Long-term growth amid global chip shortages
How did we get here and what’s next?
Pandemic accelerated a shift in demand: As the world adjusts to remote working and doing more online, demand for chips that power devices, connectivity, databases, and analytics has increased. However, the auto industry has recovered more quickly than anticipated, leading to an exacerbated shortage of both advanced and legacy node chips.
Techno nationalism: Prior to the pandemic, governments across the world were increasingly cognizant that the chip sector is strategic, leading to greater market interventions, including industry protection, subsidies and trade disputes.
New growth and segmentation levels: Demand for chips is now no longer driven by a single application (unlike PCs or smartphones in the past), but by a multitude of applications and end markets which go beyond PCs or smartphones including cloud, servers, internet of things (IoT), 5G, automotive, and AI. With each application requiring different functionalities and manufacturing technologies, the industry is witnessing an unprecedented level of segmentation and trends pointing toward structurally higher semiconductor demand.
Overall recovery: Demand is clearly outpacing supply now that application and end market segments are recovering. Although cyclical volatility in this sector is common, adding
capacity to an already stretched supply chain will take careful planning.
Technology trends will drive R&D expenditure: New materials, innovative manufacturing processes for increasingly complex chip designs and advanced integrated circuit (IC) packaging technologies will continue to drive R&D expenditure. Market leaders are also gearing R&D initiatives toward high growth end markets such as 5G, AI and IoT and have already begun to identify new ways to monetize their products.