Global chip shortage to persist until second quarter of 2022

The global semiconductor shortage will not make a recovery until at least the second quarter of next year, according to Gartner.

The analyst firm says the shortage will persist all through out the remainder of 2021.

The chip shortage started primarily with devices, such as power management, display devices and microcontrollers, fabricated on legacy nodes at 8-inch foundry fabs, which have a limited supply.

The shortage has now extended to other devices, and there are capacity constraints and shortages for substrates, wire bonding, passives, materials, and testing, all of which are parts of the supply chain beyond chip fabs. These are highly commoditised industries with minimal flexibility/capacity to invest aggressively on a 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 prices," says Kanishka Chauhan, principal research analyst at Gartner.

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 fourth quarter of 2022.

"Since the current chip shortage is a dynamic situation, it is essential to understand how it changes on a continuous basis," says Gaurav Gupta, research vice president at Gartner.

"Tracking leading indicators, such as capital investments, inventory index and semiconductor industry revenue growth projections as an early indicator of inventory situations, can help organisations stay updated on the issue and see how the overall industry is growing," he explains.

Gartner analysts recommend that original equipment manufacturers (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 OSAT players as a combined entity to gain some leverage. Additionally, if scale allows, pre-investing in a commoditised part of the chip supply chain and/or foundries, could guarantee the company a long-term supply.
• 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.