Why Is There a Chip Shortage?
The current chip shortage is, in the simplest terms, the result of high demand and inadequate supply. This dates back to the semiconductor capacity lockdowns that occurred in Asian foundries during the COVID-19 era in the second quarter of 2020, when demand for remote work technology skyrocketed and automakers found themselves in fierce competition for this scarce resource.
Further chip shortage bottlenecks in the supply chain were caused by the COVID-19 Delta variant’s negative effects on downstream operations in South Asia. The “back-end” procedures performed in Malaysia, like as chip packing and testing, are more labour intensive than wafer fabrication processes, making them more susceptible to public health interventions.
Car manufacturers cancelled orders at the start of the pandemic, but by the time manufacturing picked back up by the end of 2020, there was a severe shortage of semiconductors. The situation was exacerbated by rising demand, most noticeably for luxury automobiles as a result of historically low financing rates.
Even while the COVID-19 epidemic was the immediate cause of the chip shortage, structural issues also play a role. There has been a significant movement in the automotive sector toward the use of automation and electric vehicles. These call for additional chip shortage production, putting additional stress on an already overworked industry.
When Will Chip Shortage End?
According to J.P. Morgan Research, the chip shortage will ease in the second half of 2022. However, not all consumers’ needs can be met by the current supply of chips and chips shortage. Volkswagen predicts that through 2024, the supply of semiconductors will fall short of the demand in the automotive industry.
Weakness in various end markets, especially personal computers, smartphones, and consumer electronics. This resulted in capacity being released as of late. Some of the capacity lost during the COVID-19 pandemic is being reallocated by Taiwanese foundries. That are automotive and industrial ones. However, cars typically need more primitive semiconductors that aren’t compatible with modern computers or mobile devices.
According to European Technology Research Head Sandeep Deshpande, “we’re nearing the conclusion of the supply constraint” and a significant increase in semiconductor capacity is expected in the second half of 2022. Yet, certification is still required before capacity may be used in the automotive sector. Is it possible for demand and appropriate qualification to be matched? The problem still lies here. Were it not for this problem, I believe that life could return to normal by the end of this year.