Semiconductor crisis to last till early 2023, Deloitte reports

Consulting firm, Deloitte, released on Wednesday its latest report addressing the ongoing global semiconductor crisis, with predictions of the crunch to last till early 2023.

Deloitte’s research stated that even though the chip shortage crisis’ intensity will be far less severe than it is now, chances are customers will wait around 10 to 20 weeks for a variety of chips.

In its Technology, Media & Telecommunications (TMT) 2022 Predictions report, the firm highlighted that the industry itself is welcoming massive fresh investments in response to the heightened demand following the COVID-19 pandemic.

In parallel, the report further stated that global venture capital (VC) firms – a form of private equity investments for start-up companies – will pump heavy investments into the industry, exceeding $6 billion in semiconductor manufacturers in the next year.

This will mark a heavier VC investment rate compared to each year from 2000 to 2016.

“The lengthiness of the chip shortage boils down to one overarching factor: a significant surge in demand, driven by digital transformation and accelerated by the pandemic. And consumer devices aren’t the only thing, or even the main thing, driving this demand,” the report stated.

“Chipmakers are scrambling to catch up. The world’s three largest semiconductor manufacturers announced cumulative annual capital expenditures of more than US$60 billion for 2021 and will likely spend even more in 2022,” it elaborated.

Deloitte further explained that the continuing crisis will not reach the whole industry, as some chips will be affected more than others. For instance, semiconductors created with the most sophisticated process nodes, such as 3,5, and 7-nanometer, will continue to be affected by the global shortage due to increased demand, and they are arduous to manufacture. 

Despite the industry’s rising challenges, chip sales will maintain their augmentation. The Semiconductor Industry Association’s data revealed this year alone, sales rose by 20 percent and are predicted to sustain their growth by nine percent in 2022 reaching a whopping $574 billion.

Due to the pandemic’s global overtake, chip demand for devices and data centers skyrocketed in 2020 and 2021, with high demand anticipated to sustain its augmented position in the upcoming future.

According to Deloitte, the soaring demand for new chips is mostly driven by the market’s need for new designs and architectures, expanded governmental investments, boosted fabrication capacity, and heightened technology valuations.

Major VC investments will be directed at fabless firms with the capacity to handle rising demand on a global scale. In 2021 and 2022, almost 29 new fabricators have, or will initiate manufacturing plans, from China and Taiwan, the Americas, Europe, the Middle East and Africa, and Japan and Korea. With this global manufacturing capacity, the industry is expected to grow by 36 percent from 2020 to 2022.