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CHIP SHORTAGE NEWS Global chip shortage 2023
Automotive manufacturers are still grappling with the ongoing ramifications of the microchip shortage that originated in 2020. According to Sam Fiorani, the vice president of global vehicle forecasting at AutoForecast Solutions, the industry is anticipated to witness a reduction of 2-3 million units in production for the year 2023.
This figure underscores the persistent challenges manufacturers are confronting. Nevertheless, if Fiorani’s prediction holds true, it would signify a noteworthy improvement for the industry. For context, more than 10.5 million vehicles had to be removed from production in 2021, as reported by Auto News. In the subsequent year, 2022, automakers across the globe had to trim an estimated 4.3 million cars from their production schedules. While losing 2-3 million units would still pose difficulties for manufacturers, it would indicate a gradual alleviation of supply chain issues.
The global semiconductor shortages show no signs of immediate resolution, but there are mixed signals on the horizon for 2023. Drawing from market data and discussions with our clientele, it is anticipated that the scarcity of components such as analog, microcontrollers, FPGA, and discretes will persist well into 2023. Lead times for basic semiconductors continue to exceed 40 weeks on average, while high-end components remain in short supply, with lead times surpassing 52 weeks.
Nonetheless, a degree of relief may be on the horizon in the latter half of 2023. With the global economy cooling down, the demand in consumer markets has significantly softened. This shift allows suppliers to fulfill orders from other sectors and address the existing backlog of components. These developments have led Gartner to project a 3.6% decline in global semiconductor revenue for 2023.
Despite this, a few specific chip segments are still experiencing high demand, particularly in the Internet of Things (IoT), 5G, and the automotive industry, especially in the context of automotive electrification. Rather than grappling with shortages across the board, chip suppliers are now closely monitoring and reviewing their inventories. This strategic approach aims to ensure they have the right mix of products to meet the surging demand in specific areas while avoiding potential surpluses in industries where demand is declining.
Impacted industries
The global chip shortage that has plagued industries across the world is expected to come to an end in 2023. One of the most impacted industries by this shortage has been the automotive industry, particularly the electric vehicle sector. The shortage of automotive chips has resulted in production delays and reduced output for many auto manufacturers. Additionally, the semiconductor industry, especially in South Korea, has faced significant challenges in meeting the demand for advanced chips. Chip factories and manufacturing plants have struggled to keep up with the supply chain issues and the surge in consumer demand. The shortage has also had a ripple effect on other industries such as consumer electronics, causing production delays and impacting business plans. However, with additional capacity being added and production plans being recalibrated, the industry is optimistic about resolving the chip shortage crisis in the upcoming year.
Cars
The global chip shortage that plagued the automotive industry for several years finally comes to an end in 2023. After months of supply chain disruptions and halted production lines, car manufacturers can breathe a sigh of relief as chip production ramps up. The semiconductor industry, particularly in South Korea and North America, invests billions of dollars to increase production capacity and overcome the shortages. Automotive companies like NXP Semiconductors collaborate with auto forecast solutions providers to address the surge in demand for high-end chips. With additional capacity and improved supply chains, the auto industry is back on track to meet consumer demand for electric vehicles and advanced automotive technologies.
Desktop computers and graphics cards
As of 2023, the global chip shortage that affected various industries, including automotive and consumer electronics, is expected to come to an end. The semiconductor industry has taken measures to ramp up production capacity and address supply chain issues, leading to the gradual resolution of the chip crisis. By increasing output and investing in additional chip factories, manufacturers have been able to meet the surge in demand for automotive chips, particularly in the electric vehicle sector. This boost in production will not only alleviate the shortage but also ensure a stable supply of advanced chips for various industries in the future.
The Auto Industry’s Struggles with the Chip Shortage
In the early part of 2020 (1Q20 and 2Q20), automakers made the decision to cancel their chip orders due to a pessimistic outlook on demand caused by the COVID-19 pandemic. This move created available wafer capacity at foundries, which was swiftly taken up by orders from consumer electronics companies as the demand in this sector surged. However, when automotive demand rebounded sooner than anticipated, car manufacturers found themselves facing chip shortages, exacerbated by their just-in-time supply chain model, which typically aims to minimize inventory. This situation significantly contributed to the global chip shortage.
Both front-end and back-end manufacturing processes in the semiconductor industry rely on a multitude of different chemicals and materials. The absence of even one specific chemical can trigger a cascading effect throughout the entire value chain, disrupting the entire manufacturing process.
Expanding manufacturing capacity, whether in the front-end or back-end, within existing fabrication facilities (fabs) can be accomplished more rapidly than constructing entirely new fabs. This process can be completed within 18 months instead of the typical 3-year timeline. However, certain supply constraints for specific types of manufacturing equipment do present challenges when attempting to achieve short-term capacity expansions.
The Reasons Behind the Shortage
The global chip shortage has had far-reaching impacts on various industries, particularly the automotive sector. The shortage has been attributed to several key factors. First and foremost, the surge in demand for electronic devices, especially during the COVID-19 pandemic, has put immense strain on the semiconductor industry. Additionally, the rapid growth of the electric vehicle market has further exacerbated the shortage as automakers increasingly rely on advanced chips for their vehicles’ functionalities. Furthermore, supply chain disruptions caused by the pandemic have disrupted chip manufacturing and led to delays in production. The heavy reliance on a few key manufacturing centers, such as South Korea, has also contributed to the shortage. With supply unable to keep up with demand, automakers and other industries are facing significant challenges in securing the necessary chips to meet consumer demands.
Pandemic-related Disruptions
Contrary to expectations, the global chip shortage is predicted to continue into 2023, causing significant disruptions across various industries. The automotive sector, in particular, has been heavily impacted, with auto manufacturers struggling to meet the surging demand for electric vehicles due to limited chip supply. Companies such as NXP Semiconductors and Autoforecast Solutions are working to increase production capacity, but the shortage remains a significant challenge. This ongoing crisis has prompted auto companies to revise their production plans and explore alternative chip suppliers. As the shortage persists, it is crucial for the semiconductor industry to address the supply chain issues and invest in additional capacity to meet consumer demand.
Skyrocketing Demand
In 2023, the chip shortage crisis is expected to finally come to an end. The automotive industry, especially the electric vehicle sector, has been hit hard by the shortage, leading to production delays and disruptions in supply chains. However, semiconductor manufacturers are ramping up their production capacity and investing billions of dollars to address the ongoing chip shortages. Companies like NXP Semiconductors and Autoforecast Solutions are working towards increasing chip manufacturing capabilities and forecasting vehicle demand. With additional capacity and improved supply chains, the industry is hopeful that the chip crisis will be resolved, meeting the surge in consumer demand for high-end chips. As a result, auto makers and manufacturers can potentially reduce their dependence on chip imports and secure their supply of essential components.
Manufacturing Capacity Constraints
The chip shortage that has plagued industries worldwide is expected to come to an end by 2023. The automotive industry, in particular, has been heavily impacted by the semiconductor shortage, leading to production delays and supply chain issues for auto manufacturers. However, solutions are being implemented to address manufacturing capacity constraints, with chip factories expanding their production capacity to meet the growing demand for automotive chips. Companies like NXP Semiconductors are investing billions of dollars to increase their production of advanced chips, while auto forecast solutions are being implemented to better manage the supply chain. With these efforts, the automotive industry is hopeful that the chip shortage will be resolved by 2023, allowing for smoother production and a return to normalcy in the market.
Disruptions in the Supply Chain
Disruptions in the Supply Chain: The automotive industry continues to face challenges due to the ongoing chip shortages, impacting production plans and vehicle forecasting. Supply chain issues, coupled with the surge in demand for electric vehicles, have led to a shortage of semiconductor chips. This crisis has affected not only the automotive industry but also consumer electronics manufacturers. Chip manufacturers are working to increase production capacity and invest in additional chip plants to address the shortage. As the world’s largest chip manufacturer, South Korea’s semiconductor industry plays a crucial role in resolving this crisis. In 2023, with increased production and strategic partnerships in place, the chip shortage is expected to gradually come to an end.
Impact on the Automotive Industry
The ongoing chip shortage has had a significant impact on the automotive industry. The shortage of semiconductor chips has disrupted the production plans of auto manufacturers, leading to a decrease in the production of vehicles. This has resulted in a decrease in the availability of new cars and a surge in consumer demand for used vehicles. Auto companies have faced supply chain issues and have had to adjust their business plans accordingly. The shortage has also affected the production of electric vehicles, as they rely heavily on advanced chips. Overall, the chip shortage has caused disruptions in the automotive supply chain and has impacted the industry’s ability to meet consumer demand.
How Have Chip Shortages Impacted Markets?
The chip shortage has had its most profound impact on the automotive industry. Depending on their level of connectivity, the typical car now incorporates over 100 chips, and many vehicles require thousands of semiconductors to manage a wide array of functions, including safety features, electrical and powertrain systems, infotainment, and connectivity.
A spokesperson from TSMC explained to Time magazine that the origins of the automotive industry’s current chip supply challenges can be traced back to 2018. At that time, there was a surge in demand for connected devices, spanning from smartphones to household appliances, while the demand for automobiles remained relatively subdued. In response, semiconductor manufacturers began allocating a greater portion of their supply, particularly critical automotive components like MCUs, to other industries. This created a substantial issue when car demand unexpectedly soared in the final quarter of 2020 and continued into the first half of 2021, driven by factors such as low interest rates and consumers having more disposable income than initially anticipated.
By the spring of 2021, the auto industry was feeling the full impact of the chip shortage. Production facilities were compelled to reduce output or even temporarily shut down due to disruptions in the supply of essential parts. Adding further strain to this already constrained chip supply is the growing number of government mandates worldwide for electric vehicles. Industry experts and automakers have voiced concerns that an extended chip scarcity could hinder the introduction of these new vehicles, particularly in the United States. Analysts at AutoForecast Solutions predict that OEMs will grapple with a production shortfall of three million vehicles in 2023 due to chip shortages, a challenge although an improvement compared to the 4.5 million and 10.5 million vehicles lost in 2022 and 2021, respectively.
Furthermore, automotive chip shortages have driven up the prices of new cars. Throughout 2021 and 2022, the average cost of a new car reached record highs, culminating at $46,382 in December 2022, as opposed to $40,000 at the end of 2020. According to J.D. Power, even though the number of new cars declined by 2.8% year-over-year between December 2021 and 2022, due to a combination of supply constraints and reduced demand stemming from inflation and rising interest rates, consumer spending on new vehicles only decreased by 0.3% during the same period.
When Will The Shortage End?
The global chip shortage that has impacted various industries, particularly the automotive and consumer electronics sectors, is expected to continue well into 2023. Supply chain issues and a surge in demand for chips, driven by the growth of electric vehicles and increasing consumer demand for high-end electronics, have contributed to this crisis. Despite efforts by chip manufacturers to ramp up production and invest in additional capacity, the shortage is unlikely to be resolved in the near term. Consumer electronic companies, automotive manufacturers, and other industries relying on semiconductor chips will continue to face challenges and disruptions until the manufacturing and supply chain issues are resolved. The shortage has highlighted the need for greater investment in chip manufacturing and supply chain infrastructure to avoid future supply crunches.
