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CHIP SHORTAGE NEWS Global chip shortage 2022 – updates in May

Updated on 15.06.2022 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 is updated continuously and summarizes the most important chip shortage news in May 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 (this article is updated continuously):

WEF warns chip shortage puts life-saving medical devices at risk

The World Economic Forum (WEF) has warned that the severe global shortage of chips is threatening to disrupt the manufacturing of life-saving medical devices and systems. “If we fail to take immediate action to address this shortage, it will impact patients in all corners of the world,” a recent press release dated May 24 reads, which was published on the WEF website.

Despite the medical industry representing just 1 percent of the current total chip supply, according to the WEF, it still needs to compete with the automotive, industrial, and consumer industries for access to the limited supply of critical chips. “Due to the urgent need for these in medical technology… we call for chip allocations to be prioritized to a level that enables the industry to meet the medical-device manufacturing demands of today,” the press release goes on to say.

Highlighting the critical nature of the chip shortage, the European Commission has issued a recommendation to Member States to address shortages immediately and engage with manufacturers to prioritize critical sectors such as healthcare.

Samsung announced huge semiconductor investment plan

Samsung has announced its ‘Dynamic Innovation Growth’ plan for the next five years. The South Korean tech giant is planning to spend huge sums of money in semiconductor R&D, as well as in other areas such as biopharmaceuticals and artificial intelligence.

In a press release dated May 24, Samsung revealed that it will be investing roughly US$355 billion in these “future businesses” from now until 2027. This represents an increase of 36 percent on top of the US$260 billion it has invested over the past few years.

According to Samsung, around 80 percent of these investments will be made in South Korea, representing a 44 percent increase in domestic investment on top of figures from 2017 to 2022. The company says that by doing this, it aims to become a “semiconductor superpower” and continue contributing to the nation’s economy; the semiconductor industry accounts for roughly 19 percent of the country’s exports.

Car sales continue to be dampened by the chip shortage

Car sales in China, Europe, and the U.S. continue to be depressed when compared to figures from last year as the semiconductor shortage and COVID-19 pandemic restrictions weigh heavily on global automotive markets, new data has shown.

Figures from China show that retail car sales grew in May when compared to April but were still down 16 percent year-on-year, according to the Chinese Passenger Car Association, which has recently called for more government support for the automotive industry.

Meanwhile, in Europe, data from auto consultancy JATO has shown that new car sales have dropped by 20 percent, with electric vehicle (EV) sales down by 1.4 percent. This fall has been largely driven by a 15 percent fall in sales of plug-in hybrid EVs.

Finally, in the U.S. total sales were down 21 percent year-on-year according to Deutsche Bank research.

Intel CEO says chip shortage only at ‘halfway’ point

In a recent interview with Yahoo! Finance, Intel CEO Pat Gelsinger has said that although the chip shortage is beginning to improve, it’s likely to continue for at least another 18 months. “You know, we're about halfway through,” Gelsinger told Yahoo Finance Live at the World Economic Forum in Davos, Switzerland. “And my expectation now is that it persists through 2024.”

One of the biggest problems faced by chipmakers over the last six to nine months is the lack of equipment that goes into the fabs and manufacturing plants. “And those equipment lead times have pushed out pretty substantially over the last six months,” Gelsinger added.

An increase in U.S. manufacturing capacity could alleviate some of the pressure in the future. Intel has “created capacity that allows us to have on the order of 10 new factories over the next five years,” he added. Going on to explain how Intel is prepared to produce even more capacity, he commented how the company is “setting up that we can do even more as we go into the second half of the decade as well.”

Toyota pauses production again due to chip shortage

Toyota is once again gearing up to slash the global production of some of its motor vehicles due to the semiconductor shortage. The news has come at the same time as Samsung to invest about $360 billion over the next five years to boost chip production, along with other strategic sectors.

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In a statement released on May 24, Toyota said it has been forced to lower its production schedule by tens of thousands of units globally from the numbers that the company provided to suppliers at the beginning of the year.

"The shortage of semiconductors, spread of COVID-19 and other factors are making it difficult to look ahead, but we will continue to make every effort possible to deliver as many vehicles [sic] to our customers at the earliest date," a spokesperson said in the statement.

This means that Toyota has suspended manufacturing in May and June across 16 different production lines in 10 plants out of a total of 28 production lines across 14 plants.

Applied Materials reports weak financials due to supply constraints

Applied Materials, a large manufacturer of the machinery that’s used to create semiconductors, has reported a weak forecast after the ongoing chip shortage depressed its forecast for the current quarter.
The company’s sales will be around USD6.25 billion in the fiscal third quarter, which runs until the end of July, a spokesperson said in a statement. Analysts estimated a figure of USD6.69billion on average, according to data compiled by Bloomberg. Profit will reportedly be around USD1.59 to USD1.95 per share in this period, down from an average prediction of USD2.05.

“Demand for Applied Materials’ products and services has never been stronger, yet we remain constrained by ongoing supply chain issues,” Chief Executive Officer Gary Dickerson said in the statement. “Our priority is to work quickly and creatively across the supply chain to bring more industry capacity online.”

TSMC announces new manufacturing plant in Singapore

Taiwan Semiconductor Manufacturing Company (TSMC) is reportedly discussing plans with the Singaporean government to open a plant there. The Taiwanese chip giant is most widely known for manufacturing Apple’s A-series and M-series chips, as well as AMD processors, but TSMC also produces chips for power management and display drive. These are currently in short supply due to COVID-19 related lockdowns, and this has reportedly cost apple USD6 billion in the last two quarters.

According to a report by the Wall Street Journal, TSMC’s Singapore plant could theoretically help to solve this shortage by manufacturing more of these critical chips, the shortage of which has been somewhat overshadowed by the crisis that is currently facing the automotive industry. TSMC is currently looking at how feasible production lines that build 7 – 28 nanometer chips would be, according to reported sources.

As of the time of writing, this new plant is still under negotiation and no official announcement has yet been made.

Nissan expects flat profit this year as chip shortage becomes ‘new normal’

Nissan Motor Co has said that it expects a flat operating profit this fiscal year, far below analysts’ expectations, as Japan’s third-largest automaker struggles amidst the ongoing global chip shortage, China’s COVID-19 restrictions, and rapidly rising material costs.

In reporting this, Nissan has joined a growing list of global companies that are warning about declining profitability, because they cannot pass soaring input costs on to consumers and because they are having to face further supply chain disruptions following Russia’s invasion of Ukraine and COVID lockdowns in China.

Meanwhile, Toyota, which is Nissan’s biggest rival, has said that unprecedented surges in raw material costs could cut more than a fifth of its full-year profits. Supply chain issues have become a major challenge for the automotive industry as manufacturers’ assumptions can quickly be changed by real-time events, CEO Makoto Uchida said in an interview with Reuters. The "uncertain situation" around the supply chain, including COVID restrictions in China, is the biggest risk on the horizon, Uchida added.

JLR blames chip shortage for huge £455 million loss in 2021

UK automaker Jaguar Land Rover (JLR) has reported a pre-tax loss of £445 million in its latest financial report, illustrating the severe impact of the ongoing semiconductor shortage. That figure includes a £43 million exceptional charge related to the firm’s operations in Russia, where the automaker paused sales in March after Russia’s invasion of Ukraine.

Revenue for the year was down 7% year-on-year to £18.3 billion due to the firm's output being throttled by a lack of the crucial computing chips. By contrast, JLR reported a £662 million overall profit in 2021.

Sales volumes for the British manufacturer were down significantly in the year ending 31 March 2022, with wholesales dropping by 15% to 294,182 units and retail sales falling by 14% to 376,381 units. This is despite a late 11% increase in wholesales in the final quarter, and retail sales dropping by just one percent in the same three-month period. JLR says that this growth was offset by the end of production of the previous-generation Range Rover, which limited revenue growth.

General Motors’ latest chip shortage outlook makes for grim reading

Like pretty much every other automaker in the world, General Motors has been hit hard by the chip shortage. And after so many automakers gleefully said that they expect the shortage to subside later this year, General Motors’ CEO Mary Barra has a less optimistic outlook.

As reported by Yahoo! Finance, Barra has recently been quoted as saying that a “huge availability of vehicles” is not something that we are going to be seeing anytime soon, with constraints in parts and products still having a dire impact. More specifically, the shortage affecting new car production, and Barra says that there’s almost zero chance that the problem will be solved this year.

In other words, GM’s CEO thinks that the shortage will extend into 2023, which means even longer waits for new cars and higher prices for both new and used ones. Meanwhile, other experts warn that buyers may not see an improvement in the situation until 2024. This is because once the shortage ends, industries will need additional time to return their production schedules to pre-2020 levels.

Rivian expects chip shortage problems to ease later this year

Electric vehicle start-up Rivian Automotive has maintained its production forecast for 2022, with executives saying that the supply chain problems that have affected its output in recent months are expected to ease as the year progresses.

Rivian recently reported first-quarter results, which were US$95 million below Wall Street estimates. The automaker’s net loss almost quadrupled to US1.6 billion in Q1 2022 compared with US$414 million in Q1 2021 as the company continued to spend heavily on R&D and manufacturing of its first vehicles.

Rivian says that higher logistics costs have weighed on these results, partly due to the company’s higher spending on expedited shipping as a compromise for supply chain disruptions. Since the end of March, the company has been forced to stop assembly lines for longer periods than anticipated, leading to it losing roughly a quarter of its planned production.

Rivian said higher logistics costs also weighed on results, due in part to higher spending on expedited shipping as a workaround to supply-chain disruptions. Since the end of March, the company has stopped assembly lines for longer-than-anticipated periods, leading it to lose about a quarter of its planned production because of supply constraints, Rivian said.

Chief Executive RJ Scaringe said it has been working with suppliers to ensure more parts and believes the company is moving past earlier obstacles it had with getting semiconductors. “We’ve seen really the worst of it, or sort of the valley if you will, of the supply constraints,” he said during an interview.

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

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