Interview, Fireside Chat, Webinar
The Global Chip Shortage: Impact, Outlook and Recovery
- The semiconductor shortage is projected to peak in Q2, with conditions expected to ease slightly in Q3, more significantly in Q4, and continue improving into 2022, though structural supply-demand tightness for the auto sector and general supply issues are anticipated to persist for the next 12 to 18 months, extending through all of 2022.
- A strong sell-in is required for another couple of quarters to allow the entire supply chain to reach comfortable inventory levels exceeding pre-pandemic standards, while specific supply issues at foundries like Renesas are expected to resolve within a couple of months with proper wafer output starting in late July.
- The global auto industry faces an estimated 3% production loss in 2021, translating to $15 to $20 billion in operating profit losses and a 10 to 15% drop in the global auto profit pool, with a very favorable pricing environment expected to persist over the next 18 months despite a return to normal conditions in the December quarter.
- U.S. used car prices are expected to remain elevated having doubled in the past six months, while significant capacity additions from past capital expenditure announcements by auto semiconductor companies are hoped to positively impact supply-demand dynamics in 2023.
- Structural changes include customers increasingly willing to share medium to long-term demand forecasts and potentially signing long-term contracts to provide transparency, which may reduce volatility and lead to semiconductor and semi-cap equipment stocks trading at higher multiples.
- Governments outside the United States and the U.S. itself may implement policies to fund domestic semiconductor industries to address shortages and ensure national security, with companies like Intel and TSMC stating intentions to build capacity in the U.S. and Europe.
- The hardware and communications tech sector faces varied outcomes, with significant shortages in PCs and iPads but sufficient inventory for TVs and home audio; Apple expects $3 to $4 billion in iPad revenue to roll into the September quarter due to supply constraints.
- Consumer electronics demand, which has been pulled forward, is expected to attenuate or fall off somewhere in the next 18 months as spending shifts to other categories, leading to an outlook characterized by weakness before normalizing, a process potentially taking a couple of years.
- IT hardware products including servers, compute, storage, and networking are expected to remain in higher demand, driven by campus networking technologies required to support hybrid working models and video interaction in offices for the next couple of years.
- Companies such as Cisco are expected to benefit from increased demand for network capacity to support video traffic in hybrid office environments as the future of work evolves toward leveraging technology for efficiency in remote or traveling scenarios.