This should also bode well for equipment manufacturers, who could see demand for more cutting-edge chip production tools.
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Higher digitization following Covid-19, the 5G upgrade cycle in the wireless market, and the need for more advanced chips for applications such as AI and machine learning, and cloud computing are big levers of semiconductor demand growth. Semiconductor demand is also likely to trend higher in the long run. The consumer electronics industry is also now feeling the pinch, with Apple indicating that the production of its products such as the iPhone and iPad could be impacted by tight chip supply.
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plant that manufacturers its popular F-150 trucks, on account of the shortage. Volkswagen also may need to further cut its production, while Ford is expected to idle production for one week at a U.S.
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Toyota Motors, the world’s largest car manufacturer by volume, is likely to cut global production in September by 40% from its previous plan due to the semiconductor supply crunch, per a report from Nikkei. While there were signs that the semiconductor shortage in the automotive industry was easing earlier this summer, as major foundry players such as Taiwan’s TSMC noted that auto chip output was slated to increase, recent reports from automakers don’t sound as optimistic. For instance, Intel projects that chips will account for more than 20% of the input costs for new premium cars by 2030, up from about 4% in 2019.įirstly, the global semiconductor shortage may be far from over, causing companies to increase investment in production capacity. Semiconductor content in automobiles is also expected to rise considerably in the coming years. Trends such as higher digitization following Covid-19, the 5G upgrade cycle in the wireless market, and the need for more advanced chips for applications such as AI and machine learning, and cloud computing are big levers of semiconductor demand growth.
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The longer-term outlook for companies in the foundry and semiconductor equipment space is poised to brighten even after the shortage issue is resolved.
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Now although it is difficult to ascertain the full extent of the semiconductor supply-demand imbalance, given the heterogeneous and secretive nature of the semiconductor business and the likely hoarding of chips by some customers, the general consensus is that the shortage will persist at least until mid-2022. While auto companies continue to face the brunt of the shortage, with auto majors such as Toyota Motors and Ford scaling back on production, even consumer electronics behemoth, Apple, which is known for its robust supply chain planning, is apparently seeing shortages of chips for products such as its MacBook laptops, Beats earphones, and Apple Watches.