Semiconductor Shortage May Be Here to Stay

Intel CEO Pat Gelsinger has cautioned that the semiconductor shortage will last until 2024, a scary reality for manufacturers, businesses and consumers alike.

Semiconductor chips, or microchips, are essential for many digital consumer products. Anything that processes information uses these chips and with the exponential growth of technology, there has been a massive increase in demand. 

“The rapid acceleration of the internet of things (IoT) to date and to come forever moves semiconductors ahead of oil as the world’s key commodity input for growth,” according to economic investment firm TS Lombard. 

Although the U.S. leads the world in developing and selling semiconductors, manufacturing has shifted to Asia. Taiwan and Korea account for 83% of global processor chip production and 70% of memory chip output, according to the Semiconductor Industry Association. 

In many of these Asian economies, harsh lockdown measures were put in place in response to COVID-19, causing bottlenecks in the supply chain. As a result, certain manufacturing tools are unavailable, limiting chipmaking capacity. 

The shortage was originally projected to last until 2023, but Gelsinger now predicts that it will roll into 2024. 

“The shortages have now hit equipment and some of those factory ramps will be more challenged,” Gelsinger explained.

Semiconductor Shortage Impacts More Than Just Tech

Semiconductors are especially important in the automobile industry. Microchips are an essential component of the modern-day car, and they enable many innovations within the industry. 

As a result of the bottleneck, some automotive companies have limited or paused production. Tesla, for example, has halted production in 2022, citing supply chain issues as the limiting factor. 

In response to the shortage, companies are urgently building new manufacturing facilities. Samsung is building a $17 billion semiconductor factory in Texas and Intel is spending $20 billion on two new factories in Arizona. 

The shortage has also prompted legislative action in Florida and Texas that calls for increased funding for microchip and semiconductor factories. 

“The more we have this capacity within our own country the more opportunities there’s going to be for people and the more secure both our economic supply chains will be and our national security,” Florida governor Ron DeSantis said of the measures he’s taking to combat the shortage. 

No Definitive End in Sight

Although industry experts predicted the shortage will end in 2024, there is no definitive end in sight, prompting manufacturers and businesses to strategize accordingly. 

Some companies, like Tesla, have resorted to alternative chips and software-based solutions to endure the shortage. Companies like Latent AI offer software packages that optimize alternative hardware, which could prove to be a technological lifesaver for the many companies affected by the shortage. 

Although the current shortage is a byproduct of the pandemic, some of the alternative solutions that have arisen may be revolutionary in filling the ever-growing demand for semiconductors.