What is causing the chip shortage?

The chip, the size of a fingernail, is the "brain" of an intelligent product, packed with countless transistors. As the core component of the vast majority of electronic equipment, it plays an important role in all fields. However, the current status of chips is in shortage. The reasons for this are analyzed by xiaobian today:

1. Recovery demand in the auto and consumer electronics sectors exceeded expectations

At one point, the COVID-19 pandemic led to a drop in car sales, with auto executives cancelling orders for car chips. However, carmakers and chipmakers were caught off guard by an unexpected rebound in sales.

Meanwhile, shipments of electronic products such as 5G phones, desktop computers, tablets and laptops have increased significantly since 2020. According to data from IDC and Digitimes, in 2020, global 5G smartphone shipments reached 19%, with a significant year-on-year increase, PC shipments reached 303 million, with a year-on-year increase of 13.47%, and global tablet PC shipments reached 164 million, with a year-on-year increase of 13.88%. Global laptop shipments reached 201 million units, up 26.89 percent year on year, with chip demand rising sharply compared with previous years.

2. Chip manufacturing becomes increasingly complex and costs rise

The chip production cycle is long, requiring thousands of processes, with an average cycle of 26 weeks. In recent years, the chip industry has become widely known as Moore's Second Law, which states that chip factory costs double every four years. As a result, there are fewer fabs that can make high-end chips.

What is causing the chip shortage?3. Chip manufacturing capacity is insufficient

Manufacturers had been relatively conservative in adding capacity due to the COVID-19 pandemic. Recently, the advanced process and mature process capacity of the mainstream foundries in the industry have been fully produced, but they still cannot meet the market demand.

To increase production capacity, many companies say they will increase investment, open new factories and add new production lines. But it still cannot be converted into productive capacity in a short time. Currently, the lead time for equipment is up to a year, and it takes time from production to actual production.

4. The industry is affected by supply chain disruptions

Semiconductor industry chain is a highly globalized industry chain, which must be completed through cooperation. Once the supply chain is damaged, the entire industry is affected.

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