Deutsche Bank – Semiconductor Crisis Triggered by One-Time Event
Deutsche Bank released an article on May 5, 2022 regarding the current worldwide chip shortage. The original full article can be downloaded by clicking here
In 2021, global sales in the semiconductor industry reached an all-time high of
USD 556 bn. Despite this record figure, the industry currently faces severe
challenges.
The present semiconductor cycle is characterized by a triple whammy: Huge
demand due to a boost for digitalization, COVID-related and non-COVID related
supply shortages and geopolitical tensions.
This has hindered growth in various industries such as computer systems,
mobile phones, and automotive, with further cascading effects in related
industries.
Due to the sharp rise in chip demand, new chip factories are currently being
built in the US, Asia and Europe to meet rising demand over the next decade,
boosted by mega trends such as high-performance mobile broadband
communication with 5G, the Internet of Things with 6G-enabled edge
computing, next generation smartphones, AI and autonomous systems.
COVID has shown the limits of existing supply chains. In addition, geopolitical
tensions are leading to a selective reconfiguration of supply chains to reduce
vulnerabilities. However, these initiatives will only bear fruit in the long run.
China’s “Made in China 2025” policy to build new capabilities in semiconductor
research and manufacturing and legislation initiatives (US CHIPS Act and US
FABS Act, EU Chips Act) could strengthen continental supply chains and may
result in a partial deglobalization. History teaches that high subsidies risk
misallocation, which can lead to overcapacity.
When will the present cycle in global chip sales end? While the bottlenecks will
drag on for some time, the current cycle could be very long. It might last until the
end of 2023. Subsequently, overcapacities and a recession in the
semiconductor industry loom. Historically, over the last seven cycles sales
contracted sharply by 22% on average from peak to trough. Given the special
circumstances, it would not be surprising if sales were to decline by a similar
amount or even more
The original full article can be downloaded by clicking here
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