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Global silicon chip shortage will last until at least 2023

silicon chip

How long will the global silicon chip shortage last? If you were to ask ten CEO’s of leading technology companies, you’d probably get ten different answers.

However, there’s one timeframe most CEO’s quote…

2023 is the date CEO’s are optimistic about 

Intel’s CEO, Pat Gelsinger, has given us a realistic timeframe for the chip shortage to end – he says the chip shortage won’t end until 2023.

“We’re in the worst of it now; every quarter next year, we’ll get incrementally better, but we’re not going to have supply-demand balance until 2023,” Gelsinger told CNBC.

Gelsinger’s thoughts echo those of Glenn O’Donnell, a vice president research director at advisory firm Forrester, who says the chip shortage will last until 2022.

“Because demand will remain high and supply will remain constrained, we expect this shortage to last through 2022 and into 2023,” O’Donnell wrote in a blog in March.

Daimler chairman Ola Källenius also believes the chip shortage could last until 2023.

“Several chip suppliers have been referring to structural problems with demand,” Källenius told reporters during a roundtable event ahead of the Munich IAA car show. “This could influence 2022 and (the situation) may be more relaxed in 2023.”

What will chip demand look like in 2022-2023?

In July, the CEO of STMicroelectronics provided insight into what we can expect in 2022-2023, “Things will improve in 2022 gradually, but we will return to a normal situation … not before the first half of 2023,” he said in an interview.

The global silicon chip shortage has led to car plants shutting down, paused manufacturing lines and delayed product launches. It isn’t a short-term problem, and no one knows for sure when supply will start catching up with demand.

All industries and companies that use chips have been affected by the shortage – even Samsung, the world’s biggest computer-chip manufacturer, has been affected by it, delaying the launch of several Galaxy and Note smartphones.

Most experts agree that 2022 will echo 2021, with moderate-extreme shortages of integrated circuits and chips, as well as certain active and passive components. Prices are also expected to rise in line with raw material costs.

2023 may be the year that supply starts meeting demand, but it will require the mass opening of foundries and factories. Investment in new plants and manufacturing lines is ongoing, with new fabs set to open in the next two years.

In 2023, we hope to see regular chip inventory levels and average delays of about three months to replenish components. At the moment, some components have delays over a year, and inventory supplies for chips are running low.

Keeping supply chains moving

The best way to keep supply chains moving is to partner with an electronic components distributor like us. We can source chips from around the world, tapping into stockpiles and inventory that isn’t available to the average company.

If you are experiencing an electronic component shortage, we can help. Email us if you have any questions or call us on 1-973-579-8100 to chat with our team.

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component shortage

Chip Shortage causing car manufacturers to cut production levels

Chip Shortage

A week doesn’t pass without an announcement from a car manufacturer that they are cutting production levels. Idling shifts and even entire factories has become normal for an industry that thrives on maximising output. 

Volkswagen, Ford, General Motors, Hyundai and Toyota have cut production levels to prioritise their most lucrative models. In some cases, plants have shut down for weeks at a time to allow supply chains to catch up to one another.

To understand how big this is, a 1-2 week plant shutdown will cost a car manufacturer millions of pounds at the very least. No manufacturer would willingly do this, but the global chip shortage is forcing them to.

Chip shortage in numbers

Just 53,438 cars rolled off assembly lines in the UK in July 2021, making it the lowest output in the month of July since 1956.

In June 2021, data from the Society of Motor Manufacturers and Traders (SMMT) showed that car production was down 52.6% on the same month in 2019. Telling us that we’re a long way off reaching pre-pandemic levels.

According to research firm AlixPartners. The chip shortage will collectively cost the auto industry $110 billion in revenue in 2021. A revised figure and an increase of 81.5% over the same firm’s figures in late January.

More telling figures come from Fitch Ratings, who estimate the chip shortage will cost automakers 5% of production. North America and Europe will be the hardest hit, with Asia and China coming in third and fourth respectively.

What’s happening with chips!?

The automotive sector has been hit harder than any other by the chip shortage due to cancelling orders for chips at the start of the pandemic.

Anticipating a slowdown that would last months, most car markers cancelled orders for chips. Semiconductor manufacturers filled order books with orders from companies making smartphones, laptops and other devices.

When the automotive sector bounced back sooner than expected, semiconductor manufacturers had hardly any capacity to meet demand. This has led to the situation today, where car makers can’t secure the inventory they need. 

Now, there are not enough chips, foundries are running at 99% capacity and new foundries take years and billions in investment to set up.

Changing the production line for a chip costs tens of millions and takes months, labour shortages are causing a manpower crisis, and the pandemic is causing short-term factory shutdowns at foundries and fabless plants.

When will the global chip shortage end?

It will take at least five years for the global chip shortage to subside. Assuming investment in new foundries begins in 2021/22. New factories are the only the way out of the shortage because demand for chips is only going to increase.

Opinions on when the shortage will end vary from early 2023 to 2025. The last 18 months has tested supply chains and wreaked havoc on production, but the automotive industry is experienced enough to cope with future problems.

When you need to source hard to find electronic components quickly because of allocation, long lead times, obsolescence or quality issues, contact Lantek Corporation for a fast response to your enquiries and reliable on-time delivery. Our Team are here to help.