Even though the demand for semiconductors is increasing across different industries, the businesses depending on it are hanging around. Previously, it was expected that the semiconductor shortage would be taken care of. However, the havoc that the shortage is creating is now evident and further, the impact of the shortage has extended to 2022. Things are not as bleak as it seems because there is still a ray of hope. According to various sources, the impact of the shortage will be less severe than last year.
Last year, the lead time for laying hands on semiconductors was about 20-52 weeks. This long wait resulted in a manufacturing delay and further led to business shutdowns. In 2022, the waiting duration is 10-20 weeks long. If the trend continues, the shortage will be successfully managed by early 2023.
Why Is There a Semiconductor Shortage?
There has been a huge surge in demand for semiconductors in the past few years because of the digital transformation happening worldwide. The pandemic further enhanced the digital transformation. As a result, the demand for semiconductors is extremely high. Another factor contributing to the huge demand for semiconductors is that mechanical products have become or are on their way to becoming digital. Even basic tasks like checking Lottery Sambad can now be done digitally. Wherever digitisation is happening, there is a demand for semiconductors.
The heavy usage of semiconductors in automotive, health care and electronics devices is creating a problem. However, it is important to solve this problem to ensure a brighter future. The industries most dependent on semiconductors are witnessing the most impact of the semiconductor shortage.
Also, during the pandemic, supply chain disruption was a common issue faced by many industries, including the semiconductor industry too. The supply chain disruption also impacted the economy of different countries negatively, and many countries resorted to tactics like conducting Dhankesari to maintain the livelihood of their citizens. With the disruption, maintaining a balance between demand-supply becomes extremely tough.
Impact On Automotive Industry
Semiconductor shortages have hit the automotive industry the highest. Many car components require semiconductors, including something as basic as a digital speedometer. During the pandemic, the sales of cars went down. As a result, the automotive industries reduced their ICs to avoid any loss. However, soon after the demand started picking up, the chipmakers could not meet this massive demand.
As a result, the automotive industry is cutting down on vehicle production. Thus, it is not only facing loss in terms of production units but also suffering revenue loss. Also, many more automobile businesses are waiting to start working on semi-finished cars once the shortage of semiconductors is taken care of.
Impact On Electronic Devices
The demand for electronic devices like tablets, computers and smartphones saw a demand during the pandemic as the students shifted to online learning and professionals shifted to remote work. In short, there was a massive shift of almost all the demographics towards online activities. This shot up the demand for the devices. Further, electronic devices are extensively dependent on ICs, and the supply is tight.
Impact On Gaming Consoles
Again during the pandemic, the lockdown was forced at different levels worldwide. To socialise, many people shifted to gaming. Consequently, there was an increase of 155% in sales of gaming consoles. Subsequently, gaming consoles like Xbox Series X and PlayStation 5 ran in short supply. The semiconductor is an essential element of gaming consoles. With the low supply of semiconductors, there is also a shortage of gaming consoles in the market at present.
Impact On Consumer Goods
Consumer goods like refrigerators, television and washing machines depend on chips. According to a recent statement by Samsung, the impact of the semiconductor shortage is now felt in the production of appliances like television. Consequently, the customers will have to bear a price increase in different appliances shortly.
Even though a chip hardly costs a few dollars, the impact of its shortage is so high that different industries across the globe are facing losses of billions of dollars. The shortage of semiconductors started during the pandemic, and in the later months, the shortage only intensified. On the other, the demand for products that use semiconductors increased with each passing month. According to an analysis by Goldman Sachs, a total of 169 industries are facing the wrath of the semiconductor shortage. Not only the developing countries are facing its impact but also the developed nations too.