Global Chip Shortage: Looking Ahead
Since 2022, chip makers and related industries have faced problems because of the persistent shortage of semiconductors. As demand keeps on rising, not being able to fulfil orders has been a major issue.
Shortages are not unusual in the semiconductor industry, but the shortage was accelerated during the COVID-19 pandemic. Consumers started to buy in urgency and data centres were overwhelmed by video calls and streaming. Unfortunately, chip fabs were unable to meet demand.
The CHIPS and Science Act
In 2022, President Biden approved the CHIPS Act, giving $52.7 billion for American semiconductor production, development, workforce and research into semiconductor technologies. It also offers a 25% investment tax credit for capital expenses incurred while manufacturing semiconductors and related equipment.
Jose Fernandez, US Undersecretary of State for Economic Growth, says the US will also invest in Vietnam's semiconductor industry. This investment aims to diversify supply chains and reduce reliance on China. More information on this can be found on tomshardware.com.
European Chips Act
Furthermore, the European Chips Act became law on September 21, 2023. The European Chips Act is an arrangement of public and private investments worth 47 billion euros. The main aims are to create more capacity, be self-sufficient in Europe, and stay ahead of future supply problems.
The EU wants to achieve "digital sovereignty," which means having more control over important technologies. Europe's share of chip production is expected to rise from 10% to 20%, which will change the balance of power in this industry hugely. This Act creates partnerships that improve resource distribution, making regions less susceptible to supply chain issues.
The UK’s National Semiconductor Strategy
The National Semiconductor Strategy was created in May 2023 to assist and fortify the semiconductor sector in the UK. The plan's goal is to make the UK a global leader in the semiconductor industry. It also aims to protect the economy, strengthen supply chains, and ensure national security.
A twenty-year strategy has been laid out to secure the UK as a leader in design, research, and advanced chip manufacturing. The plan has been funded with £1 billion over the next ten years and £200 million between 2023 and 2025.
Critics say the UK's £1 billion support is insufficient compared to higher investments from the US and Europe. Only time will tell whether this plan will prove to be strong enough to compete with large players in the industry like Nvidia, AMD and Qualcomm.
The Current Landscape of Chip Manufacturing
Many semiconductor companies like Intel have already expanded or built new fabrication plants. In September 2023 Z2data published research that states 73 semiconductor fabs were currently being built/expanded, and 40% of those are in the US. Particularly, Samsung Foundry has put a lot of investment in and planned for 10 fabs to be built in Texas and completed between 2023 and 2042.
In August 2023 The White House stated ‘In total, since the beginning of the Biden-Harris Administration, companies have announced over $231 billion in commitments in semiconductor and electronics investments in the United States.’
Additionally, in the UK, Pragmatic, a semiconductor manufacturer, has raised £182m to expand its facilities.
Conclusion: The global chip shortage prompted a re-evaluation of industry practices and led to collaboration between governments, industries, and semiconductor companies. Semiconductor companies have made efforts to improve chip production and trade and have invested in expanding production to meet supply and demand. Companies are also diversifying their supply chains, and semiconductor foundries are increasing their capacity to meet demand and lead times. Despite challenges, there's optimism for a more stable semiconductor market in 2024 and beyond.