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CHIP SHORTAGE NEWS Global chip shortage 2022 - updates in October

Updated on 14.11.2022 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:

Missing chips cost the European auto

sector €100 billion

The automotive industry has been the biggest casualty of the ongoing global semiconductor shortage. According to researchers at Allianz, the shortage has led to a shortfall of around 18 million vehicles globally, with Europe’s automotive sector being hit particularly hard. Allianz estimates that the shortage will cost Europe around €100 billion in 2021 and 2022.

At the start of the pandemic, automakers and their suppliers drastically reduced their semiconductor stockpiles and orders. Eventually, the industry realized that chipmakers had moved manufacturing resources to end-markets with increasing demand, such as computers and data centers, leaving little capacity for the automotive sector when demand for automobiles rebounded quicker than anticipated in Q3 and Q4 of 2020.

The situation has been somewhat worse in Europe where, unlike in China or North America, automotive manufacturing reached an all-time low of 13 million units in 2021.

Chip shortage puts a dent in Thai

motorcycle sales

In Thailand, economic recovery is expected to lend a boost to motorcycle sales, but manufacturers are continuing to struggle with ongoing semiconductor shortages.

This is according to the Federation of Thai Industries (FTI), which says that manufacturers are looking forward to continued sales in the remaining months of this year after September saw motorcycle purchases soar by 35.8 % year-on-year to 150,297 units.

Despite rising motorcycle sales in September and an increase in tourism numbers, however, purchases dropped by 12.5 % from August, largely because of semiconductor shortages. "The semiconductor shortage is still a major problem for motorcycle makers as it affects the production of big bikes and other new motorcycle models," said Surapong Paisitpatanapong, vice-chairman and spokesman for the FTI's automotive club.

According to the club, total sales of motorcycles in Thailand from January to September increased by 13.3 % year-on-year to more than 1.36 million units.

Toyota cuts full-year production target

Toyota Motor Corp said on Friday its annual vehicle production was likely to come in below its initial target, as the ongoing global semiconductor shortage continues to impact efforts made by the world's biggest automaker to boost output.

Toyota has recently come under heavy scrutiny over whether it’s able to stick to its annual production target of 9.7 million vehicles after it missed interim goals in the first four months of the fiscal year beginning in April.

Although production rebounded in August, output in October and November is expected to be below the average of 900,000 monthly units planned for September through November.

Toyota did not say by how much its annual production target will be lowered, but output in the first five months of the current fiscal year was 6.7 % short of the company's initial plans, according to Reuters calculations based on company data.

Toyota said on Friday it will suspend 11 production lines at eight domestic factories next month for between two to nine days, affecting the output of a wide variety of vehicles including the Corolla, RAV4, and Yaris.

Chinese chipmaker asks U.S.

employees to leave

Chinese chipmaker Yangtze Memory Technologies Co (YMTC) has asked its U.S. employees occupying core tech positions to leave as the company rushes to comply with new U.S. export restrictions.

Chip imports to China surged in 2021 as tensions between them and the United States over technology policy escalated, and the global chip shortage caused many Chinese companies to stockpile supplies. Recent data from the National Bureau of Statistics has shown that domestic chip output in September fell 16.4 % year-on-year to 26.1 billion units, with the ongoing tensions thought to be partly to blame by industry analysts.

Achieving chip self-sufficiency for China’s chip industry remains a major priority for the Chinese government, especially as the U.S. continues to target the progress of its domestic semiconductor sector. Earlier this month, President Biden announced a new set of sanctions, which has caused major overseas-based chip manufacturing equipment companies to cease supplying their products to Chinese companies.

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As for YMTC, it’s currently unclear how many U.S. citizens and green card holders will be forced to leave their posts.

Qualcomm says the chip shortage

has illustrated their importance

The ongoing chip shortage has been wreaking havoc around the world, not least in the automotive industry which continues to struggle more than two years after the first inventory problems began to show up. There are currently no signs that the shortage is going to be resolved any time soon, and many automakers expect the shortage to continue into 2023 and beyond.

However, Qualcomm, one of the world’s largest chipmakers, has recently highlighted one of the positives of the shortage: Its impact has illustrated just how important chips are, and this will push companies to handle their inventories in a more effective manner.

Qualcomm CEO Cristiano Amon called for companies to be more efficient when it comes to chips, explaining that “people realized chips are an essential ingredient for the digital economy.” Amon goes on to explain that predicting how the chip market would evolve is currently impossible because of various factors, including the way China is attempting to tackle the ongoing coronavirus crisis.

China’s chip imports fell in September

China’s chip imports fell by 12.5 % in September, according to customs data published on Monday, October 24, representing a continuing decline amid tensions between China and the United States and the ongoing chip shortage.

The country imported 47.6 billion chip units during the month, compared with 54.3 billion units in September 2021, according to the data. This figure maintains an ongoing downward trend for chip imports.

In the first nine months of 2021, China imported 417.1 billion units of chips, down 12.8 % year-on-year. Separate data from the National Bureau of Statistics showed that China’s domestic chip output in September fell by 16.4 % year-on-year to 26.1 billion units. In the first nine months of 2022, total output fell 10.8 % to 245 billion units.

Canadian lawmaker asks Taiwan for

more chips

Canadian lawmaker Chris Lewis, who is a member of parliament from Ontario, has asked Taiwan to “please send more chips” to resolve an ongoing shortage that continues to impact production lines.

Lewis, whose constituency is home to Ford Motor Company and other auto factories, told reporters on a visit to Taiwan as part of a Canadian parliamentary delegation that the lack of chips continued to cause problems.

“We’ve got parking lots full of cars, finished product cars, that sit in the parking lot, can’t be sold, because we don’t have semiconductors,” he said.

Lewis said they had met senior executives at Taiwan Semiconductor Manufacturing Co Ltd. (TSMC), the world’s largest contract chipmaker, while on their trip, along with other companies, to ask them to “put Canada at the top of the list.”

“I think every single meeting, including the upper levels of government, I brought up there are very major shortages of chips. It was a very broad conversation and every time we said ‘please send us more chips’.”

Lewis told reporters that the delegation received reassurances that Taiwan is working “very diligently” to build more chips, but added that ultimately, the best solution would be increased chip manufacturing capacity in Canada or the United States.

TSMC is currently building a US$12 billion plant in the U.S. state of Arizona.

Chip delivery times see biggest drop

in three years

Recent research by Susquehanna Financial Group, reported via Bloomberg, says that chip lead times - the time between a chip being ordered and delivered - averaged 26.3 weeks in September, which is down from 27 weeks in August.

August’s lead times were still a lot longer than what was deemed ‘normal’ in pre-pandemic times, which were 12.7 weeks in August 2019 by comparison. However, the recent decline is still significant, with Bloomberg reporting that lead times for all key product categories saw their wait times fall, with power management and analog chips seeing the largest decline.

Not every market has seen their chip-related problems alleviate, though. Dell’s CFO Tom Sweet said last month that the PC supply chain was back to operating more like its “historic norm” despite some issues remaining, but the server market continues to suffer due to the ongoing shortage. That said, the recent drop in lead times could ensure that Sweet’s prediction that tightness in the market will fall in Q4 2022 is an accurate one.

Canon invests USD345 million into chip production

Canon Inc. has announced that it plans to invest 50 billion yen, or USD345 million, to double its production of semiconductor manufacturing equipment in Japan. This is according to a source familiar with the matter, who leaked the information in early October, as the country tries to strengthen chip supply chains due to the ongoing shortage.

Canon plans to start building a new facility at its factory in Utsunomiya in 2023, which will help the company increase the output of semiconductor lithography equipment, the source said. Canon aims to begin the facility's operation in 2025. The company is also considering producing next-generation equipment, which could make chips at a lower cost, at the facility.

The news comes as Japan, the U.S., and other Asian countries, including Vietnam, rush to invest in the semiconductor industry to fight back against the ongoing shortage and safeguard against future events. Canon currently has two production sites for semiconductor lithography equipment in Japan, one in Tochigi and another in Ibaraki Prefecture, northeast of Tokyo.

Chinese students avoiding careers in chipmaking

The Chinese government is desperate to become self-sufficient in chipmaking, especially as the U.S. continues to restrict the country’s access to advanced chip technology. However, China is facing a severe talent shortage that is quickly becoming a major threat. As reported by the South China Morning Post, students simply aren’t interested in entering the industry. According to Chen Ying, a partner at Huike Edutech, which helps students find work placements, there’s little desire to work in processor manufacturing. “They feel the job is too hard and not that well paid,” he said.

The talent shortage is a problem that's only set to get worse over the coming years, with the China Semiconductor Industry Association (CSIA) predicting a shortfall of 200,000 people for 2022-23. Add to that the fact that less than 15 % of graduates majoring in integrated circuits (IC) in 2020 decided to work in the field.

While China’s Ministry of Information Technology has made semiconductor design a “first-level discipline” for graduate doctorate studies, some undergraduates have said that available teaching is out of date. “The knowledge taught in class is 15 or 20 years behind,” when learning about manufacturing, said one student

Chip shortage a ‘major challenge’ for Election Commission of India

The Election Commission has a unique challenge facing it amid the ongoing chip shortage - it has to source and prepare four Election Voting Machines (EVMs) for the 2024 general election.
Professor Rajat Moona who recently took charge of the Indian Institute of Technology Gandhinagar (IITGN) shared his concerns with The Indian Express: “The world is going through an unprecedented crisis of semiconductors. It is taking enormous time to get components though we started the planning almost a year ago.”
He added that there are nearly four previous generation M2 machines, and that all future elections, including assembly elections, will be on a much more advanced version, or the M3 machines. “As per estimates, there is a requirement of 10-11 lakh EVMs for the 2024 Lok Sabha elections along with 20-30 % additional machines as back-up that adds up to a total 13 lakh machines against the nine lakh machines available.”

To cover the shortage in the short term, Moona said they are exploring “alternative sources”, with a major supplier being Europe.

Samsung’s plan to end the chip shortage

The ongoing chip shortage has smashed the entire tech world, affecting the availability of cars, phones, tablets, and many other electronics. Although the situation is improving, companies are eager to press ahead with plans to make sure that another shortage doesn’t arise in the future. One of these companies is Samsung, who has announced plans to expand its chip manufacturing efforts.

Although Samsung might be known for its consumer electronics, it also owns some of the world’s best semiconductor foundries. It, for example, manufactures all Snapdragon 8 Gen 1 chipsets as well as the memory chips used in iPhones. The ever-rising demand for their chips, paired with supply chain pressures, has been the perfect storm for pressing ahead with expansion.

Samsung announced several changes to its foundry business on October 4. First, the company plans to introduce a 2nm process in 2025, enabling more powerful and energy-efficient chips, followed by more advanced 1.4nm chips in 2027. Samsung is also working on new designs with non-volatile memory (eNVM), ideal for cars, with 14nm eNVM products planned for 2024 and 8nm after that.
Samsung also hopes to “expand its production capacity for the advanced nodes by more than three times by 2027 compared to this year.” The electronics giant is currently building a new facility in Texas.

Vietnam hopes to produce domestic chips

With the coronavirus pandemic still having an impact on the major semiconductor manufacturers in Taiwan, China, Japan, and South Korea, Vietnam is ready to step up and face the challenge of producing chips in the future. A move to produce chips in Vietnam would be timely, as the world has a major ongoing chip shortage and the country is undergoing a digital transformation that includes a transition to digital governance, digital economy, and digital society.

"Venturing into chip manufacturing will be a chance for Vietnam to self-develop or acquire cutting-edge technological expertise. This might be a challenge, but the move will boost Vietnam's future aspiration to become the prominent manufacturing hub in the region," said Majo George, RMIT lecturer. Local industries will be able to secure locally manufactured chips, and Vietnam’s chip output could help to combat the global and regional shortage.

"Almost all aspects of modern society require semiconductors. If Vietnam can succeed in the semiconductor industry, it will be able to enter the supply chain of high-tech products such as communication equipment, computers, medical equipment, and military equipment," said Nguyen Manh Hung, who is also an RMIT lecturer. He added that the semiconductor production process had three main stages: design; manufacturing; and assembly, test, and packaging. The first two stages are high-value and high-tech processes, whereas the final stage is very labour intensive, and has the lowest barriers.

"Joining stage three seems to be easiest for Vietnam at the moment. However, the main goal of the country's entry into this competitive market should probably be to strengthen its chip design capabilities and move towards producing high-end semiconductor components," Hung said.

Stellantis cuts shift at its Michigan plant

Stellantis, the parent company of Chrysler, said on October 13 that it plans to cut one of three shifts at its Michigan Truck Assembly plant. Ann Marie Fortunate, a spokeswoman for Stellantis, cited the global microchip shortage for the decision to cut the third shift at the Warren Truck Assembly Plant, north of Detroit, in order "to improve production efficiency."

Stellantis has about 5,500 workers at the plant that produces the Jeep Wagoneer, Grand Wagoneer and Ram 1500 Classic. Fortunate said that there would be no layoffs in connection with the current situation, and there will only be a reduction in working hours for “non-seniority” supplemental employees. Full-time “seniority” employees will be moved to other shifts, she said in an email.

Chinese EV start-up hopes to make its own chips

Chinese electric vehicle (EV) start-up NIO hopes to take a leaf out of Tesla’s book and begin making its own chips, joining a growing cohort of other start-ups doing the same. To date, NIO has already put together a 300-strong team of engineers who are working to make the company’s self-driving LiDAR chips.

According to CnEVPost, NIO’s team started in the second half of 2020 under its smart driving hardware division. The leader of the chip team comes from Huawei’s HiSilicon chip division, having joined NIO in the first half of 2021. According to NIO, first goal is to develop two kinds of chips: high-level self-driving chips and LiDAR chips.

To date, NIO hasn’t made any significant progress. According to the company, the self-driving chips are not yet at the tape-out stage, which is the final design phase before going into production. To speed things up, NIO hopes to lure top talent by offering remuneration packages that are way above the industry average. According to the reports, the new chips should be ready for use in production vehicles starting as early as 2024.

Jaguar Land Rover reports increase in sales

British carmaking giant Jaguar Land Rover has reported a rise in retail and wholesale volumes during the second quarter of fiscal year 2023 but says that it’s still being impacted by a shortage of microchips, which is harming production. Wholesale sales are the finished cars that JLR sells as a business while retail sales are when customers purchase vehicles from retailers.

Jaguar Land Rover, which has production plants at Halewood in Merseyside and Solihull and Castle Bromwich in the West Midlands of England, issued figures for the three months from July 1 to September 30, 2022. These figures showed retail sales of 88,121 vehicles for the quarter, representing an increase of 9,296 units compared with the quarter ending 30 June.

Meanwhile, wholesale volumes were 75,307 units in the same period, up 4 % compared to the previous quarter. The automaker says that this growth was less than planned, primarily due to a lower-than-expected supply of specialized chips from one supplier which could not be resourced.

Hyundai resists chip shortage and reports strong sales

South Korean automaker Hyundai has reported strong sales for September, as its shipments increased by 24.4 % compared to a year earlier. Translated to numbers, this means that Hyundai sold 355,050 units, out of which 298,310 were delivered to customers outside of Korea. Hyundai also reported impressive growth in terms of its domestic sales, which increased by 30 percent to almost 57,000 units.

Although some might be led by these figures into optimism that the chip shortage is finally coming to an end, that isn’t what’s happening in this case. Hyundai’s reported numbers come after the industry was hit even harder by the semiconductor shortage a year ago. Chip inventories continue to be constrained today.

One of the contributors to Hyundai’s strong September sales is the decrease in the market performance gap in the first three quarters of 2022 compared to 2021. Hyundai says that this difference is shrinking, and thanks to strong numbers reported in September, sales from January through September are down by just one percent when compared to 2021.

STMicroelectronics plans new plant in Italy

Demand is currently soaring for microchips that are used in everything from consumer electronics to the latest cars. Supply chain bottlenecks that have strangled the industry for the past two years have wreaked havoc across several global industries, most notably the automotive industry.

To aid production capacity in Europe, the European Union launched the so-called ‘Chips Act’ earlier this year, creating EUR 15 billion in additional public and private investment in the industry by 2030, on top of EUR 30 billion of existing public investments.

One firm now rising to the challenge of boosting European chip supply is STMicroelectronics. The chipmaking giant has said that it plans to build a new integrated silicon carbide (SiC) substrate manufacturing facility. The five-year investment, due to be completed in 2026, is being made possible with EUR 292.5 million of public funds from Italy as part of the country’s National Recovery and Resilience Plan, with the grant approved by the European Commission.

“The Italian measure approved today will strengthen Europe’s semiconductors supply chain, helping us deliver our green and digital transition,” European Commission Executive Vice-President Margrethe Vestager said in a statement. “The measure will ensure that our industry has a reliable source of innovative substrates for power-efficient chips,” she added, citing their use in electric vehicles and charging stations.

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

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