Chip shortage may continue till early 2023, predicts Deloitte

The ongoing shortage of semiconductors could last till early 2023, global professional services firm Deloitte has predicted. The company’s Technology, Media and Telecommunications (TMT) 2022 predictions noted that chip demand for “both devices and data centres” increased in 2020 and 2021 after the pandemic increased the demand for PCs by over 50% year-over-year. It added that data centre chip purchases increased by 30%, and though both areas have “slowed a little” towards the end of 2021, demand is expected to stay above long-term expectations in 2022.

Further, it noted that the use of chips in the automotive industry is also “growing fast” and “will probably keep growing for the foreseeable future”. “The average car in 2010 contained US$300 worth of microchips. As cars become increasingly digital, that figure will likely rise to more than US$500 in 2022, totalling more than US$60 billion for the year,” the report said. Chips for healthcare devices and those specialized in artificial intelligence (AI) are also predicted to grow through next year.

On the other hand, Deloitte also noted that while the shortage will continue through 2022 it will be “less severe” than it was during the fall of 2020 and “most of 2021”. It also said that the shortage won’t affect all chips, with the most advanced process nodes — 3,5 and 7 nanometre — being in short supply well into the next year since they are the “hardest to make”, have lower yields and there are fewer fabs capable of making them.

Lastly, Deloitte noted that a period of short supply in the chip industry is usually followed by a “period of oversupply”, which leads to falling prices, revenues and profits. “The cycles of the past 25 years have been like a roller coaster that no human would voluntarily ride. Between 1996 to 2021, year-over-year chip revenue soared by more than 20% no fewer than seven times. It also plunged by almost 20% year-over-year five times over the same period. The drop was especially stomach-churning in 2001, which saw revenues fall by nearly 50% from a year earlier,” the report said.