Chip majors say shortage may last up to two years

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Depending on various product categories like mobile devices, ICE, electric vehicles, appliances, data centres, chip shortage might last anywhere between four months to a year, or perhaps even two years, according to microchips providers Qualcomm and Intel, Business Standard reported on Thursday. Intel reported that the demand surge was huge and was spread across segments like PCs, phones, appliances and auto that lead to the shortage. The company believes that there will be a gap in most next segments over the next 12 to 18 months.

Intel’s view was endorsed by chip design company Qualcomm, which gets the product manufactured by fab companies like Samsung. It also said that the shortage was due to the unprecedented surge in demand during the pandemic.

Adding to that, some industries like automobile which uses heavier nodes of chips (legacy chips) might be affected for a little longer as the capacity moved to lighter node chips for electric vehicles and autonomous cars.

FADA slashes growth projection of auto components

According to the Federation of Automobile Dealers Association (FADA), vehicle retail sales have declined by 5.7% in September as compared to the same period last year.

It had also pointed out that the semiconductor shortage has had an adverse impact in the sales of passenger vehicles. Due to the shortage, the association has cut down the growth projections of auto components. The vehicle inventory with dealers have sunk to a new low.

According to the chipmakers, the just-in-time inventory model of vehicle makers in the auto sector has been a key reason for not having enough stocks of chips required and to have cancelled orders after the pandemic.

Also, the bulk of chips used by the auto industry are mainly mass produced legacy chips which have lower margins. Once demand picked up across board, fab plants shifted to lower nanometer high tech chips which fetch a premium, thereby increasing the problem.