Chip shortage to last well into 2022 Electronics360 Latest Industry News | by Deanna Parenti August 17,2021


Author: Peter Brown

06 August 2021


The situation in the semiconductor supply chain is not improving quickly and now experts believe the chip shortage will last deep into 2022.

The constrained situation is likely to last until at least into the mid-point of 2022 and that is without surprises in the market such as the deep winter storm that impacted much of the Southwest last year. If COVID-19 continues to persist globally, this could be another wrinkle in extending the shortage further.


Initially, when the supply chain issues started, the automotive market was looking at constraints lasting the entirety of 2021. The automotive market was hit hard by the supply chain issues caused by COVID-19 and automotive OEMs were slower to secure capacity after the initial slowdown.

When suppliers saw demand return in the fourth quarter, which is generally not a huge production period for the automotive market, semiconductor manufacturers were already busy producing consumer electronics and other parts and no capacity was available.

Eight months later, the front-end has improved since the fire that destroyed a portion of the 300 mm line at Renesas’ Naka and the ice storm that crippled the supply chain in Texas last year. However, the back-end is starting to bottleneck, according to Phil Amsrud, senior principal analyst for automotive at IHS Markit.

“Therefore, just adding fab capacity won’t fix everything on its own,” Amsrud said. “The back-end is limited because of lead frames, substrates and resins and a lot of the back-end facilities are in countries with low COVID vaccination rates. As the Delta variant spreads, it is impacting these facilities. For example, Malaysia shut down because of COVID.”

With the Delta strain of COVID-19 running through many countries, it is still unclear how far it could impact the supply chain and if other areas will be forced to halt or suspend operations. If this happens, it could potentially push the chip shortage further into 2022.


One interesting trend is that automotive suppliers are accepting the new conditions of the chip shortage including longer firm orders and price increases.

“The suppliers who are complying with these conditions have a better chance of getting what they want than those who don’t,” Amsrud said. “Also paying expediting fees are another option to move to the head of the line, and all things being equal automotive may start out closer to the head of the line, but it’s not the case that automotive gets everything that they want first and everyone else is fighting over what’s left.”


One other problem that is emerging is the lead times for semiconductor equipment. Whether it is the back-end or front-end, semiconductor equipment is critical to expanding capacity.

Equipment lead times have increased because companies cannot get the semiconductors necessary to build them, leading to a catch-22 situation.

“The biggest challenge continues to be knowing the real demand,” Amsrud said. “We call this the toilet paper effect because when COVID first hit the demand for toilet paper skyrocketed. A similar thing happened with semiconductor demand, so the supply chain continues to struggle to know how much to make of what specific devices. Even after additional capacity is online, knowing what to make is still key to helping everyone inside and outside of automotive get enough of what they need.


Digi-Key, a leading electronics distributor, also sees the chip supply chain remaining tight through mid-2022.

“There are some areas of capacity coming online but much of that is not until the end of this year or next year early-mid 2022,” said David Stein, VP of global supplier management at Digi-Key. “There are many different end markets that are causing this lead time for shortage of products. Today, as many as eight different verticals/end market segments are driving demand for the consumption of product.”

The cycles of the semiconductor industry have changed in this regard where one or two end markets were driving the electronics market, Stein said. Now, when a market slows, there are others such as medical, automotive, 5G, industrial automation, internet of things, consumer or computer and more markets available to pick up the slack.

But this also means that demand for electronics is higher than ever before, meaning more capacity is needed from more companies. Until more capacity is available, the shortage will persist.

The demand for semiconductors is not expected to slow down either as growth of about 5% is expected over the next decade as these markets continue to want more chips.

Supplyframe, an e-commerce vendor that runs the electronic component sourcing site Findchips, sees the constraints in the supply chain pushing into the first quarter of 2023.

“One customer described the current environment as a ‘game of whack-a-mole,’ and we can see the ripple effect moving inconsistently over time and across adjacent sub-commodities,” said Richard Barnett, CMO of Supplyframe. “Component suppliers and distributors know they have to reduce inefficiencies in their quoting process and work more directly with end customers to meet their needs.”

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Source: Chip shortage to last well into 2022 | Electronics360

About Author

Deanna Parenti

Deanna is from Frederick, MD. She attended Juniata College in Huntingdon, PA, to earn her Bachelor of Arts degree in English Literature and Professional Writing and minor in Fine Arts. While at Juniata she worked as a Juniata Assistant Professional Writer for the Provost.

This experience then led her to work as a journalist for Arts Help and a volunteer grant writer for Team Hope after graduating. In her free time, Deanna enjoys volunteering, making pottery, and getting outside.


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