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No Light at the End of the Tunnel Yet for the Global Semiconductor Shortage

Aug. 23, 2021
Here’s the current state of the chip shortage and a look at what could lie ahead for the rest of the year.

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In July, the global semiconductor shortage hit a milestone when the news broke that OEMs like Nvidia and AMD were officially taking 20.2 weeks to fulfill chip orders. For some microcontrollers and logic chips, those lead times are now extending past 26 weeks.

“This basically means the chip shortage is escalating,” TechRadar reports, “and if something doesn’t change, soon, the prices of various CPUs and GPUs may go even higher in the future, especially with the holiday season fast approaching.”

Blamed mostly on the COVID-19 pandemic, the chip shortage came about due to prolonged lockdowns, with OEMs shrinking their orders and hunkering down in anticipation of a global economic recession. When that didn’t happen—and as people stuck inside during the pandemic turned to their electronic devices for entertainment, shopping and work—a global tech shortage took over.

Extended Lead Times

According to Bloomberg, chip lead times, the gap between ordering a semiconductor and taking delivery, increased by more than eight days to 20.2 weeks in July from the previous month. That gap was already the longest wait time since Susquehanna Financial Group began tracking the data in 2017.

“In better news for industries that rely on semiconductors, the lead times were reduced for power management chips, semiconductors that regulate the flow of electricity in everything from smartphones to solar power generation,” Bloomberg adds, noting that the automotive industry has felt the brunt of the chip shortage.

“Other areas have been pinched, too, with many electronics makers, including the biggest companies such as Apple Inc., unable to meet all the demand for their products,” the publication reports.

Are Smartphones Next?

Smartphones have so far been mostly shielded from the chip shortage, thanks to manufacturers like Apple and Samsung stockpiling critical components, CNBC says. “The automotive industry doesn’t run at the same cadence as the smartphone business,” Ben Wood, chief analyst at CCS Insight, told CNBC. “They saw the problems more slowly than the smartphone guys.”

Plus, CNBC says demand for smartphones waned in 2020 as the coronavirus pandemic raged, with sales declining 12.5% according to Gartner. However, that demand has been quickly recovering this year, as several countries lift their COVID lockdown restrictions. Gartner says that global smartphone sales grew 26% in the first quarter.

In Welcome to the never-ending chip shortage,” CNN’s Charles Riley predicts that smartphones could be the next industry to get “walloped” by the disruption, citing ING’s Greater China chief economist Iris Pang. “Taiwanese semiconductor companies are [tailor-making] chips for autos, so the chip shortage should be solved for autos in a few weeks,” Pang told the Reuters Global Markets Forum, “but other electronics’ chip shortage problems persist.”

No Relief in Sight Yet

In August, General Motors once again began halting assembly lines of several pickup truck plants because the company doesn’t have enough computer chips, Vox reports. “The plants had been back up and running for just a week following a shutdown in July, which was also caused by the chip shortage,” the publication explains. “It’s clear that the global chip shortage shows no sign of abating anytime soon. In fact, it seems to be getting worse.”

Some relief could be coming in the form of new U.S. plant capacity, but those new facilities still have to be built and outfitted with equipment—a challenge in and of itself right now due to the ongoing raw material shortages.

“While the White House is racing to expand chip manufacturing in the U.S. to avoid future shortages, it could be years before that government investment actually pays off for consumers,” Vox points out. “So for now, the chip industry will continue to be hampered by the fallout from the COVID-19 pandemic, as products ship with missing features and higher prices—often after long delays.”

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About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.