The global semiconductor shortage has impacted many industries for more than a year for the supply of everyday devices starting from smartphones, personal computers, game consoles, automobiles, medical devices etc. and affecting about more than 169 industries. The average modern car can have between 1,400 and 1,500 chips, some even up to 3,000. Cars account for 15% of global chip production, while personal electronics account for around 50%. Chip revenues are even more skewed towards non-automotive sectors. The chip shortage is expected to cost the global automotive industry dx$210 billion in revenue in 2021.
At the start of the pandemic, car manufacturers incorrectly predicted that sales would drop, cancelled chip orders, and were unprepared to meet demand. Chip manufacturers had more commitments from the IT sector, which reduced capacity for car chips. At the same time, the global chip crisis made it difficult to acquire a new graphics card, while an increase in cryptocurrency mining in 2021 increased the demand even more. Finding gaming PC components became more difficult and more expensive, and as gaming PCs rely on either AMD or Nvidia to make their discrete (sometimes called dedicated) graphics, both of those companies refreshed their lineups during the pandemic with popular new models that are very difficult to find or priced 50–300% above MSRP.
The lack of chips has been caused by booming demand for tech gear, in large part because of the pandemic, and winter weather in Texas and a fire in Japan have added to the problem. It’s been a boon for companies such as Applied Materials Inc. and Lam Research Corp. that produce the equipment semiconductor makers need to boost output.
One positive aspect of the chip shortage - with demand for consumer electronics as strong as it is, it gives companies the power to raise prices and pass on higher costs. Sources said, every tech company today is not struggling for the orders but they are struggling for the supply chain as the demand for the company’s laptops is soaring because of purchases by people working at home, and the stock has doubled since August. December is already approaching and the tech companies in India are in a position to supply the orders booked in the months of May and June. While automakers have continued the struggle, the flip side of the semiconductor shortage is that the companies supplying those chips could see a boost to their business.
Most semiconductor companies should report strong results for the first quarter and give good guidance for the second. With experts predicting that the situation could improve by the middle of next year when more supplies are expected to become available, everyone seems to be asking what led to this major supply chain disruption in the first place and why it’s taking so long to fix. Now the government is keen to promote the manufacturing of semiconductors in the country and has even proposed tax incentives for those who set up state-of-the-art fabs in India.
