to a US$12 billion investment for its 5nm Arizona-based fab, said in an email to the EE Times that the company is “now constructing” a building to potentially serve as a second fab and help achieve improved cost-effectiveness at the new site.

“This building enables us to remain flexible for future expansion, but we have not arrived on a final decision on a second fab,” TSMC spokesperson Nina Kao said in a prepared statement. “In light of the strong customer demand we are seeing in TSMC’s advanced technology, we will consider adding more capacity in Arizona with a second fab.”

Although TSMC has not said what purpose the second fab would serve, industry analysts reckon that the Arizona fab is likely to target the 3nm process node.

Toyota beats targets as October global production rises by 23 %

Toyota Motor Corp. has reported a 23 percent rise in October global vehicle output, beating its own target for the third month in a row. The Japanese automaking giant produced 771,382 vehicles globally in October, slightly above its downgraded target of 750,000 units and up 23 percent from the same time a year earlier, the company said in a statement published November 29.

However, growth slowed down from the record monthly output of more than 887,000 cars manufactured in September, and the company continues to face supply chain disruptions as China continues to implement coronavirus-related restrictions. A spokesperson said on Tuesday it was adjusting some operations in China due to these lockdowns.

Earlier in November, Toyota cut its annual output target in response to rising costs of materials and the ongoing chip shortage.

Jaguar Land Rover cuts production due to chip shortage

UK car maker Jaguar Land Rover (JLR) is again reducing production at one of its key facilities due to the ongoing chip shortage which continues to plague new car production.

Production will be slashed at factories in Solihull and in Halewood, which will affect the output of the Jaguar F-Pace and Land Rover Discovery Sport. This is understood to be a temporary measure as JLR focuses on its more profitable models in the short term.

JLR said it would "continue to actively manage the operational patterns of our manufacturing plants whilst the industry experiences ongoing global semiconductor supply chain disruption. "We expect our performance to continue improving in the second half of the year, as new agreements with semiconductor partners take effect, enabling us to build and deliver more vehicles to our clients,” a spokesperson said.

Toyota predicts U.S. sales will recover to 15M in 2023

Japanese automaker Toyota believes that the semiconductor shortage that has plagued the global automotive industry is likely to stick around for the foreseeable future, even as sales in the U.S. continue to slowly recover. This is according to Jack Hollis, Toyota’s head of sales.

Hollis, who is a first-year executive vice president of sales for Toyota Motor North America, said that he believes the industry will finish 2022 at 14 million new U.S. vehicle sales, with a recovery in 2023 to 15 million. This prediction comes as production continues to battle through supply shortages in critical components.

“For 2023, we think we’re really going up another million vehicles, which is great, because if you look at where we’ve been so supply constrained, to see there being growth and a path to growth I think is going to be encouraging for everybody in the industry,” Hollis told Automotive News on December 1.

EU Chips Act allocates €43 billion to new European chipmaking industry

Just like the U.S., Europe could soon have its own ‘Chips Act’; a legislative effort designed to boost the European Union’s competitiveness, innovation, and security in an area that governments around the world have realized is critical amidst a long, ongoing global chip shortage.

The European Council announced early in December that it had adopted a common position to propose the new regulation, which will seek to strengthen the EU’s competitiveness in semiconductor technologies.

In contrast to the U.S. CHIPS Act, which aims to boost domestic research and manufacturing, the EU’s Chips Act will provide funding to build up a European chipmaking industry largely from the ground-up. Chips are "essential for a wide range of technological and digital products such as cars, household appliances and electronics," says the EU Council's official press release.

The Chips Act will provide a total of €43 billion in public and private investments, allocated across three different pillars: the Chips for Europe Initiative, to support technological capacity and related research and innovation; a new framework to ensure the security of supply and resilience by attracting investment; and a mechanism to monitor the semiconductor supply chain and coordinate a quick reaction in crisis situations—in other words, to ensure that a repeat of the current situation can never take place.

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