When do you expect the current chip shortage to ease? What are the main drivers of prolonged shortages, and why will they ease over this timeframe?
PRINCIPAL ENGINEER AT A SEMICONDUCTOR MANUFACTURER
The overall shortage of chips should ease starting in 2023, assuming the Covid situation is controlled. The more advanced nodes at 5nm and below will still be constrained in 2023, but older nodes (7nm and above) should ease as new fab capacities in Asia and the US come online. The main drivers of the shortage are related to the impacts of Covid, which has caused the demand for computers and data center servers to surge. The tech stand-off between the US and China has also led Chinese firms to hoard chips to get around anticipated US bans (and re-engineer them). With time, the shortage should ease because of increased industry capacity, new entrants into the fab and lithography market, and Covid finally being overcome, reducing the removal of computing needs.
NATIONAL SECURITY CONSULTANT AT A STRATEGY CONSULTANCY
Considering the US CHIPS Act, South Korea’s $452 billion investment, EU’s 20% production increase goals, Japan and Taiwan’s multi-billion investments, the shortage is prioritized, but results can take 1-3 years. IBM, Intel, and Samsung have all commented on the issue and suspect a 2-year lull. There are approximately five drivers of prolonged shortages. To start with, few countries make chips, which creates a bottleneck. Then given the increased demand for tech amidst Covid and 1 to 2-year planning cycles, the demand caught the supply off guard. Since the barrier to entry is too high, competitors have not been able to step in. Then geopolitically, the West lost a significant producer in banning China’s Huawei/ZTE chips. Climate disasters have also significantly impacted production (for example, Texas power outages and Japan fires). Lastly, increased supply chain costs during Covid have also slowed things down.
VICE PRESIDENT AT A TAIWANESE TELECOMMUNICATIONS COMPANY
Three main problems have caused the current IC/chip shortage. First, the EU/US block and the reduction of imports of semiconductors from China (mainland) due to policy to reduce the power of China in the market. Second, IC production depends heavily on Taiwanese and Japanese semiconductor companies to supply almost 85% of total semiconductors to the global telecom market. Third, the water supply for Taiwanese semiconductor production (primary production) is on low reserve. This water supply is essential to semiconductor and chip production. The first point I made related to US policy could last four years. The second point around most of the production happening in Taiwan and Japan can only be solved by semiconductors building more plants in other countries, which takes 3 to 4 years. Lastly, the issues related to water supply should be resolved within 1 to 2 years depending on weather conditions construction more dam/water recycling/purify the system. Overall, the estimated time of this shortage will be at least 2 years.
POLITICAL ECONOMIST AND GLOBAL FELLOW AT A US UNIVERSITY
The chip supply will begin to increase from Q2 2021, but the shortage will be resolved from 2023 when new fabs are established (i.e., TSMC). As there was soaring demand during Covid for communication devices, smartphones and laptops, the mismatch of product MiX, lackluster investment in 8inch fabs and geopolitical uncertainty led to chip shortage of PMICs (Power Management IC). Notably, in Q2 2020, the closure of Malaysia, water shortage in Taiwan, and Covid spread aggravated the shortage issue. For smartphones, the issue was mainly the shortage of PMICs and driver ICs, ratcheting up prices by 20%. A new supply of chips from newly established fabs is required to readjust these factors. Lastly, for interested countries of Europe, TSMC is considering establishing its first fab in Germany.
PROGRAM DIRECTOR AT A TELECOMMUNICATIONS COMPANY
The consensus for the easing of the chip shortage is Q2. In 2022, the semiconductor supply chain will begin to return to normal. The ripple effect and conflicting business interests will have a negative impact on the sourcing of semiconductors for the telecommunications industry. In my opinion, realistically, Q4 2022 is when normalcy will regain. The main drivers, in one end, are due to a shortage in raw material, production and supply chain logistics due to the pandemic. Covid created the shortage compounded by increased demand for devices to support the digitalization of communication and works due to remote work. Lastly, since manufacturing is a leading indicator of this shortage easing, which is beginning to turn around, we can assume that this shortage will ease in the given timeline.