Major Points 

• The semiconductor chip scarcity could last beyond 2023.
• Extra manufacturing capacity will be implemented next year to address those challenges.
• The shortfall has hurt various industries, but none more so than the automotive industry.

We expect this scarcity to endure through 2022 and into 2023, since demand will stay high and supply will remain tight. Demand for PCs, which contain some of the most powerful CPUs, is expected to soften a little in the coming year, but  not drastically. Meanwhile, after a dismal 2020, he expects data centers, which are brimming with computer servers, to acquire more chips in the coming year.

When you combine that with people’s insatiable need to instrument everything, as well as continuous development in cloud computing and cryptocurrency mining, we see nothing but boom times ahead for chip demand.

Demand Causing Shortages

The situation might have been manageable if a global pandemic hadn’t prompted consumers and businesses around the world to rush out and buy new devices. This was in order to stay in touch with friends, family, and coworkers, while the health crisis kept entire populations confined to their homes for months.

While smartphone sales did not take up as quickly as PC, tablet, and gaming console sales did last year, it is projected that consumers would be eager to upgrade to 5G-enabled devices in 2021, and demand for mobile phones will spike in the coming months.

Economists warn that the scarcity is affecting a wide range of gadgets, from smart doorbells to basic home appliances, such as microwaves and refrigerators. The automobile industry has been particularly hard hit, and car production lines have been temporarily halted in several cases.

Because semiconductors have become such an important part of the economy, a global chip shortage will almost certainly have far-reaching and unanticipated consequences. We are likely to see configuration adjustments for items with significant chip content, such as PCs or phones. Where you had something with 16 GB of memory before, it may suddenly only have 8 GB.

Government Wake Up Call

Chipmakers have already announced plans to expand capacity: TSMC plans to spend $100 billion on new fabs over the next three years, Intel is spending $20 billion on two new factories that will also supply semiconductors to other companies.

However, the shortfall appears to have served as a wake-up call for governments, who are increasingly talking about “self-sufficiency” in semiconductors. With chips now being used in everything from military equipment to telecommunications infrastructure, it’s easy to understand why such a reliance on East Asia for consistent supply is a cause for concern.

In the end, the semiconductor supply chain is far too complicated to be confined to a single country, and it will almost certainly remain worldwide. From chip design to wafer manufacturing and testing, materials supply, assembly and packaging, the ecosystem is just too broad for any single country to achieve complete self-sufficiency.

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