Semiconductor crisis: is it over?
The semiconductor crisis which has caused concern over the last two or three years, now seems to be over. At least, that is what data from the commercial areas most damaged by the shortage suggests, especially in markets connected with the IT supply chain, consumer goods and the automotive sector.
Up until a few months ago, stores of microchips and other electronic components were running low, but it seems that manufacturers are now finally able to meet demand. According to some rather optimistic estimates, the crisis should be completely resolved by the end of 2023 or by early 2024 at the latest.
The main causes of the semiconductor crisis
In contrast to popular opinion, the semiconductor crisis was not generated by the Covid-19 pandemic, or at least not by that alone. If we take a closer look at the history of digital innovation, we can clearly see that over time, the electronic component supply has experienced alternating cycles of abundance followed by scarcity.
In order to better understand how fluctuations in cost and availability form a normal part of the evolution of the electronics market, we might consider the example of the RAM and CPU shortage which afflicted the sector in the mid-nineties. At that time there was a boom in computers with a graphic interface, which led to a sudden increase in prices, followed by a significant decrease not long after.
We should also bear in mind the graphic processor unit (GPU) shortage that almost brought the consumer market to its knees just a few years ago. When the cryptocurrency mining craze exploded, these devices had become almost impossible to source and the few available models were sold at vastly inflated prices compared to their real value.
One factor which has definitely affected the scarcity however is the excessive concentration of chip manufacturing in certain localised areas. In some cases, a minor incident affecting a specific factory is sufficient to cause a drastic reduction in global microchip supply.
This happens because the few factories meeting global requirements are mostly located in Asia and there are no valid alternatives to turn to in case of emergency. The lengthy periods of production stoppage imposed by lockdowns only added to the typically cyclical nature of the electronics sector, resulting in a chain reaction which led to the current situation.
The re-evaluation of microchips by governments
The vulnerabilities of the supply chain highlighted by the semiconductor crisis have forced governments around the world to re-evaluate their strategic role. While electronic components were previously taken for granted or even ignored, they have now earned recognition as a crucial resource which must be protected.
The current instability of the geopolitical situation has spurred many nations to take protective measures, with the USA introducing the Chips and Science Act last August 20th. This legislation is aimed at supporting semiconductor manufacturers across the United States wishing to increase their production capacity, with the allocation of state funding for over 53 billion dollars.
A similar strategy has been adopted in Europe, with the legislation known as the European Chips Act. This support scheme, introduced last February 15th, aims to increase European production of microchips from 10% to 20% by 2030, with the allocation of around 43 billion euros in subsidies. This is in addition to another research and development programme launched some time ago, known as the Impresa Comune Chip (Chip Joint Venture).
The aim of these and other funding schemes in the sector is mainly to reduce dependency on foreign markets and avoid the repetition of another crisis similar to the one which the sector is still struggling to recover from.
Translated by Joanne Beckwith
