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CHIP SHORTAGE NEWS Global chip shortage 2022 – updates in January

From Luke James

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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 January 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:

Toshiba stops chip production after earthquake

In order to put an end to the ongoing semiconcutor shortage, the production of chips by many renowned manufacturers is running at full speed. Nevertheless, unforeseen incidents can occur from time to time that affect production. This was the case at the Toshiba semiconductor factory, which was temporarily closed on January 22 due to an earthquake measuring 6.6 on the Richter scale. After neither employees were harmed nor serious property damage was reported, production resumed.

Incidents like this are reminiscent of the March 19 fire at Renesas Semiconductor Manufacturing Co, Ltd's Naka Factory in Japan. At the time, the fire had caused a worldwide stirzwi and added to the woes of the automotive industry, which was severely plagued by chip shortages.

ASML to hire 3,500 staff to overcome chip shortage

ASML, Europe’s largest semiconductor equipment manufacturer, plans to boost its employee headcount by over 3,500 to a total of 35,000 by the end of this year in a bid to help ease the chip supply crisis, Chief Executive Officer Peter Wennink said in an interview on January 16. The company hired more than 4,000 new employees in 2021 and the company’s headcount will be 30 % higher by the end of 2022 when compared to 2020, Wennink said.

ASML’s net sales forecast for Q1 2022 fell short of analyst estimates due to the company’s decision to delay testing its machines in a bid to speed up deliveries. With demand 40 to 50 % higher than its maximum capacity, it will take two to three years to get a balance between supply and demand, Wennink said. He added that there could even be an oversupply in the industry by 2025 or 2026 as a consequence of new factories being built.

Semiconductor revenue reached new heights in 2021, says Gartner

The chip shortage might be raging on, but Gartner says that this didn’t stop the semiconductor industry from growing by 25.1 % in 2021, causing revenues to top USD$500 billion for the first time. Gartner’s latest projections don't show the chip shortage easing until the latter half of 2023, however, some industries are likely to see a return to normal later this year. Until new manufacturing facilities can be built and production increased, supply will continue to outpace demand, which Gartner says is one of the main reasons for the record-breaking profits.

"Post"-COVID economic rebounds in 2021 caused shortages in the supply chain that hit the automotive industry particularly hard, says Andrew Norwood, research VP at Gartner. "The resulting combination of strong demand as well as logistics and raw material price increases drove semiconductors' average selling price higher, contributing to overall revenue growth in 2021," Norwood said.

Intel to build USD20 billion chip facility in Ohio

Intel has announced that it has selected Ohio for a new chip manufacturing facility that will cost at least USD20 billion to build and potentially become the biggest in the world.
The chipmaker said on January 21 that the new site near Columbus would initially have two factories and directly employ 3,000 people while creating 7,000 short-term construction jobs and tens of thousands of positions as partners and suppliers.

Intel CEO Pat Gelsinger has quickly increased the company’s investments in manufacturing to help reduce U.S. reliance on foreign chipmakers. Indeed, the company’s new facility is the latest in a series of efforts by chipmaking giants to increase U.S. production of computer chips – a huge focus of the incumbent Biden administration.
According to Gelsinger, Intel hopes to invest as much as USD100 billion over the next decade to build up to eight factories on the Ohio site.

EU car sales in 2021 fell to a record low

Registrations of new passenger cars dropped by 2.4 % in 2021 to 9.7 million, marking the worst performance since records began back in 1990. This is according to data from the European Automobile Manufacturers Association (ACEA), the main lobbying and standards group of the automobile industry in the European Union.

The lack of semiconductors was the main reason for the industry being held back to such a high degree. "This fall was the result of the semiconductor shortage that negatively impacted car production throughout the year, but especially during the second half of 2021," said the ACEA.
While many manufacturers initially shrugged off the potential impact of the chip shortage, it eventually caught up to them and led to a huge slowdown in production. Although EU car sales did rebound in the second quarter of 2021, for most of the latter half of the year they were down by around 20 %.

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    Ford temporarily pauses production of popular Mustang model

    We’re only three weeks into 2022 and already we are seeing automakers being forced to temporarily pause production yet again.
    The latest victim of the ongoing semiconductor shortage is one of the world’s most iconic sports cars, the Ford Mustang. The car’s production line in Flat Rock, Michigan, has been forced to shut down until more chips become available. According to The Detroit News, this shutdown is not expected to be a long one and could restart within a few days.

    The chip shortage massively affected the production of Ford Mustangs last year, too. According to figures, 2021 was the worst year of sales since the Mustang’s inception in 1964. Only 52,414 new models were delivered to customers last year. The previous worst-year record for the Mustang was, perhaps unsurprisingly, 2020. Prior to that, it was 2016.

    Mitsubishi expects chip shortage to continue affecting Mexican output

    Automotive production in Mexico may be slow during the first half of 2022 due to the ongoing chip shortage and COVID-19 disruptions, the head of Mitsubishi Motors Corp in Japan said in mid-January. The shortage, which has affected automakers worldwide, has caused Mexico and other manufacturers in North America to implement rolling shutdowns in order to remain functional.
    "I think we'll still (see) an impact for at least the first six months of this year," Mitsubishi Motors de Mexico President and Chief Executive Officer Jorge Vallejo said in an interview with Mexican business newspaper El Financiero.

    Automotive production fell by 2 % in 2021 compared to 2020, the four consecutive annual decline. The drop in production was especially steep during the second half of 2021, falling by 16.51 % in December according to official data. The Mexican Automotive Industry Association (AMIA) said last year that automotive production might not reach pre-pandemic levels until as late as 2024.

    Volvo's December sales fell by 18 %

    Volvo’s car sales fell by a whopping 18 % to 64,436 in December due to pressures caused by the ongoing global chip shortage, the automaker has said in a statement released in early January. Volvo, which has faced huge struggles owing to the shortage, warned in November that the situation is likely to continue well into 2022 and possibly beyond.

    In Europe, Volvo’s sales fell by 15 %. Meanwhile, they fell by 27 % and 21 % in the U.S. and China respectively. "The result was significantly influenced by continued component supply shortages, which affected production and consequently deliveries to customers," Volvo said in the statement.
    Volvo was recently listed on the Nasdaq Stockholm after securing Europe’s largest IPO of 2021, selling 380 million new shares at USD6.22 each for a market value of USD18.5 billion.

    Indian automakers continue to struggle despite sales jump

    India’s automakers association has warned that the ongoing chip shortage will continue to disrupt automotive production in the country despite vehicle sales increasing last year.
    “The shortage is expected to continue for more time as new investments in semiconductors will take a long time,” said Kenichi Ayukawa, president at Society of Indian Automobile Manufacturers. “For the sustainable growth of the industry, there is a need for both demand improvement and easing of supply chain challenges.”

    Last year, India’s total vehicle sales rose by 6 % to 18.5 million units. Sales of passenger vehicles, which include cars and SUVs, jumped by 27 % to 3.1 million while sales of two-wheelers rose to 14.5 million, a more modest increase on the 14.3 million sold in 2020.
    According to Ayukawa, who is also chief executive officer at Maruti Suzuki, India’s biggest carmaker, the shortage has affected supplies of critical components such as engine control units and vehicle information systems. On top of this, an increase in raw material costs has forced automakers to increase prices.

    NVIDIA: GPU shortage should end this year

    Just like it’s nigh impossible for gamers to get their hands on the latest consoles, finding a graphics card is a frustrating endeavor and has been for quite some time now. Thankfully, graphics processing unit (GPU) manufacturing giant NVIDIA says that there’s light at the end of the tunnel as the company believes that it’s in a “good position” to begin meeting demand. In a recent interview, NVIDIA CFO Colette Kress discussed the chip shortage, among other things, saying, “We continue to try and get more supply for the latest quarter. But at the same time, we are procuring supply commitments for longer-term…. We believe we’ll be in a great position with our overall supply in terms of our estimations of what we need going forward.”

    NVIDIA makes some of the world’s most popular and powerful GPUs, and as a result, they’re some of the hardest to find. NVIDIAs optimism comes as automakers and industry analysts say that they’re hopeful that the ongoing chip crisis will begin to calm down in the second half of the year.

    Volkswagen sales fell by 4.5 % in 2021 due to chip shortage

    Volkswagen said on January 12, that it delivered 8.8 million vehicles in 2021, a drop of 4.5 % when compared with 2020, as supply chains were strangled by a global shortage of microchips and other factors such as the COVID-19 pandemic and its economic fallout.

    Volkswagen, which is the world’s second-largest carmaker and owns other brands including Audi, SEAT, and Porsche, saw its sales drop further in China. Figures released on January 11 revealed that sales in the Chinese market had dropped by 14 % to 3.3 million vehicles.
    While Volkswagen believes that the supply chain problems that disrupted production in 2021 will continue for some months into this year, industry analysts are hopeful that we should begin to see some improvement by the second half of the year.

    Volkswagen EV sales double in 2021 despite shortage of chips

    Latest sales figures from Volkswagen Group have revealed an increase in global demand for electric vehicles (EVs). According to the figures, Volkswagen sold 452,900 electric vehicles last year, representing an increase of 96 % over 2020 and 5.1 % of all car sales. This is despite overall Volkswagen car sales falling by 4.5 %.

    Given this trend, Volkswagen Group predicts that by 2030, one in two cars sold worldwide will be electric. Europe showed particularly high demand for EVs in 2021, with EVs accounting for more than 10 % of sales. Meanwhile, 37,200 Volkswagen EVs were delivered to North America, three times more than the amount delivered in 2020. Volkswagen’s best-selling electric car was the ID.4 crossover which sold 119,600 units. This was followed by the ID.3 hatchback. Meanwhile, Audi, which is owned by Volkswagen, sold just under 50,000 e-tron vehicles while 41,300 Porsche Taycans were lapped up by consumers.

    Canon printers read their own cartridges as fake due to chip shortage

    It’s not just smartphone manufacturers and automakers that have been hit hard by the chip shortage. Canon, a world leader in the field of professional and consumer imaging equipment, has found itself scrambling to satisfy a wave of furious customers who found that their Canon printers were rejecting genuine Canon printer ink cartridges and reading them as fake.

    It is believed that some of Canon’s printers are not able to verify the legitimacy of official Canon ink cartridges due to the company not being able to include the key microchips in these cartridges that are used for verification purposes. Canon Germany issued a public statement confirming this, explaining that due to a lack of microchips, official Canon ink is being misread by the printers as counterfeit. In the meantime, Canon has explained to customers how they can bypass a digital rights management tool that prevents customers from using unofficial third-party ink cartridges.

    TSMC plans to spend USD44 billion to address chip shortage

    Taiwan Semiconductor Manufacturing Co., the world’s largest contract chipmaker, has said that it will increase its investment to boost production capacity by as much as 47 % this year as demand continues to surge amid a global shortage of microchips. TSMC said on January 13, that it had set its capital expenditure budget at USD40-44 billion, a record high. Last year, the company’s capital expenditure budget stood at US$30 billion.

    As a surge in demand for various devices requiring microchips has created a worldwide shortage, major chipmakers like TSMC, Samsung, and Intel have been on a major investment spree to raise production capacity as soon as possible. According to Gartner, three chipmakers accounted for almost three-fifths of the USD146 billion that semiconductor companies spent on building new production capacity in 2021. During a quarterly earnings call on January 12, TSMC CEO C. C. Wei said that demand from sectors such as automotive and high-performance computing would keep TSMC’s production capacity utilized at a high rate.

    Sony increases production of PS4 to deal with PS5 shortage

    Sony’s PlayStation 5 console is arguably one of the products hardest-hit by the chip shortage. It has now been 14 months since the console launched in November 2020, and it’s still extremely difficult to buy one. To provide consumers with an alternative, Sony has announced that it plans to ramp up production of the PlayStation 5’s predecessor consoles, the PlayStation 4 and PlayStation 4 Pro.
    Sony had reportedly planned to discontinue production of the PlayStation 4 by the end of 2021, but according to a Sony official speaking to Bloomberg, the PlayStation 4 will continue to be produced this year.

    The official denied the rumour that Sony had plans to discontinue the PlayStation 4, adding, “It is one of the best-selling consoles ever and there is always crossover between generations.”
    The PlayStation 4, which was released in 2013, has sold more than 116 million units to date and is still a popular option among gamers.

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