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CHIP SHORTAGE NEWS Global chip shortage 2022 - updates in September

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 September 2022:

Semiconductor vs microchip vs integrated circuit: What’s the difference?

The terms semiconductor, microchip, and integrated circuit are often used interchangeably.

Although there are many similarities between the three, which means that using them interchangeably is generally fine in the context of high-level discussions surrounding them, there’s no ignoring the fact that they are quite different on a technical level.

Let’s look at all three of these in isolation and explore how they differ from one another.

What is a semiconductor?

A semiconductor is a material with conductivity that is between a conductor and an insulator and room temperature, whose conductivity can be controlled within this range. As its name implies, a semiconductor is a material that conducts current only partly.

Semiconductors are ubiquitous in electronics because of these properties and can be found in everything from electronic calculators to mobile phones and gaming consoles to personal computers. Most semiconductors are crystals made of certain materials, and the most common one used in electronic applications is silicon.

Taiwanese chip firm looks to boost automation

Taiwan's ASE Technology Holding Co Ltd, one of the world's largest semiconductor testing and packaging firms, said last week that it aims to build a more advanced smart factory.

The new factory in Kaohsiung, which will be powered by U.S. chip designer Qualcomm Inc´s Snapdragon system, will be the first in the world to deploy a "5G mmWave new radio-dual connectivity standalone" network. ASE, which is building the facility in response to the ongoing labor shortage, said that this will improve stability and equipment efficiency.

"To counter the talent crunch and adapt to diverse customer requirements, ASE is accelerating its adoption of smart manufacturing technologies including automation," the company said in a statement.

ASE currently serves large companies like Apple and began investing in automated factories in 2015. This year, the company plans to build 10 smart factories, bringing the total number of them to 37 in Taiwan.

Leading MEP pushes for geographical balance in the EU Chips Act

Member of the European Parliament Dan Nica is pushing for “a clear added value for all the member states” in a draft report presented to the European Parliament. The lawmaker’s text addresses widespread concerns that the EU Chips Act would only benefit large countries with deeper pockets to subsidise expensive chipmaking facilities, the so-called mega fabs.

“The [Chips for Europe] Initiative is also intended to strengthen the economic, social and territorial cohesion of the Union and at reducing disparities between the levels of development of member states and of the various regions within the Union, creating a clear positive impact on several member states,” Nica says in the report.

The Chips Act provides a special regime for first-of-a-kind “mega fab” facilities that are equipped to advance Europe’s technological status and receive public subsidies. The definition of first-of-a-kind was extended to include product innovation and contribution to the EU and global supply security, in addition to processing raw mate, manufacturing materials, or equipment needed in semiconductor manufacturing.

Could next year be the end of the chip shortage?

The chip shortage continues to be the cause of many problems for business leaders across the world, particularly in the automotive sector where daily operations continue to be disrupted.

While most industries are looking to more efficient approaches to minimize these disruptions, however, the automotive sector is sticking with temporary production halts and the shipment of vehicles with parts missing.

Unfortunately, predicting when the semiconductor crisis could come to an end is something that nobody can do. But analyst Bill Jewell of Semiconductor Intelligence says that the market could stabilize next year as the market’s bigger players deal better with supply chain disruptions and keep production running.

Jewell believes that once PCs and smartphones go back to normal growth, which he anticipates will happen in the next year, automotive and IoT will become the leading market drivers in the semiconductor industry.

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Experts say the chip shortage is being exacerbated by structural factors

Experts at the World Intelligent Connected Vehicles (WICV) Conference held in Beijing earlier this month say that the global shortage of semiconductor chips for vehicles is being ​exacerbated by structural factors that have increased the need for even more chips, pointing specifically to the higher demand for smart vehicles,​ which require more chips.

"This phenomenon is happening all over the world. Intelligent networked vehicles have brought OEMs and chip companies closer than ever before. Some people joked that chip companies are now Tier 1 suppliers" he said. What this translates to is a more complex vehicle production process that involves multiple parties and ​several different companies supplying software, hardware, and semiconductors.

Marcus Bollig, managing director of the German Association of the Automotive Industry, called for dialogues across sectors and companies. "During these challenging times, such as the pandemic, high energy prices, and supply chain disruptions, we need to seek dialogue especially when it comes to difficult questions and different opinions" he said.

General Motors parking lot illustrates the impact of the chip shortage

Parking lots packed with incomplete vehicles are nothing new; they have become the norm over the last couple of years, symptomatic of the ongoing chip shortage that has crippled automotive and electronics manufacturers worldwide.

Constrained inventory is one of the biggest problems faced by automakers at the moment, and images of GM’s parking lot in Kokomo are nothing more than proof of the nightmare scenario that most automakers are facing.

As recently reported by local media, there are currently around 3,000 trucks packed in the Kokomo lot waiting for the missing chips, though right now, nobody knows for sure when they could be finished and shipped to dealers.

According to General Motors CEO Mary Barra last month, there’s a chance this problem won’t be easing any time soon; the company doesn’t expect the chip shortage to be resolved any earlier than 2023. Although Barra says the current global chip inventory is slowly getting better, there are still signs that the crisis will continue for at least one more year and perhaps “a little beyond.”

Honda cuts car output by 40% in Japan

Honda Motor Co said on Thursday, September 22, it would reduce car output by up to 40% at two Japanese plants in early October because of ongoing supply chain and logistical problems.

The latest cut in output provides further evidence of problems that automakers are likely to face when they try to increase their production volumes during the second half of the financial year to March in a bid to make up for a shortfall caused by the ongoing chip shortage in the first half of the year.

Two lines at Honda's Suzuka plant in western Japan will cut back production by about 40% in early October. Meanwhile, its assembly plant in Saitama prefecture, north of Tokyo, will also cut production plans by about 30% for the period. Honda has also said it would cut vehicle production at Saitama by about 40% and at Suzuka by about 20% for the rest of September.

Toyota fails to meet October production target due to chip shortage

Toyota has reduced its October production estimate by more than 11%, pointing to a continued shortage of semiconductors, the Japanese automaker said on Thursday, September 22nd.

Toyota says that it had initially estimated September to November production to average 900,000 units per month. However, October estimates have since been revised to 800,000 units because of the lingering semiconductor shortage. The automaker said it estimates production of 250,000 units in Japan and 550,000 units overseas.

Earlier this month, the National Automobile Dealers Association (NADA) said it projected new light vehicle sales to improve slightly in Q4 and finish at 14.2m units. It’s safe to say that the consistent cutbacks we’re seeing with all major automakers, which more recently include fellow Japanese automaker Honda, are not encouraging.

L3Harris begins cannibalizing parts due to chip shortage

L3 Harris Technologies, an American defense firm, has said that it is buying back and cannibalizing its own radios to meet customer demand for its other products amid a major shortage of computer chips and components.

The company and others across multiple sectors have been hampered by a semiconductor shortage that stretches back nearly two years, and many industry insiders and commentators, including automotive giant Volkswagen, expect it to continue for now.

Speaking at a Morgan Stanley event last week, L3Harris CFO Michelle Turner said a “big-name chip supplier” she did not identify was unable to meet her firm’s demand heading into the fiscal quarter that began in July. That forced the company to find circuits, called field-programmable gate arrays, from an unusual source.

“We went to one of our customers, where we knew they were disposing of some old radios. We took those radios back, we broke them down. We’re using the [field-programmable gate arrays] within those radios to rebuild them into the current formation, to be able to meet the demand and deliver,” Turner said.

Chip delivery times dropped in August

Chip delivery times shrank again in August, a potential sign that the global chip shortage is easing further. However, some types of semiconductors remain hard to find.

Lead times—the gap between when a chip is ordered and when it is delivered—averaged 26.8 weeks in August according to research by Susquehanna Financial Group, a whole day shorter than they were in the prior month.

According to Susquehanna, the shorter lead times represent slowing demand for certain electronics, such as phones and personal computers. However, parts of the market remain strained, with orders flooding in faster than chipmakers can fulfil them. “We believe over-ordering trends and inventory builds have yet to work through the system,” Susquehanna analyst Chris Rolland said in a research note.

Foxconn to invest up to $19 billion in India

Taiwanese electronics giant Foxconn has reportedly struck a deal to invest US$19.4 billion to make semiconductors in India with Vedanta, a local conglomerate, backed by New Delh´s push to boost tech self-reliance after a global chip shortage.

This follows on from December of last year when Indian authorities approved a US$10 billion incentive to kickstart its own domestic industry by covering up to 50% of all project costs.

The deal announced on Tuesday, September 20, is the scheme´s most ambitious investment to date and will see a manufacturing facility built in Prime Minister Narendra Modi´s home state of Gujarat. "India´s own Silicon Valley is a step closer now," Vedanta group chairman Anil Agarwal tweeted on Tuesday, thanking the government for helping "tie things up so quickly";.

Vedanta, which is one of India’s largest mining companies, will take a 60% share in the joint venture, which represents its first foray into chipmaking.

"The improving infrastructure and the government´s active and strong support increases confidence in setting up a semiconductor factory", Foxconn vice president Brian Ho said in a statement.

Stellantis and Renault pause assembly lines as chip shortage continues

Carmakers Stellantis and Renault will partly pause production at their Spanish plants in the coming weeks as the lack of semiconductors persists, two union representatives told Reuters on Friday, September 16.

Two Renault factories in Spain's Castile and Leon region will come to a temporary halt. One paused its operations on Saturday, September 17, while others will be cancelling shifts on several days in the weeks commencing September 19 and September 26, a representative from the CCOO union said.
"They stopped production for 15 days in February. The supply shortage could mean more shutdowns in any moment," a Stellantis union representative told Reuters. In recent months, both Stellantis and Renault have halted their operations in Spain in response to developing challenges posed by the chip shortage.

Chip shortage to last past 2023, says Volkswagen

Supply chain shortages created by the global pandemic have exacerbated a chip shortage for almost two years now, and Volkswagen doesn’t think it will be resolved any time soon. “There will likely still be a structural shortfall in semiconductors up to and including 2023,” Volkswagen’s head of procurement Murat Aksel told the weekly German trade publication Automobilwoche on September 19.

Rather than the chip supply increasing, Aksel said that existing geopolitical uncertainty surrounding major chip producing countries like Taiwan is creating even more obstacles. “This is the new normal,” he remarked during his interview. “With the new geopolitical issues, if anything, it’s going to get even more complex and challenging.”

TSMC says that supplies of penny chips are strangling supply chain segments

A shortage of so-called ‘penny chips’ that cost anywhere from 50 cents to USD10 is slowing down swathes of the USD600 billion semiconductor industry. This is according to the CEO of Taiwan Semiconductor Manufacturing Co (TSMC), C. C. Wei.

At a recent tech symposium, Wei said that TSMC, the world’s largest contract chipmaker, can no longer meet the demand for low-end chips at legacy factories, and it is building new plants as a result. Wei also suggested that mature chips may begin to cost more in the months ahead.

Shortages are showing up as a result of automakers adding more features to cars and increasing the silicon used by 15 % every year, while smartphones now require two to three times the number of power management chips they did five years ago, Wei added. “The age of an efficient, globalized supply system has passed,” he said, noting that production costs are also increasing due to more countries racing to build fabs at home. “Costs are swiftly rising, including inflation.”

Production at Stellantis’ plant halted due to chip shortage

Car production at Stellantis' Sochaux car plant in France was suspended from Thursday, August 25 until Saturday, August 27, the company confirmed to Reuters, after a union official cited semiconductor shortages as the reason for the interruption. This isn’t the first time that Stellantis has faced problems due to the chip shortage.

Earlier this summer, two Stellantis plants in France faced production stoppages due to shortages in components from Continental, a German supplier. According to Stellantis, Continental was unable to deliver its connected navigation and entertainment systems to a Citroen plant in Rennes. Meanwhile, a Peugeot plant in Sochaux was halted because Continental had been unable to deliver touch screens.
At the time, a Stellantis spokesperson said the group would not comment on individual suppliers and reiterated that current stoppages at both plants were related to bottlenecks in semiconductor supply.

President Biden signs order to implement new CHIPS Act

U.S. President Joe Biden has signed an executive order to begin the implementation of the USD52.7 billion semiconductor chips manufacturing subsidy and research law, also known as the CHIPS Act. Last month, President Biden signed the bipartisan bill to boost efforts to make the U.S. more competitive which China’s advanced chip capabilities.

Commerce secretary Gina Raimondo said the department has been preparing for months for the program, including the launch of CHIPS.gov, which will oversee funding awards for the production of silicon semiconductors. “We are committed to a process that is transparent and fair,” Raimondo said. “This program is intended to be an investment in America’s long-term economic and national security and we will take the necessary steps to ensure its success.”

Biden’s order sets six primary priorities to guide the implementation of the Chips and Science law and establishes a 16-member interagency CHIPS implementation council that will include the secretaries of Defense, State, Commerce, Treasury, Labor and Energy. The White House has not specified how much funding for semiconductor production will be provided, or how long it would take.

Intel hopes to hire 7,000 construction workers for its new $20 billion chip plant

Intel’s latest U.S. chip plant project, a 1,000-acre site that will see more than USD20 billion invested into Ohio—representing the largest economic development project in the state’s history—will naturally come with many challenges. One of the biggest? Filling roughly 7,000 construction vacancies at a time when there’s a shortage of construction workers across the country.

Announced by Intel in June, the USD20 billion project is estimated to reach completion in 2025 and create 3,000 new jobs for Ohio with an average salary of around USD135,000. Before this happens, however, the 1,000-acre site must be leveled and the factories built.

“This project reverberated nationwide,” said Michael Engbert, an Ohio-based official with the Laborers’ International Union of North America. “We don’t field calls every day from members hundreds or thousands of miles away asking about transferring into Columbus, Ohio,” he said. “It’s because they know Intel is coming.”
To win the project, Ohio offered Intel roughly USD2 billion in incentives, including a 30-year tax break.

India minister Piyush Goyal meets US-based semiconductor companies

India’s commerce and industry minister Piyush Goyal has met representatives from U.S. semiconductor companies to explore greater collaboration with Indian firms amid the ongoing global chip shortage.

The meeting comes after the Indian government approved an outlay of ₹76,000 crore for the development of semiconductors and display manufacturing ecosystem earlier this year. “Building on our pool of young and skilled workforce, discussed how India in collaboration with Lam research, can provide a leading edge in semiconductor innovation," Goyal said in a social media post after his meeting with Tim Archer, CEO of Lam Research.

Goyal, who is currently on a six-day visit to San Francisco and Los Angeles, said that he has thought about ways that the world’s largest semiconductor companies can help to strengthen India’s semiconductor, display, and solar manufacturing industries.

Could growth in UK vehicle production suggest the chip shortage is easing?

Car production in the UK rose for the third consecutive month in July, raising hopes that the industry is beginning to recover from the global chip shortage. According to the Society of Motor Manufacturers and Traders (SMMT), car production was up 8.6 percent to 58,043 units when compared to the same time last year.

In 2021, the UK car industry saw the worst output for the month of July since 1956 as the automotive struggled with ongoing staff shortages alongside strained supplies of semiconductors.

So far, the chip shortage has forced Ford, Jaguar Land Rover, Volkswagen, General Motors, BMW, Renault, Toyota, Peugeot, and more to close factories, pause assembly lines, scale back production, and cut non-critical features from their cars. It’s a problem that has been plaguing the industry for the best part of two years and it has had a significant impact worldwide.

Nevertheless, the SMMT is hopeful that the growing number of vehicles produced suggests that the shortage may be starting to ease.

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

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