As 2023 nears its end, the global chip shortage, which originated in early 2020 due to the COVID-19 pandemic, continues to cast a long shadow over various industries, and the timeline for its resolution remains uncertain.
The persistent shortage can be attributed to the indispensable role of semiconductors in almost every digital electronic device, from smartphones and computers to everyday appliances. Yet, semiconductor production is a time-consuming process, with some estimates suggesting it takes up to six months to manufacture chips.
Despite the ongoing shortage, the semiconductor industry has continued to grow steadily, with the automotive, data storage, wireless, and other sectors leading the market. McKinsey estimated that semiconductor sales would grow by over 20% to around $600 billion in 2021. The firm predicted that the industry could become a $1 trillion market by the end of the decade, assuming average price increases of approximately 2% per year and a return to balanced supply and demand.
The global semiconductor market also witnessed significant growth, rising by 6.8% in 2020 compared to 2019. Projections indicate further expansion, with estimates of the market reaching $1,380.79 billion by 2029, at a compound annual growth rate of 12.2% during the forecast period from 2022 to 2029.
While the chip supply improved in 2022, challenges persisted. Automakers increasingly demanded chips with higher computing power, particularly as the industry shifted towards electric and autonomous vehicles. Additionally, global tensions, particularly between the U.S. and China, have led to government controls on chip sales, further affecting the supply chain.
The semiconductor industry is grappling with the unpredictability of demand, especially with the rise of AI, IoT, and 5G and 6G technologies. The exact nature and magnitude of increased demand remain uncertain.
Efforts are being made to address the chip shortage, including the passage of the CHIPS Act in the U.S. in 2022. This act aims to bolster semiconductor research investments and manufacturing incentives, with an expenditure of $280 billion to secure the nation’s economy, national security, and supply chains.
Global policies and initiatives aim to promote semiconductor research and production. The European Union approved its Chips Act with the goal of producing 20% of the world’s semiconductors by 2030. Chip manufacturers, including Intel and STMicroelectronics, have announced new plant projects in Europe, further boosting domestic production.