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Chip Shortage Persists, Yet Shipments Rise to Record High
Despite efforts to ease the global semiconductor shortage, the deficit is expected to persist through the end of 2022 as demand remains sky high.
According to Livewire Markets, when the chip shortage first began, industry executives originally expected it to subside at the end of 2021. Now, even the most optimistic estimates predict the shortage will abate mid-2022, yet more cautious opinions fear it won’t fully subside until early 2023.
Intel CEO Pat Gelsinger has long held bearish sentiment toward the chip deficit resolution, and he recently reiterated his projection that it could drag into 2023.
The Wall Street Journal recently reported that the global chip shortage ‘is far from over’ as demand has yet to moderate and supply struggles persist. Wait times for chip deliveries have continued to soar in the range of 22-25 weeks, significantly higher than the typical threshold of 9-12 weeks. In some cases, specifically with microcontrollers used in the auto industry, wait times have risen to an unimaginable 38 weeks.
Even with extended wait times, semiconductor sales recently jumped to all-time highs on strong demand and higher prices.
Per Digitimes Asia, worldwide chip sales totaled $144.8 billion in the third quarter of 2021, up 27.6% from a year ago and 7.4% higher than the previous quarter. More semiconductor units were shipped during the third quarter than any other quarter in the market’s history, highlighting record levels of demand.
Year-over-year sales increased the most in the Americas (33.5%), followed by Europe (32.3%) and Asia Pacific/Other (27.2%).
GlobalFoundries CEO Tom Caulfield recently told CNBC that the company was sold out of chip capacity through 2023, and he expects the market to be chasing supply over the next five to ten years.
Similarly, Qualcomm announced record quarterly sales, despite the chip crisis, citing a tremendous uptick in demand for 5G smartphones, per The Wall Street Journal. Chip sales for smartphones surged 56% year-over-year, CNBC writes.
Strong sales come as major chip manufacturers aim to ramp up production. According to PYMNTS.com, Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung Electronics Co. and Intel have all announced they will be building new facilities, yet it will take years – and billions of dollars – to become reality.
Even as manufacturers try to increase production, supply simply cannot keep up with the surge in post-pandemic demand. With additional supply unlikely to come to market soon, a lack of chips will hinder production across several key industries through next year.
Multiple Industries Battle Lingering Production Woes
As MRP has recently highlighted, the chip shortage has been a major detriment to auto production. Total vehicle sales in the US have declined significantly each month since March 2021, falling to 12.56 million units sold in September. That figure is frighteningly close to the pandemic low of 8.96 million units in April of 2020.
Per Marketwatch, October’s seasonally adjusted annual rate for light vehicles came in at 13.1 million, but Garrett Nelson, an analyst with CFRA characterized that as only “some incremental improvement happening over the last month or so… but we are talking very marginal improvement.”
On average, total vehicles sales ranged between 17-18 million units per month over the last 5 years, before the pandemic began.
While some automakers have weathered the semiconductor storm fairly well, others have not been as fortunate. Per the Financial Times, premium carmakers have largely defied the chip crisis by selling more of their luxury vehicles with much higher price points, even as overall vehicle sales fall lower.
On the other hand, Reuters notes that Volkswagen owned Skoda Auto recently announced it will produce a quarter of a million fewer cars than anticipated this year due to the chip shortage. Similarly, Stellantis announced semiconductor shortages cut quarterly production by 30%, or 600,000 vehicles, noting that deficit was more significant than previously anticipated.
MRP has also noted the impact chip deficits have had on both smartphone and video game production, and those constraints appear to be worsening.
Tech giant Apple announced the semiconductor bottlenecks have slowed the production of iPhones and other marquee products, citing a $6 billion dollar hit. Notebook Check writes that Apple has reportedly slashed its iPad production by 50% in order to meet the level of demand for the new iPhone 13.
Further, Nintendo has announced it will be cutting its production of the Nintendo Switch by 20%, equating to roughly 24 million units, per Kotaku.
Demand for electronics is unlikely to subside soon, and while the chip crisis has hampered production, a robust consumer market has allowed both smartphone and video game producers to weather the storm well and post impressive overall sales numbers.
Still, additional chip production will take years to come online, meaning a continued rise in demand for electronics could keep the market tight and extend wait times further, leading to strong results from semiconductor manufacturers. |
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