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Global semiconductor shortage to persist until 2022

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The worldwide semiconductor shortage will persist through 2021, and is expected to recover to normal levels by the second quarter of 2022, according to Gartner.

The research firm notes the ramifications of the COVID-19 crisis resulted in chip shortages, starting primarily with devices, such as power management, display devices and microcontrollers, fabricated on legacy nodes at 8-inch foundry fabs, which have a global limited supply.

The shortage has now extended to other devices, and there are capacity constraints and shortages of substrates, wire bonding, passives, materials and testing – all of which are parts of the supply chain beyond chip fabs, notes the research firm.

These are highly commoditised industries with minimal flexibility/capacity to invest aggressively at short notice.

“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 device prices,” says Kanishka Chauhan, principal research analyst at Gartner.

The global supply chain constraints have also rocked the South African tech distribution channel, with some distributors labelling the predicament as the “worst challenge the industry has experienced in three decades”.

Gartner notes that 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 the fourth quarter of 2022.

The index bar for 2Q21 to 4Q22 is a directional estimate. Source: Gartner (May 2021)
The index bar for 2Q21 to 4Q22 is a directional estimate. Source: Gartner (May 2021)

Gartner analysts recommend that OEMs dependent directly or indirectly on semiconductors take four key actions to mitigate risk and revenue loss during the global chip shortage:

Extend supply chain visibility: The chip shortage makes it essential for supply chain leaders to extend the supply chain visibility beyond the supplier to the silicon level, which will be critical in projecting supply constraints and bottlenecks and eventually, projecting when the crisis situation will improve.

Guarantee supply with companion model and/or pre-investments: OEMs with smaller and critical component requirements must look to partner with similar entities and approach chip foundries and/or outsourced assembly and test players as a combined entity to gain some leverage.

Track leading indicators: While no relevant parameter by itself will project how the shortage situation will evolve, a combination of relevant parameters can help guide organisations in the right direction.

Diversify supplier base: Qualifying a different source of chips and/or OSAT partner will require additional work and investment, but it would go a long way in reducing risk. Additionally, creating strategic and tight relationships with distributors, resellers and traders can help with finding the small volume for urgent components.

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