Home Innovations The Global Chip Lack Carry On To Impact The Technology Supply Chain

The Global Chip Lack Carry On To Impact The Technology Supply Chain

The semiconductor industry has seen record numbers this year, but it is still crippled by capacity constraints. For consumers, this means longer wait times.
Laptops, Phones, Tablets, and Game Consoles: The devices that keep us connected to our friends, family and colleagues have been in high demand last year, and it's been a big win for the industry semiconductor, which produces the tiny chips that power all of these devices.
The latest figures released by technology analyst IDC show that global semiconductor sales hit a colossal $ 464 billion in 2020 , an increase of almost 11% from 2019.
There is no sign of a trend reversal: IDC predicts that the market will grow another 12.5% next year, to reach $ 522 billion in 2021. This development will be largely driven by consumers, who will continue to buy digital products, consume data and adopt cloud services at an unprecedented rate.
5G phone chip revenues soar
Products like PCs have played a central role in triggering the surge in chip sales. Semiconductor shipments powering computer systems experienced a boom of more than 17% from 2019, mainly driven by the demands of telecommuting and e-learning.
The PC market has not experienced annual growth of this magnitude since 2010 , according to IDC, and semiconductor revenue from computer systems is expected to continue to grow, albeit at a slower pace, in 2021. De Likewise, with consumers increasingly turning to digital services at home and in their leisure time, IDC predicts a steady increase in sales of chips powering devices like game consoles, tablets, wireless headsets or smart watches. .
It is, however, in the mobile telephony industry that semiconductors will be most in demand. Although Smartphone shipments fell more than 10% last year, mobile phone semiconductor revenue still increased as many vendors switched to 5G devices. But that's just the start: in 2021, when the general public actually starts buying new 5G compatible devices. , IDC predicts that revenues from chips that power mobile phones will increase 23.3%, to 147 billions of dollars.
"2021 will be a particularly important year for semiconductor vendors, as 5G phones capture 34% of all mobile phone shipments, while 5G phone semiconductors will capture nearly two-thirds of segment revenue," says Phil Solis, research director for connectivity and smartphone semiconductors at IDC.
A year darkened by worrying shortages
Despite apparently healthy results, all is not rosy in the semiconductor space. The industry was not prepared for the explosion in demand triggered, in part, by the Covid-19 pandemic, and for several months, supply chains have been disrupted by the limited availability of chips. In other words, the strong sales recorded last year are also a reflection of an industry that is operating near full capacity.
“Just like a traffic jam and its ripple effect, a disruption in the semiconductor supply chain operating at full capacity will impact the entire supply chain,” says IDC.
PC vendors have been facing component shortages since Q2 2020, and as demand continues to rise, delays are expected for the rest of the year.
Similar problems have been encountered by Smartphone manufacturers. Shortly after its release, Apple's iPhone 12 Pro came with a three-week waiting period. At the same time, both Samsung and Xiaomi have warned of potential delays for their upcoming releases.
Impact on the availability and costs of electronic devices
Shortages in industries with high demand are increasingly affecting the availability of chips in other markets, as the amount of semiconductor manufacturing capacity falls further and further behind. "Chip shortages are likely to impact the availability and costs of electronic devices," Brandon Kulik, director at Deloitte Consulting. “And when we talk about electronic devices, we go way beyond PCs, phones and game consoles and we should include consumer products like home appliances, home networks and wearable’s."
“On the whole, for this type of product, it will be necessary to face a real expectation of the products affected by the shortage and, in some cases, to pay higher prices for items present in very small quantities.” The IDC report also highlights the effect chip shortages are already having in the auto industry, where some automakers are temporarily halting production of new vehicles due to difficulty in sourcing the necessary semiconductors.
Studies show that some manufacturers are now having difficulty producing products powered by simple processors, such as microwaves, refrigerators and washing machines, due to the shortage.
Businesses are also on the front line
Next year, according to IDC, the industry will continue to struggle to rebalance chip distribution. And even if the major players invest in new capabilities, the improvements will only be felt in a few years.
In industries like the automotive industry, companies already need to implement mitigation strategies, warns Brandon Kulik. They range from redirecting the supply of chips to more profitable vehicles to completing some cars without certain modules in place, in order to keep assembly lines running.
Ultimately, according to Brandon Kulik, the risk of a chip shortage could affect most businesses. “The impact on businesses is perhaps more compelling than for individuals, given that they need more data capacity than ever before to serve their customers, manage operations, build and deliver products. This data is managed by their own data centers or by cloud service providers who need high-end semiconductors,” he recalls.
“If we see shortages in the processor and GPU markets, improving the way that data is managed may become more difficult and the costs of managing that data will increase,” he adds. There aren't any dramatic shortages in this segment yet, but Brandon Kulik warns that could change soon.
Due to the cyclical nature of the industry, supply will eventually catch up with demand, says Brandon Kulik. But the explosion in semiconductor sales has once again highlighted a trend that experts have been seeing coming for years: users and businesses are consuming data at a rate that is orders of magnitude larger than capacity forecast of the semiconductor industry.