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CHIP SHORTAGE NEWS Global chip shortage 2023 - updates in January

From Luke James Reading Time: 13 min

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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)
Skip to chip shortage news in July 2023

JLR finances recover as chip shortage eases

Jaguar Land Rover has announced that it achieved positive free cash flow and profitability in fiscal Q3 as semiconductor supply challenges eased. Revenue for the company was up by 28 % year-on-year to £6 billion, reflecting a strong model mix and pricing as the production increase of the new Range Rover and Ranger Rover Sport continued. 27,456 units were wholesaled in the quarter, up from 13,537 in Q2.

The higher profitability reflected increased wholesale volume with favorable mix, pricing, and foreign exchange offset partially by higher inflation and supplier claims largely related to constrained volume. Profit after tax in the quarter was £261 million, up from a loss of £67 million in Q3 2022 while free cash flow was £490 million in Q3 2022, up from £164 million in Q3 2022.

“Although there continue to be supply chain and other macro risks, our guidance for the full year remains unchanged. Positive profits and free cash flow in Q4 FY23 on wholesales of 80,000 or more are expected to achieve breakeven cash flow and a positive EBIT margin for the full year,” JLR said in a statement.

Ford executive expects chip shortage to ease in 2023

The chip shortage has caused problems for the automotive sector for more than two years now, and while it has been joined by other supply chain problems, it’s still one of the biggest concerns for automakers. Ford has removed several non-critical features from its latest vehicles as a temporary solution to keep assembly lines moving, along with storing thousands of unfinished vehicles in the hopes that they can be completed when chip supplies improve, which has been a controversial move among consumers.

While opinions on when exactly the ongoing shortage might come to an end vary massively, Ford Pro CEO Ted Cannis has said that he believes things will improve this year. “Unfortunately, on the supply side, the situation remains tenuous. We expect the chip situation to get a little better this year, but it’s still an ongoing issue,” Cannis said while speaking during the ninth annual Evercore Utility Conference in Florida on January 12-13.

Nintendo to produce more Switch consoles in 2023

Nintendo has announced that it plans to release more Switch consoles during the next fiscal year, and that it may also make a special edition Switch based on the popular game The Legend of Zelda. The company plans on increasing production and then shipping them from Q2 2023 following the easing of the microchip shortage because Nintendo is hopeful that demand will remain high.

Ever since 2020, the global microchip shortage has affected more than 150 industries, including the video game industry. This forced companies including Microsoft, Sony, and Nintendo to make fewer consoles and charge higher prices to make up for the lack of supply. It is worth noting, however, that the Switch has been on the market since 2017 and according to a market analyst, its sales were underwhelming during the 2022 holiday season.

Gartner cuts it's 2023 IT spend growth projection to 2.4v%

Just three months after Gartner forecasted that worldwide IT spending would grow by 5.1 % in 2023, it has revised its projection by more than half to 2.4 %. It now projects $4.5 trillion of IT spending this year. The forecast has been lowered in every major product category, including data center systems, IT services, and communications.

“During the height of the pandemic, employees and consumers had technology refreshes of tablets, laptops, and mobile phones due to remote work and education,” said John-David Lovelock, VP analyst at Gartner. “Without a compelling reason for an upgrade, device assets are being used longer, and the market is suffering.”
Shipments of PCs in particular saw big drops in Q4 2022 (down by 29 %) and for all of 2022 (down by 16 %). Gartner doesn’t expect the enterprise PC market to return to growth until 2024.

Toyota limits orders for Lexus in Japan

Toyota continues to struggle with a shortage of semiconductors and has now limited orders for nine models under the Lexus brand as a result. The Japanese automaker has set a limit on the number of orders allocated to each dealership in Japan, according to a recent article published in Nikkei Asia. Lexus dealers are also reporting long wait times in Japan for vehicles.

The Toyota brand is not seeing the same impact on production shortages and order limits because the Toyota model vehicles use fewer semiconductors than higher-end Lexus models. However, chips and parts shortages are still a big factor for the Toyota brand as a whole in its domestic market.

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Globally, Toyota plans to produce 450,000 units overseas in February and 300,000 units in Japan. Although an improvement on the 700,000 unit tally for January, it’s still a step back towards levels needed to remain on track of achieving its 10.6 million unit target for 2023.

Dutch legislators expected to impose further restrictions on exports to China

Expectations that Dutch legislators will limit exports to China by microchip equipment manufacturer ASML Holding NV may overshadow anticipated strong Q4 2022 results that are due for release imminently. The Hague is expected to impose at least some new restrictions on ASML's exports to China. This is according to a Dutch government source who is familiar with security discussions between the U.S. and the Netherlands, though no timeframe has yet been given.

ASML is a major supplier to chipmakers and generates roughly 15 % of its sales in China. Although ASML was restricted from selling its most advanced products to China in 2019, it’s still a key growth market for the company. Since then, tensions have worsened between the U.S. and China, and new export restrictions were imposed last October as a result. U.S. officials say they expect the Netherlands to follow suit.

Hyundai India to increase production capacity from June

Hyundai Motor India has announced plans to increase its production capacity to 8.2 lakh units annually from June this year in a bid to reduce a backlog of orders following improvement in semiconductor supply issues, according to company officials. The automaker, which has been one of the worst-affected automobile manufacturers in the world by the chip shortage, currently has a backlog order of around 1.15 lakh units.

"We see the semiconductor situation is getting better this year. So, we are increasing our production to meet our customers and we are positive for this year," Hyundai Motor India Ltd Managing Director and CEO Unsoo Kim said in a statement during Auto Expo 2023. The company’s chief operating officer added, "We are increasing the supplies... last year Creta [vehicle model] was 140,000, which was 12 % more than 2021. From June we would have increased the [plant] capacity to 820,000 units from the current 760,000 units [per annum].”

ABB says the chip shortage is coming to an end

Although a lack of chips continues to be problematic in the automotive space, engineering company ABB thinks that the worst is already over and that the end of the shortage could be just around the corner.
In a recent interview, ABB chairman Peter Voser said the semiconductor crunch severely hit the company, especially as its focus these days is on electrification and robotics, two sectors that heavily rely on chips. After battling with limited inventory, ABB now expects the production of chips to get in line with demand this year.

Although ABB seems optimistic that the shortage is “being sorted out,” many automakers think the opposite. General Motors CEO Mary Barra recently said that the shortage will continue this year, and Toyota has recently issued a new forecast for 2023 production, explaining that its target could still be impacted by the lack of chips. The Japanese carmaker, which estimated it would build 10.6 million vehicles this year, said the figure could go down by approximately 10 %.

Toyota not optimistic despite signs of recovery

Japanese automaker Toyota has said that anticipating what’s going to happen in the supply chain is still difficult, not least because of the ongoing global coronavirus issue but also due to the lack of semiconductors. Although the shortage is showing some signs of recovery, Toyota has said that it cannot ignore the impact that a lack of chips can eventually have on its production capacity. Toyota has previously suspended production at all its Japanese facilities due to the semiconductor crisis, with its annual output reduced as a result.

In 2023, Toyota estimates that it will be able to produce a maximum of 10.6 million units if things go according to plan. However, the company acknowledges that the production challenges caused by the parts supply shortages could eventually impact this figure.

Samsung suffers its biggest downfall in recent memory

South Korean electronics giant Samsung issued some of its worst figures in recent memory in early January. For Q4 2022, the company expects to have brought in US$55 billion in sales, down from the US$60.2 billion it reported a year earlier. Even worse is the company’s anticipated operating profit. Having reported US$11 billion in Q4 2021, Samsung expects to make just US$3.4 billion in Q4 2022.

This is troubling information from an industry leader like Samsung and may be a sign of terrible trends to come. Like other semiconductor makers, Samsung dramatically increased its operations after the pandemic to supply industries that had been starved of components.

Recent research by Omida shows that smartphone shipments fell 7.6% year-on-year for the recent third quarter, to about 301 million. These trends may partly explain why Samsung’s sales and operating profits have suffered.

Experts now believe that spending cuts are due in the consumer electronics market which, for the first time in a while, is in a chip glut.

Chip shortage causes car prices to rise in Thailand

The Federation of Thai Industries (FTI) expects car prices to rise by 5-10 % in 2023 because of the prolonged impact of the global semiconductor shortage. According to the FTI, new prices will apply to both domestic and overseas markets due to the higher prices of raw materials.

Surapong Paisitpatanapong, the vice-chairman of the FTI and spokesman for its Automotive Industry Club, said chip scarcity will continue to be a major challenge for the Thai automotive industry this year. "It's difficult to forecast car production in Thailand in 2023," he said.

Last year, the country’s total car manufacturing target was cut to 1.75 million units from 1.8 million after the Russia-Ukraine war worsened the global semiconductor shortage. Manufacturers will also see their operating costs increase this year if the Thai government doesn’t address the increase in energy bills, he added.

Electric vehicles overtake Diesel sales in the UK for the first time

The UK Society of Motor Manufacturers & Traders (SMMT) said in a recent report that despite supply chain shortages hitting the country’s new car market last year, battery electric vehicles grew in popularity. The SMMT said that supply chain shortages, particularly in chips, subdued the new car market in 2022. New car registrations amounted to 1.6 million units, down 2.0% from 2021.

The SMMT also noted that battery electric vehicles had its largest ever monthly market share of 33% in December, helping them become the UK’s second most popular power train for 2022, surpassing diesel for the first time as yearly registrations rose to 17%. The UK car market also recorded a fifth consecutive month of growth in December, increasing by 18% to reach 128,462 new registrations.

This strong performance in the second half of 2022 wasn’t enough to offset declines recorded in the first half, however. The SMMT said that more needs to be done to ensure drivers in every part of the UK can benefit from switching to EVs in 2023.

"For a nation aiming for electric mobility leadership, that must be matched with policies and investment that remove consumer uncertainty over switching, not least over where drivers can charge their vehicles," said SMMT Chief Executive Mike Hawes.

Pakistan works with China to develop chip manufacturing industry

Pakistan and China have reportedly partnered to build a semiconductor industry in the country, it has been reported by Pakistani media agency WealthPK.

Although Pakistan’s semiconductor industry is considered to just be emerging and displaying signs of potential, the country’s Ministry of Information Tec and Telecommunication (MOITT) said that a semiconductor zone will be set up in Pakistan with the help of China.

The report says that since Pakistan imports most of the semiconductor chips used in local manufacturing, the global semiconductor shortage has hit the country hard. Seeing how many other countries are several lightyears ahead of Pakistan in terms of their semi industry maturity, the initiative to grow its domestic production has been pushed ahead by the MOITT.

Rs41.75 million in funding has already been approved by the provincial government for establishing chip design centers at eight Punjab universities. According to Hamza Saeed, the director of strategic planning and client services, Chinese companies have shown immense interest in the projects of the Special Technology Zones Authority (STZA).

Samsung suffers its biggest downfall in recent memory

South Korean electronics giant Samsung issued some of its worst figures in recent memory in early January. For Q4 2022, the company expects to have brought in USD 55 billion in sales, down from the USD 60.2 billion it reported a year earlier. Even worse is the company’s anticipated operating profit. Having reported USD 11 billion in Q4 2021, Samsung expects to make just USD 3.4 billion in Q4 2022.

This is troubling information from an industry leader like Samsung and may be a sign of terrible trends to come. Like other semiconductor makers, Samsung dramatically increased its operations after the pandemic to supply industries that had been starved of components.

Recent research by Omida shows that smartphone shipments fell 7.6 % year-on-year for the recent third quarter, to about 301 million. These trends may partly explain why Samsung’s sales and operating profits have suffered.

Experts now believe that spending cuts are due in the consumer electronics market which, for the first time in a while, is in a chip glut.

TSMC boss sees an end to the chip shortage

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, expects a further easing to the chip crunch that has restricted production across the global automotive industry. The shortage of critical semiconductors for cars has persisted for over two years now, causing major problems for even the biggest automotive manufacturers like Toyota and General Motors.

“Automotive demand continued to increase and today we’re still probably not supplying 100 % of the wafers they want, but it’s improving,” TSMC Chief Executive Officer C. C. Wei told analysts during a conference call on Thursday, January 12. “We expect the shortage to be relaxed quickly. We expect auto shipments to grow again this year.”

TSMC on Thursday predicted sales below analysts’ estimates and said it will reduce spending as the chip industry braces for a potential recession.

UK car sales drop to 30-year low

New car registrations in the United Kingdom fell to 1.6 million in 2022, marking the lowest level since 1992, as the global chip shortage continued to hit sales in the first two quarters of the year.

Supply constraints meant that many manufacturers prioritized the delivery of battery electric vehicles, which saw record sales and overtook diesel vehicles for the first time in the UK market as yearly registrations rose to 17 %. Total vehicle registrations in 2022 were 2 % below 2021 and around 700,000 units below pre-pandemic levels, however, said the Society of Motor Manufacturers and Traders (SMMT).

Sales picked up in the last five months of the year, allowing the country to reclaim the position of Europe’s second-largest new car market by volume, behind only Germany. The SMMT has said that this trend could continue this year.

“The automotive market remains adrift of its pre-pandemic performance but could well buck wider economic trends by delivering significant growth in 2023,” SMMT CEO Mike Hawes said in a statement.

Volkswagen sales fall to 11-year low

Volkswagen has said that it expects easing supply chain problems and a backlog of orders to boost its sales this year, after semiconductor shortages in 2022 led to an 11-year sales low.

Group sales fell 7 % to 8.3 million vehicles after supply constraints saw factories grind to a halt, a spokesperson reported on Thursday, January 12. Volkswagen said that it has a high order bank of 1.8 million vehicles in Western Europe that will help offset shortages this year.

“That gives us confidence for 2023 despite weakening macroeconomics and ongoing supply shortages,” VW’s group sales head Hildegard Wortmann said in a statement. “The latter is expected to improve step by step in the course of the year.”

After a lengthy chip shortage and major problems with raw materials supply chains and shipping, automakers are now facing a weakening outlook where high energy prices and record inflation levels are expected to cause further challenges in the near term.

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