Three Reasons behind the Global Semiconductor Crisis

Before the pandemic, many chipmakers projected this supercycle to grow sales dramatically, but the crisis has accelerated many of those tendencies while temporarily halting shipments.

Fremont, CA: Many industries are suffering as a result of the worldwide semiconductor shortage. PC, mobile device, gaming console, automobile, networking device, and industrial machine manufacturers are all scurrying to obtain enough chips to utilize in their goods, despite rising demand for the same items. Investors who want to manage this circumstance and prevent a risky stock trade should be aware of the scenario. Here are three reasons for the decline of global semiconductor:

Secular tailwinds

Over the last few decades, global chip demand has tended to be cyclical. The secular expansion of new technologies, on the other hand, is fueling a super cycle of chip improvements that might continue considerably longer than a typical cycle.

Smartphones and automobiles, for instance, require an increasing number of chips. Many chipmakers projected this supercycle to grow sales dramatically before the pandemic, but the crisis has accelerated many of those tendencies while temporarily halting shipments. The global chip deficit is anticipated to worsen as a result of this strain.

Ongoing tech war

Another serious problem is the US-China tech battle, which accelerated under President Donald Trump and continues under Vice President Joe Biden. Due to national security concerns, the US has already imposed restrictions on several large Chinese businesses, including SMIC and Huawei.

These sanctions are exacerbating China's advanced chip shortage, but they are also encouraging the Chinese government to invest heavily in domestic chipmakers to reduce its overall reliance on foreign technology, potentially leading to a messy decoupling of the US and Chinese markets.

COVID-19 pandemic

In response to remote work, online learning, and other stay-at-home habits, the pandemic momentarily impacted semiconductor exports as global demand for new mobile devices, PCs, and data center upgrades skyrocketed.

Most chipmakers were able to recover from their first outages, and TSMC remained operational since its most advanced operations in Taiwan were unaffected. In response to the increased demand, memory chipmakers immediately increased production.

However, the chip industry was unable to meet the market's need for new chips. Intel recently warned that the worldwide chip scarcity might endure for another two years and that resolving it would necessitate enormous investments.

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