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CHIP SHORTAGE NEWS Global chip shortage 2022 – updates in February

Updated on 15.06.2022 From Luke James, Nicole Kareta

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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 summarizes the most important chip shortage news in February 2022.

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 )

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:

Prioritization of medical technology companies in component supply determines patients' quality of life

Katrin Pucknat, President ResMed Germany, comments on the current logistical challenges and tight supply situation of semiconductors for ventilator and respiratory therapy device manufacturers:
"As respiratory and therapy device manufacturers, we are currently competing primarily with car manufacturers, smartphone producers and consumer electronics companies. Often these are global brands where the volume of demand for electronic components - especially semiconductors - is huge, making them particularly attractive to manufacturers. Accordingly, in recent weeks we have been able to read repeatedly in the business press about exclusive, long-term supply contracts with these global brands. Supply contracts that make it even more difficult for medical technology companies to secure the supply volumes they need to ensure sufficient supplies for hospitals and patients."

Pucknat is therefore now calling for a transnational act of solidarity among business enterprises, governments and society to support prioritized supply.

In the fight against the chip shortage: Bosch expands semiconductor factory

Chip demand, particularly in areas such as mobility and the Internet of Things, continues to rise steadily. That's why the Bosch announced back in October 2021 that it would invest more than EUR400 million in 2022 alone to expand its semiconductor sites in Dresden, Germany; Reutlingen, Germany; and Penang, Malaysia.
Now action is being taken in Reutlingen: In order to expand the semiconductor factory there, the company is planning an investment of more than a quarter of a billion euros by 2025.

A new section of the building will be created with an additional 3,600 square meters of ultra-modern cleanroom space. From 2025, semiconductors based on the 150- and 200-millimeter technology established in Reutlingen will be manufactured there. Bosch is also expanding an existing power supply facility. An additional building for media supply systems is planned in order to serve both the existing and new manufacturing areas. Production on the new premises is scheduled to start in 2025.

Dr. Stefan Hartung, chairman of the board of management of Robert Bosch GmbH says: "We are systematically expanding our manufacturing capacity for semiconductors in Reutlingen, this new investment will not only strengthen our competitive position, but will also benefit our customers and help combat the crisis in the semiconductor supply chain."

Intel acquires Tower Semiconductor

Intel and Tower Semiconductor on Feb. 15, 2022, announced a definitive agreement under which Intel will acquire Tower for USD53 per share in cash, representing a total enterprise value of approximately USD5.4 billion. Tower Semiconductor is a foundry for analog semiconductor solutions and serves high-growth markets such as mobile, automotive and power. The acquisition accelerates Intel’s path to becoming a major provider of foundry services and capacity globally, now offering one of the industry’s broadest portfolios of differentiated technology.

Intel's CEO Pat Gelsinger said: "“Tower’s specialty technology portfolio, geographic reach, deep customer relationships and services-first operations will help scale Intel’s foundry services and advance our goal of becoming a major provider of foundry capacity globally. This deal will enable Intel to offer a compelling breadth of leading-edge nodes and differentiated specialty technologies on mature nodes – unlocking new opportunities for existing and future customers in an era of unprecedented demand for semiconductors."

Russell Ellwanger, Tower CEO, stated: "With a rich history, Tower has built an incredible range of specialty analog foundry solutions based upon deep customer partnerships, with worldwide manufacturing capabilities. I could not be prouder of the company and of our talented and dedicated employees. Together with Intel, we will drive new and meaningful growth opportunities and offer even greater value to our customers through a full suite of technology solutions and nodes and a greatly expanded global manufacturing footprint. We look forward to being an integral part of Intel’s foundry offering.”

Volkswagen expects chip shortage to ease later this year

German automaker Volkswagen says that it expects a continued hit from the semiconductor shortage this year, although production should be able to increase during the second half, Chief Executive Herbert Diess said last Wednesday.
"The supply situation is getting better, but even in 2022 we will not be able to build all the cars we could sell. But we see opportunities for further production increases, especially in the second half of the year," Diess said.

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Earlier this month, Volkswagen said that night shifts at Wolfsburg would be cut on some production lines due to a lack of chips. Diess also said that capacity adjustments will also be needed in the medium term, but that the supply of chips is the only major challenge right now.
Volkswagen’s top models of its premium brand vehicles are already sold out for the whole of 2022.

Infineon invests more than EUR2 billion in new fab to expand production

Infineon Technologies is adding significant manufacturing capacity in the field of wide bandgap semiconductorssilicon carbide (SiC) and gallium nitride (GaN) — that are widely used in power electronics applications.

According to a press release, the company is investing more than EUR2 billion to build a third module at its existing site in Kulim, Malaysia. Once complete, the new module will generate more than EUR2 billion per year in additional revenue with products based on SiC and GaN. The expansion follows Infineon’s long-term manufacturing strategy and will benefit from the economies of scale that are already being achieved with its existing Kulim manufacturing presence.

“Innovative technologies and the use of green electrical energy are key in reducing carbon emissions. Renewable energies and electromobility are major drivers for a strong and sustainable rise in power semiconductor demand,” said Jochen Hanebeck, Chief Operations Officer at Infineon. “The expansion of our SiC and GaN capacity is readying Infineon for the acceleration of wide bandgap markets."

Between 2020 and 2025, the GaN market is expected to grow from USD47 million to more than USD800 million. By getting ahead now, Infineon can ensure it will be able to meet growing demand and avoid problems similar to that of the currently ongoing chip shortage.

Chip shortage to keep car prices high and inventory low for the rest of 2022

Analysts have said that car buyers shouldn’t expect a quick return to normal pricing and availability until the end of this year at the earliest, even though car production is expected to return to pre-pandemic levels.
Latest forecasts estimate a gradual recovery in inventories at the end of the year but until then, low supply and high demand will continue to plague the market for both new and used stock.

The chip shortage has forced automakers to forge new relationships with suppliers to help solve the crisis. “Automotive companies are notorious for bullying their suppliers and throwing their weight around. But some companies like Toyota, which had long cultivated its suppliers, were – until recently – insulated from the chip shortage,” said Rob Handfield, professor in supply chain management at North Carolina State University in a recent interview with Canadian newspaper, The Globe and Mail.

“The GMs and Fords of the world are finally figuring out that maybe they have to stand in line like everybody else now.” Ford and General Motors is now known to be working with chipmakers to develop new manufacturing capacity.

ZVEI says EU Chips Act needs to address a broader technological scope

The European Union has released a comprehensive plan to strengthen the semiconductor and enable new investment opportunities with the EU Chips Act (see news below). However, commentators say that planned EU market intervention is disproportionate.

With the European Chips Act, the European Commission is presenting a future-oriented, comprehensive package for the semiconductor industry. It is right to sustainably promote the entire semiconductor ecosystem in Europe. However, the focus on structure sizes below ten nanometres is too narrow and misses the needs of the European user industry," said Wolfgang Weber, CEO of ZVEI, Germany’s electro and digital industry board.
Weber has also said that Europe needs to strengthen its competence in all structure sizes because power electronics and sensor technology are critical for a successful green digital transformation.

Despite the criticism, the European Chips Act will bring with it many good opportunities and strengthen technological competence in Europe, which many argue has dwindled in the years gone by as manufacturing has moved to Asia.

"The EU Chips Act is also a wake-up call to finally strengthen the microelectronics industry in Europe in the long term and to avoid one-sided dependencies,” Weber said.

VDMA Statement: „Chip factories in Europe must fit the industry“

VDMA Executive Director Thilo Brodtmann says about the EU Commission's "Chips Act" (see news below) and the role of mechanical and plant engineering for the technological sovereignty of the EU:
"With the Chips Act, the EU Commission is launching an ambitious race to catch up with planned investments totaling EUR47 billion. This can only succeed if the EU uses the funds strategically and wisely to expand market share in key technologies. The planned chip factories in Europe should be precisely tailored to European needs. The needs of mechanical engineering - one of Europe's largest industrial sectors - must be taken into account: These include chips in the >16 nanometer range, which will not change fundamentally by the end of 2030. The Commission must ensure that the focus is not only on fabs for 2 nanometer chips. But it should take into account the needs of the broad mass of European industry. Sovereignty comes from efficient value chains and excellent production technology. Like that, there are not only export opportunities for European companies, but also strong positions for the EU in the world market for semiconductors, as well as mutual dependencies. The chances for this are good: There are many EU companies - also in mechanical and plant engineering - that offer world-leading technologies for chip production. The EU can build on this strength. It is therefore in genera good that the Chips Act is broadly based. However, we call on the EU Commission and Member States to focus on strategic strengths in production technology and international cooperation when designing it."

EU Commission proposes Chips Act to confront semiconductor shortages

On February 08, the Commission proposed a comprehensive set of measures to ensure the EU's security of supply, resilience and technological leadership in semiconductor technologies and applications. The European Chips Act will ensure that the EU has the necessary tools, skills and technological capabilities to become a leader in this field beyond research and technology in design, manufacturing and packaging of advanced chips, to secure its supply of semiconductors and to reduce its dependencies.

Ford cuts output at eight plants

Ford has suspended output at several of its factories this week due to the ongoing chip shortage. The plans have seen production cut or suspended at assembly plants in the U.S., Mexico, and Canada during the course of this week, with Ford’s plans hitting different plants on different days and for different durations.

The plants affected produce some of Ford’s most popular vehicles, including the Ford-150, Ranger, Bronco, Explorer, and Mustang Mach-E. The announcement last Friday came a day after Ford warned that the ongoing chip shortage would lead to a fall in Q1 vehicle production.
Output at factories in Michigan, Chicago, and Cuautitlan, Mexico, will be suspended. Meanwhile, in Kansas City, production of the F-150 truck will be idled while only one shift will be running to build the company’s ubiquitous Transit van models.
Single shifts and reduced schedules will also affect factories in Dearborn, Kentucky, and Louisville, while overtime will be cut at an Oakville factory in Ontario, Canada.
Ford expects production volume to significantly improve in the second half of this year.

Volkswagen sees chip shortage continuing this year

Volkswagen does not anticipate that the global semiconductor shortage will end this year, a spokesperson for the company has said. “The volatile situation will affect us at least beyond the first half of this year," Murat Aksel, the head of procurement on the Volkswagen board said in an interview with German automotive publisher Automobilwoche.

Askel said that there are clear structural issues at play and that demand for new automobiles will continue to rise despite this. Volkswagen is therefore looking at working closely with chip suppliers to ensure better availability rather than taking formal action against suppliers who are behind on their deliveries.
The company is hopeful that once we get into the second half of the year, the situation will ease up and that by 2023 when more chip production capacity comes online, it will become easier to make reliable output predictions.

Toyota: Covid and chip shortage will lead to 500,000 fewer cars

Toyota, the world’s biggest carmaker, has said that the combined impact of COVID-19 and the chip shortage will result in 500,000 fewer cars being made in its 2021-22 financial year, which ends in March, as it continues to battle threats from the Omicron variant.

The company’s estimated figure of 8.5 million – revised downwards from a previously revised figure of 9 million – represents a total reduction of around 800,000 vehicles compared to its expectations a year ago. Toyota builds a large number of its vehicles in its home market of Japan where it has 16 production facilities.

Tokyo officials imposed further COVID-19 restrictions as it battles rapidly rising cases induced by the Omicron variant. Like other global carmakers, Toyota has also been forced to cut output due to the pandemic's impact on global supply chains. While the company’s operating products in its October-December quarter were down by a fifth, the company says that it’s sticking to its full-year forecast of USD24.3 billion.

Volvo’s January sales fall as chip shortage lingers

Swedish automaker Volvo has been heavily impacted by the ongoing supply chain disruption and microchip shortage and warned last year that it would continue well into 2022. Volvo said that while production had slowly improved, retail deliveries were held back by an “increase of cars in transit”.

"The supply situation continues to ease, but component shortages will remain a constraining factor for Volvo Cars and the auto industry," Volvo said in a statement. The company was listed on the Nasdaq Stockholm in October after completing Europe’s biggest initial public offering of the year. Global sales of Volvo cars fell to 47,561 in January 2022 as sales in Europe dropped by 24.8 %. In the United States, sales dropped by 12.8 %.
Volvo is expected to post Q4 2021 results on February 11.

Biden administration says chip shortage to continue for the foreseeable future

A recent survey of 150 supply chain companies by the U.S. Department of Commerce has revealed that the ongoing chip shortage will continue for the foreseeable future. The survey, which was completed late last year, confirms that “there is a significant, persistent mismatch in supply and demand for chips, and respondents did not see the problem going away in the next six months.”

As we’ve covered, the global semiconductor shortage has impacted multiple industries, most notably automotive, which has led to product shortages and long waitlists around the globe. As a result, chipmakers like Intel and Bosch have upped their investment in microchip manufacturing, but it will be a while before new facilities are online and able to pump out chips.

The information revealed by the survey only confirms what we’re all experiencing: Demand has skyrocketed over the last two years and current chip supplies have been unable to meet it. According to Commerce Secretary, Gina Raimondo, the demand for chips in 2022 is 20 % higher than it was in 2019.

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

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