Will Semiconductor Chip Shortage End in 2023

2023 could be the light at the end of the tunnel for the chip shortage that caused a turmoil in the supply chain over the past 3 years — with the world grappling with global shortage since the COVID-19 pandemic hit in 2020.

Chip Shortage Easing Up but Automobile Shortage Still Prevalent 

As the global economy has cooled down, demand in consumer markets has softened significantly — allowing suppliers to fulfill orders from other markets and begin clearing component backlogs. After more than two years of struggling to find critical semiconductors, there are signs the chip shortage is beginning to ease and that is good news for automotive manufacturers and consumers alike. 

That translates into fewer production halts, according to Sam Fiorani [1], chief analyst with AutoForecast Solutions. However, the availability of chips has not been uniformly enhanced, especially in the automotive industry. According to Fiorani, “Over the past two years, manufacturers have found new ways to secure chips. Unfortunately, some manufacturers haven’t done as well as others.” Major carmakers, in particular, have been significantly impacted by the chip shortage, resulting in production cuts and reduced revenue. Ford Motor Company recently announced a net loss of $2 billion [2], citing cost issues and continuing chip shortages as contributing factors. North American automakers eliminated approximately 344,000 vehicles from their 2023 worldwide production plans in March because of further escalation in the ongoing global microchip shortage, according to AutoForecast Solutions (AFS). [3]

When Will the Chip Shortage End? 

Industry executives and experts have mixed opinions about when the chip shortage will end. 

According to the 18th annual global semiconductor survey conducted by multinational accounting firm KPMG and the Global Semiconductor Alliance (GSA) in Q4 [4] of 2022, a significant number of key players in the semiconductor industry exhibit optimism about the direction of the chip shortage in 2023. 

Out of the 152 semiconductor executives who participated in the survey, over half of them represented companies with a yearly revenue of more than $1 billion. Based on the survey findings, the Semiconductor Industry Confidence Index for 2022 currently stands at 74 out of 100, indicating a majority of respondents possess a positive outlook for 2023. The survey also revealed that 56% of executives anticipate the chip shortage to last into 2023.

Multiple industry experts have shared similar opinions. Patrick P. Gelsinger, the CEO of Intel, expressed to CNBC [5] that he does not anticipate a resolution to the semiconductor shortage in 2023. Dr. Barbara Hoopes [6], an associate professor of Business Information Technology at Virginia Tech University and an expert in supply chain management, suggests that several challenges in resolving the chip shortage have yet to resolved.

Grey Market Components: A Growing Issue with Chip Shortage

Another issue that has emerged with the chip shortage is the growing prevalence of grey market components. Grey market products are items that are sold through channels not approved by the manufacturer. Although these products are legitimate, they are often sold at discounted prices on unauthorised websites, and are typically not associated with any local offices. The grey market for electronic components is currently estimated to be around $60 billion annually [7], accounting for 6 to 8 percent of the electronic components market. This market includes branded products that are diverted from authorised distributors, resulting in potential issues with warranties and technical support. As such, it is critical for end-users to work with trustworthy distributors with reliable supplier networks to ensure that only authentic and brand-new components enter their production lines.

Choosing a Reliable Partner during Unreliable Times

In a time of uncertainty, independent distributors play a crucial role in ensuring the supply of electronic components. Independent distributors can help alleviate the shortage by providing access to a range of electronic components and offering alternative solutions. With their flexibility and agility, independent distributors can help bridge the gap between manufacturers and end-users in times of supply chain disruptions and uncertainties. Ample Solutions is one of the leading electronic components in Asia with an extensive global network and a stringent quality assurance process, delivering quality components without compromising on speed and service excellence. 

In conclusion, the chip shortage is a complex issue that has significant implications for various industries. While some companies have been able to weather the storm and even thrive, others have faced significant losses. The outlook for 2023 is mixed, with some industry executives feeling positive about the direction of the chip shortage, while others anticipate that the shortage will continue through 2023 or later. Nonetheless, independent distributors can play a critical role in ensuring the availability of electronic components and providing alternative solutions to end-users.

References:

[1] Eisenstein, P.A. (2023) Chip Shortage Eases But Problems Remain. The Detroit Bureau. Available at: https://www.thedetroitbureau.com/2023/02/chip-shortage-eases-but-problems-remain/

[2] Rosevear, J. (2023) Ford’s EV business lost $2 billion in 2022, offset by big profits in fleet and legacy units. Available at: https://www.cnbc.com/2023/03/23/ford-2022-unit-financials.html

[3] Moore, C. (2023) PRODUCTION CUTS INCREASE AS CHIP SHORTAGE AND SUPPLY CHAIN ISSUES PERSIST. Available at: https://www.alvarezandmarsal.com/insights/production-cuts-increase-chip-shortage-and-supply-chain-issues-persist

[4] Clark, L., Jones, S. and Gibson, M. (2022) Global Semiconductor Industry Outlook 2022. KPMG. Available at: https://assets.kpmg.com/content/dam/kpmg/co/sac/pdf/2022/04/global-semiconductor-industry-outlook-2022.pdf

[5] Stankiewicz, K. (2022) Intel CEO now expects chip shortage to last into 2024. Available at: https://www.cnbc.com/2022/04/29/semiconductor-shortage-intel-ceo-says-chip-crunch-to-last-into-2024.html

[6] Straughan, D. (2023) Is There an End in Sight for the Vehicle Chip Shortage? Available at: https://www.automoblog.net/vehicle-chip-shortage/

[7] State, S. (2023) WHAT ARE GRAY MARKET ELECTRONIC COMPONENTS? Available at: https://www.solidstateinc.com/blog/what-are-gray-market-electronic-components/