Essential chip industry not yet ready to absorb all shortages by 2022, according to Deloitte

According to Deloitte, there are still many deficiencies in the way the semiconductor industry is organized, even though the industry is essential to our modern world. Deloitte predicts in its semiconductor industry report how the industry will fare this year.

A new report from Deloitte shines a light on the trajectory of the semiconductor industry in 2022. Deloitte does not miss the opportunity to get right to the point: The semiconductor industry is as essential to our modern world as food, energy, logistics and other fundamentals.

Problematic situation

In turn, the pandemic showed that the industry is not set up like an essential industry. Chip factories did not run at full capacity for a long time due to lockdowns in countries where the corona virus was circulating and the chip factory was located. At the same time, the demand for chips did increase for manufacturers of laptops, monitors and game consoles, for example. We explained all further details of the origin of the chip shortage earlier.

On the consumer side, the shortages cause delays and limited inventories of coveted items. On the manufacturing side, the shortages are causing far less revenue, Deloitte writes: “In multiple end markets, the shortage of a single critical chip, which often costs less than one dollar, can stop sales of a device worth tens of thousands of dollars.” According to the figures, the industry would have lost $500 billion over the past two years.

Dislocation

The market is firmly disrupted for a long time, and Deloitte’s forecasts are far from hopeful. For example, the four forecasts start with the expectation that the shortage will continue. Though not to throw in the towel immediately, as Deloitte says the shortages will be less severe than in 2021.

“We expect the severity and duration of the chip shortage, and its economic impact, to be less pronounced because of increased capacity, but also because of improvements in the supply chain that chipmakers, distributors and end customers make.”

Labor shortage

Then again, what is killing the semiconductor industry is the shortage of workers. Moreover, the chip industry does not hire just anyone; some level of understanding is required. Moreover, the requirements in the industry are changing, so software skills are gaining importance.

To the second prediction, the third will not do much good: chip production will take place in new areas. Taiwan and South Korea will lose some of their dominance in the chip world as chip factories are also being built closer to customers. Intel, for example, is already planning to expand chip capacities in Germany, France and Italy. Getting everything up and running already did not happen overnight, and these new chip factories will require workers, who again must first receive the necessary training.

Deloitte does believe that new site locations ultimately benefit the chip industry, as new jobs are created, there is less chance of all factories going out of business at once and concerns about shortages due to trade sanctions are eliminated.

Digital transformation is accelerating

Deloitte concludes its predictions on a positive note: chipmakers will accelerate digital transformation. “If manufacturers want to strengthen their competitive advantage, they will be forced to be the first to launch new products, scale up production quickly and focus on innovation and efficiency.”

So there is still a lot of work to be done in the chip industry to keep things running smoothly. The arrival of a chip factory in Europe, at least according to the European Union, should already leave some pressure off as far as the European market is concerned.