It seems the tech industry isn’t out of the woods yet in relation to the global semiconductor shortage, which is expected to continue beyond the end of 2021 and not ease up until it returns to normal levels in the second calendar quarter of 2022.
The global chip shortage started primarily with devices, such as power management, display devices and microcontrollers fabricated on legacy nodes at 8-inch foundry fabs, which have a limited supply, analyst firm Gartner noted.
Indeed, by March this year, carmakers had already for several months been struggling with a chip shortage due to pandemic-related demand for consumer electronics, with the shortage expected to eventually affect phone makers as well.
The shortage has now extended to other devices, according to Gartner, which said that there are capacity constraints and shortages for substrates, wire bonding, passives, materials, and testing, all of which are parts of the supply chain beyond chip fabs.
These are highly commoditised industries with minimal flexibility and capacity to invest aggressively on a short notice, the analyst firm pointed out.
Now, across most categories, device shortages are expected to be pushed out until the second quarter of 2022, while substrate capacity constraints could potentially extend to fourth quarter of 2022, according to Gartner.
“The semiconductor shortage will severely disrupt the supply chain and will constrain the production of many electronic equipment types in 2021. Foundries are increasing wafer prices, and in turn, chip companies are increasing prices,” said Gartner principal research analyst Kanishka Chauhan.
Interestingly, Gartner’s estimate is far more conservative than earlier forecasts by at least one company in the chip-making business, Taiwan Semiconductor Manufacturing Co. (TSMC), which happens to have the reputation of being the largest chip foundry in the world.
TSMC’s customers include Nvidia, which had already predicted that crippling GPU shortages would continue throughout this year.
Gartner’s analysis suggests the chip shortage will ease at least six months earlier than TSMC’s gloomy predictions.
In the meantime, Gartner said its analysts recommended that original equipment manufacturers (OEMs) that are either directly or indirectly dependent on semiconductors take four key actions to mitigate risk and revenue loss during the global chip shortage.
These include extending supply chain visibility and, for OEMs with smaller and critical component requirements, looking to partner with similar entities and approach chip foundries and/or outsourced semiconductor assembly and test (OSAT) players as a combined entity to gain some leverage.
Gartner also said OEMs should track leading indicators, suggesting a combination of relevant parameters can help guide organisations in the right direction.
Additionally, creating strategic and tight relationships with distributors, resellers and traders can help with finding the small volume for urgent components.
“Since the current chip shortage is a dynamic situation, it is essential to understand how it changes on a continuous basis,” said Gaurav Gupta, research vice president at Gartner. “Tracking leading indicators, such as capital investments, inventory index and semiconductor industry revenue growth projections as an early indicator of inventory situations, can help organisations stay updated on the issue and see how the overall industry is growing.”