Industry experts predict that the global shortage of microchips – which hampers supply chains in several industries – will not improve until 2023. Last year, experts predicted that some relief would come in the second half of 2022.
The Semiconductor Shortage hit the auto industry for the first time during the COVID-19 pandemic in 2020, when overall consumer demand for cars declined during the lockdown. This had a cascading effect leading to “labour shortages, raw material shortages, trade tensions and the growth of 5G electronics, which require more chips than previous generations of devices,” according to the report. an article in the MIT Sloan School of Management†
According to Gaurav Gupta, vice president of semiconductors and electronics at Gartner, there will be “a better balance of supply and demand” in the second half of 2022. Some devices still have long lead times, such as car chips, Gupta added.
Gartner expects the semiconductor supply chain to “step into normal zone by 3Q22with normal stock for key chip categories expected by 2Q23.”
Paul Silverglate, a leader in Deloitte’s US tech sector, agreed, saying that “sentiment among tech industry leaders seems to suggest that the challenges in the semi-supply chain could improve by the latter part of calendar ’23.” — versus a sense that things are getting worse.”
This is based on research from Deloitte showing a “potential softening of consumer demand, more capacity that eventually goes online and that companies are better able to implement systems and processes to make their supplier ecosystem more variable and improve their supply chain.” manage,” said Silverglate.
The nonprofit World Semiconductor Trade Statistics predicts that the global semiconductor market will grow by just over 16% in 2022 and continue to grow by 5% in 2023.
However, Silverglate noted that two prominent executives, Intel CEO Pat Gelsinger and US Secretary of Commerce Gina Raimondo, predict the chip shortage will continue through 2024.
“Part of the reason we believe the overall semiconductor shortage will now drift to 2024, from our previous estimates in 2023, is simply because the shortages have now affected equipment and some of those factory ramps will be more challenging,” Gelsinger explained. out in a April interview with CNBC†
After meeting several chip maker CEOs during a May visit to South Korea to discuss ways to overcome the crisis, Raimondo warned that she does not see the chip shortage diminish in any meaningful way at any point in the coming year. She added that it would be “deep into 2023, possibly early ’24 before we see real lighting.”
With the possibility of a recession looming, there is some indication of a potential easing, noted Jennifer Strawn, Americas and EMEA, head of sourcing and sales for Rand Technology, a global supply chain solutions company.
“Current demand underscores the importance of building technology out at a pace we never thought possible,” Strawn said. “We are defining what will be the new standard for the supply chain in the coming years.”
Automotive companies continue to experience supply chain problems
The chip shortage in the auto industry has been exacerbated by an increase in smart cars, which are more dependent on electronics. Car manufacturers had to adapt accordingly. BMW shipped vehicles to customers in May without Android Auto and CarPlay functionality and built-in Wi-Fi in selected countries. The German carmaker also said it was forced to switch chip suppliers because of the semiconductor crisis.
Toyota July ’22 global production plan cut by 50,000 vehicles, citing shortages of semiconductors and disruption of parts supply. The automaker stuck to its annual global production target of 9.7 million vehicles, but said supply chain disruptions could affect that target. Toyota also extended production shutdowns in Japan at several plants.
New manufacturing facilities in the US
To help relocate chip manufacturing, construction is underway on at least three new manufacturing plants in the US, including the TSMC plant in Arizona, which may be ready for production by 2024 and Texas Instrumentswho has pioneered a fantastic facility in Texas.
in 2021, Samsung has also announced it is also investing in a fabulous new facility in Texas.
Intel has announced plans to build two leading logic fabs in Ohio at a cost of $20 billion with construction to start in 2022 and production is expected to begin in 2025.
As geopolitics continue to create the need for transformation in manufacturing and the supply chain, both Strawn and Silverglate said not much sourcing has returned to the US in the meantime.
“Because risk mitigation and supply assurance are at the forefront of every company’s initiatives, and OEMs are determining how much control over their supply chain they need to regain… we’re seeing a lot of companies repositioning where they manufacture to create more flexibility,” he said. Strawn. “While there is a focus on bringing some of this production back to the US, it’s not an immediate solution as it takes time to build these manufacturing facilities and get them online.”
Can artificial intelligence help?
It’s too early to see AI easing supply chain challenges, but experts agree the technology will be very helpful.
“As with any technology, it takes time for companies not only to implement it, but to learn how to use it effectively to improve the way they currently manage their business,” said Silverglate.
Companies are trying to use all the latest tools and technology to streamline, optimize and use analytics in supply chain practice, Gupta said. While this will help reduce supply chain and chip shortages, “systems take time to evolve — in the long run, this will help.”
Strawn also echoed that, saying it will take time to leverage AI and other technologies for maximum impact.
“As an agility partner participating in our customers’ circular ecosystem, at Rand we see predictive analytics playing a critical role in helping businesses navigate and mitigate supply chain challenges,” she said.
Predictive analytics can be used to identify market shifts, spot gaps before products go into production, and understand trends and signals important to drive transformation and strategies for how customers protect their supply chain.
How companies should respond
As supply chain issues persist, Silverglate offers some best practices for businesses to consider:
- Re-evaluate long-term business plans with a keen eye for risk mitigation and security of supply.
- Build into their plans the expectation that there will most likely be conditions in the near future that will lead to downtimes and logistical and production problems.
- Recognize that the desire for just-in-time production can lead to procurement delays and consider shifting to a more long-term assessment of inventory requirements.
- Inventory needs must be clearly forecast, not just for the short term, and communicated internally and especially with suppliers.
- Consider creating and holding a buffer or partnering with a company that does this for them.