The global shortage of semiconductors has had a major impact on the automotive sup

THE AUTO CHIP SHORTAGE and semiconductors REMAINS, BUT IT MAY BE IMPROVING

INTRODUCTION

A global shortage of semiconductors has had a major impact on the automotive supply chain, forcing automakers around the world to cut production over the last two years due to the lack of these crucial parts. As COVID-era regulations begin to relax, some – but not all – industry inspires speculation that the chip shortage may come to an end in 2023. The?semiconductor industry?is cyclical at the best of times; gluts and shortages are not uncommon. But the pandemic magnified the problem, as?workers stuck at home rushed to buy a kit. Data-center demand also spiked, as people turned to video-calling, video-streaming, and video gaming. The conflict in Ukraine has the potential to exacerbate semiconductor supply chain issues and the chip shortage that has impacted the industry for the past two years. Prior to the conflict, more than half (56 %) of semiconductor firms believed the chip shortage wouldn’t end until 2023. The most immediate risk is the supply of specific raw materials used in semiconductor manufacturing such as neon and palladium. Russia and Ukraine are?major producers of two key materials used in semiconductor manufacturing: neon and palladium. Ukraine represents about 70 to 80 % of the global supply of neon, and Russia produces about 35 to 45 % of the world's palladium supply.

While the impacts of inflation and indirect supply-chain effects appear to be manageable in the near term, the potential for longer-term impacts is yet to be determined and will likely be predicated on how events continue to unfold. The challenges of the past two years have highlighted the importance of semiconductors in almost all aspects of life. The economic resiliency of many industries is supported by solutions powered by semiconductors, including remote connectivity, portable computing, and communication infrastructure.

Automotive manufacturers are still dealing with the effects of the microchip shortage that began in 2020. Sam Fiorani, vice president of global vehicle forecasting at Auto Forecast Solutions, told reporters that he believes the industry will see 2-3 million units cut from production in 2023. Automotive manufacturers are still dealing with the effects of the microchip shortage that began in 2020. Sam Fiorani, told reporters that he believes the industry will see?2-3 million units cut from production in 2023. This figure highlights the continued production difficulties that manufacturers face. However, if Fiorani’s estimate holds true, it would mark a significant improvement for the industry.?More than 10.5 million vehicles were cut from production in 2021, according to Auto News. In 2022, automakers around the world cut an estimated 4.3 million cars from their production schedules. Losing 2-3 million units would still be a hardship for manufacturers, but it would indicate that supply chain issues are beginning to ease.

?‘CHIP SHORTAGE MAY LAST INTO 2023 AS FIXES SLOWLY EMERGE

?Vehicle assembly workers are among the most affected by the chip shortage, which could last through 2022. President Biden’s effort?to get congressional support for his $2.2 trillion infrastructure package includes a strong push for bolstering domestic chip manufacturing with a $50 billion investment. By several recent accounts, it appears the industry is settling in for chip shortages to last into 2023, especially for chips used by automakers, even as companies commit to expanding chipmaking capacity. The president has appeared several times in public forums on the issue, holding up props like a tiny semiconductor and a larger wafer in a Monday virtual summit with chipmakers and car company executives who have had to scale back vehicle production at plants for want of more chips. He claimed bipartisan support for the CHIPS for America initiative which passed last year as part of the Defense Act and calls for tax incentives for building domestic chip fabrication facilities. A letter he received said 23 U.S. Senators and 42 House members from both parties supported the CHIPS Act and how it helps the U.S. compete with China in chip research and development. “China and the rest of the world are not waiting,” Biden said. The meeting resonated with executives who attended the event, according to some accounts.

Several executives interviewed by VLSI Analyst Dan Hutcheson after the meeting told “are uniformly bullish about bi-partisan support for the industry,”. The bullish executives came from firms including TSMC, based in Taiwan, a leading producer of chips designed by American companies, including Apple, Hutcheson said.?TSMC alone produces more than half?the world’s chips. The company recently said it will spend $100 billion over the next three years to increase capacity to meet demand. Others who attended were leaders from GlobalFoundries, Micron Technology, NXP, Samsung, and Intel.

In early April, GlobalFoundries CEO Tom?Caulfield told CNBC?that the world’s semiconductor supply could lag behind demand until 2022 or later.?GlobalFoundries is the third-largest foundry and plans to invest $1.4 billion in chip factories this year. In another example, Nvidia uses a variety of foundries to produce the chips it designs. On Tuesday, Nvidia CEO Jensen Huang told reporters he doubted the chip shortage “will be a real issue in two years…The industry recognizes this and will build out the necessary capacity.” Huang added he has “every confidence” that a high-performance AI chip called Atlan that Nvidia is developing for autonomous vehicles will be available for cars coming in 2025. “We’ll do whatever is necessary to do when the time comes,” he said. “A company of our scale and resources can surely adapt the supply and make [Atlan] available to customers that use it.” To fulfill chip requirements. April the following companies informed under?Sony Semiconductor invests in Raspberry Pi on Apr 12, 2023, Canada’s Project Arrow parades down Georgia tech street in EV challenge on Apr 11, 2023, Micron, NSF join 21 top universities in semi network, Apr 10, 2023, and Hammer time: PC shipments drop 29%; Samsung profits plunge 96% on Apr 10, 2023. All stakeholders are keen to see the fallout of The ONLY event covering the biggest design engineering trends slated on June 20-22, 2023 at Santa Clara Convention Center.

??SEMICONDUCTOR INDUSTRY EXECUTIVES ARE CAUTIOUSLY OPTIMISTIC ABOUT 2023

Many key players in the semiconductor industry are feeling positive about the direction of the chip shortage in 2023, according to a recent poll. Multinational accounting firm KPMG and the Global Semiconductor Alliance (GSA) conducted the?18th annual global semiconductor survey?in Q4 of 2022.?The poll asked 151 semiconductor executives about their outlook for 2023 and into the future. Of those executives, more than half represent companies posting more than 1 billion USD in annual revenue. Based on the results, the Semiconductor Industry Confidence Index for 2023 currently stands at 56 out of 100. This score indicates that a small majority of respondents have a more positive outlook for 2023 than a negative one. The survey asked semiconductor executives when they think the chip shortage will subside. Of those, 65% said that they believe the shortage would end in 2023 while 20% said they believe that it would extend into 2024 or later. Around 15% of respondents said they believe chip supply and demand are currently balanced. Executives were also asked when they believe there will be a net excess of semiconductors. Around 31% said they believe there will be a surplus by the end of 2023, while 24% stated that they believe there is already a semiconductor surplus. That means that over half of respondents think that we will see a surplus in this calendar year if we haven’t already.?However, 36% believe that the next surplus won’t happen until between 2024 and 2026, and 9% said they believe the industry won’t see a surplus at any time in the next four years.

For Automakers, The 2023 Outlook is Mixed?

The effects of the automotive chip shortage do not appear to have been evenly distributed between manufacturers. Some companies, such as BMW, Mercedes, and Volvo, reported no significant chip supply issues early in the second half of 2022. Others like Nissan, Hyundai, and Volkswagen said that semiconductor issues were improving at that time. But many of the world’s largest manufacturers are still facing significant difficulties related to the microprocessor shortage heading into 2023. Honda, General Motors, Ford, and Toyota all reported significant chip supply issues in the second half of 2022. General Motors suggested that those issues would continue into this year. “While the chip shortage is improving, there is still uncertainty about semiconductor supply availability,” she says. “Increased buying during the peak of the electronic component constraints and decreased demand for consumer electronics at the end of 2022 left many [original equipment manufacturers] OEMs and contract manufacturers with an imbalance of inventory,” Strawn observes that this has resulted in some companies being more affected by the shortage than others, hence the varying outlooks. “In some instances, they have a surplus,” she says. “However, many are still missing the ‘golden screws’ – the parts needed to complete production.”

Car Manufacturers Are Making Adjustments in Response to the Chip Shortage

The number of vehicles cut entirely from production schedules doesn’t tell the entire story, either. Some automakers have been able to limit the number of vehicles cut from production by rationing the chips they use, removing some features that rely on microprocessors. Mercedes-Benz, for example, removed features like premium audio and wireless phone charging from several vehicles. General Motors got rid of the assisted-driving feature Super Cruise from its Cadillac Escalade, along with vented and heated seats on a few of its trucks and SUVs. BMW removed parking assist and even touchscreen functions from several models. The company also pulled the semi-autonomous driving feature from the X3, its most popular model. In many cases, these companies offered reimbursements for the lack of these features. Drivers who bought these cars may also be able to retrofit some of the features when the chip shortage diminishes.

Chip Shortage: Factors At Play

Predicting the end of the microprocessor shortage?is difficult because of the complex and global nature of the supply chain. There are a number of variables that affect manufacturing and distribution throughout the world. Businesses in the semiconductor industry have responded to the shortage by investing in increasing their manufacturing capacity. In Germany,?Bosch invested?more than $1 billion in 2022 to help ramp up production. The company also has plans to spend another $3 billion toward expanding its production capacity in the near future. The first semiconductor fabrication plant in the U.S.?opened its doors?in Marcy, New York in August 2022. Built by North Carolina-based Wolfspeed, the $1 billion factory produces 200-millimeter silicon carbide wafers for domestic and international manufacturers.?This factory is set to be just one of many to come following the passing of the Creating Helpful Incentives to Produce Semiconductors (CHIPS) for America Act in August 2022. The?new law?could provide as much as $52 billion towards funding new chip manufacturing projects.?

According to Semiconductors.org, companies have announced?more than $200 billion in investment?in the build-up to and wake of the passing of the CHIPS Act. These investments span more than 40 projects across 16 states. Investments like these around the world should result in a noticeable increase in production capacity in 2023. That increased capacity could play a vital role in alleviating chip supply shortages. However, Strawn warns that solving supply chain issues is more complicated than simply making more semiconductors.

“The issues don’t just concern the high-level infrastructure,” she says. “The sub-infrastructure must also be ready to tackle future demands. Investment into new wafer foundries, substrates, OSAT [outsourced semiconductor assembly and test] capability, and producing and sourcing key raw materials – including cobalt, palladium, copper, neon gas, and others – is required to support the build-out, and meet next-gen hardware needs.”

Suppliers Are Playing Catch-Up

In 2023, semiconductor manufacturers aren’t just trying to meet current demand. They’re also trying to fill backorders resulting from the last several years of issues. Even with increased investment and capacity, doing both simultaneously presents a serious challenge. In other words, one of the main obstacles to the recovery of the supply chain shortage is the shortage itself.?“I expect some companies will spend a decent portion of the year trying to absorb or sell surplus supply while looking to obtain vital parts to complete the manufacturing process,” says Strawn.

Changes In Demand For Semiconductors

The chip shortage presented at the same time as demand for microprocessors began rapidly increasing. Despite the recent setbacks, the long-term outlook for the semiconductor industry remains strong in part due to automotive manufacturing needs. A 2022 analysis from McKinsey estimated that the auto industry accounts for roughly 20% of microprocessor demand. Automakers are using more semiconductors in all vehicles, as these feature an increasing number of computer-controlled components. Gina Raimondo, the U.S. Secretary of Commerce,?said in 2022?that the average car uses more than 1,000 microprocessors.?However, demand for semiconductors has been supercharged by the increase in electric vehicles (EVs) hitting the market. Raimondo said that the average EV uses twice as many chips as gasoline-powered vehicles. As EVs take up an increasing market share, demand for the microprocessors that power them will continue to grow exponentially.

Geopolitical Factors

Some of the most impactful factors in the supply chain picture are more political than industrial. The global nature of the semiconductor industry means that the supply chain is vulnerable to government policies and geopolitical developments.

End of COVID Lockdowns in China

Delays in manufacturing and logistics difficulties in China due to COVID lockdowns are one of the primary drivers of the chip shortage. Under the country’s zero-COVID policy, factories, ports, and even entire cities were frequently forced to cease activity to prevent the spread of the disease since 2020. However, officials in Beijing announced the end of the zero-COVID policy in late December 2022. The loosening of regulations could help to increase production and improve shipping logistics, resulting in greater inventory and a more reliable supply chain. Strawn says this could be a significant step in returning stability to the supply chain. “There is no doubt China’s rigid COVID policy put a lot of strain on many companies,” she says. “With the easing of restrictions, it will help alleviate some transportation issues and shutdowns, which will help get people back to work and ultimately improve the supply chain.”

?Growing Trade Tensions Between the U.S. and China

Trade issues between China and the U.S. – the world’s largest trading partners – are nothing new. But tensions over microprocessor chips have begun to heat up in recent months. In October 2022, the U.S. announced broad export restrictions that make it more difficult for Chinese entities to obtain advanced semiconductor technology. Some of the new measures include requiring a license to export chips that use American tools or software and banning sales to certain companies. The new rules also forbid green card holders to work for some Chinese semiconductor companies.?The U.S. maintains that the policies were designed to limit China’s access to “sensitive technologies with military applications.” But the measures could also impact China’s ability to develop advanced semiconductors and limit the country’s ability to contribute to the supply chain.

Chinese officials responded by filing?a complaint with the World Trade Organization (WTO)?on December 15, 2022. The complaint alleges that the U.S. regulations have put “the stability of the global industrial supply chains” in jeopardy. The U.S. had 60 days – until February 13, 2023 – to resolve the issues outlined in the complaint. Chinese officials could now request a WTO panel to review the matter, as there has yet to be any further movement on the issue at the time of press. It is not uncommon for WTO disputes to take years to resolve.

The Ongoing Russian Invasion of Ukraine

Russia’s invasion of Ukraine in 2022 has had a significant impact on the supply chain. Before the invasion, Ukraine was one of the largest suppliers of several raw materials used in semiconductor manufacturing, such as neon gas. The ongoing conflict has limited the country’s ability to capture, process, and export these materials. An end to the invasion in 2023 could open Ukraine up again and remove a major bottleneck in the microprocessor manufacturing supply chain. But a continued invasion would mean manufacturers will need to find other sources for raw materials and sustained disruption.

When Will the Chip Shortage End?

The most optimistic take is that the semiconductor supply chain could return to “normal” by the end of 2023. Others think that the shortage could continue well into 2024. But with demand for chips shifting and producers around the world ramping up auto production, it’s worth asking what the end to the shortage looks like. All of the shifts over the past two-plus years in the auto industry mean that a fully-functioning supply chain looks different in 2023 than it did before the shortage began in 2020.?Strawn says that those seeking signs that the chip shortage is coming to an end should look for shorter and more consistent manufacturing lead times .“Indicators of improvement would be consistent and ongoing deliveries from factories,” she says. “Lead times would also improve significantly.”

The Reason Why There Is a Global Semiconductor Shortage

The semiconductor business has experienced shortages before, but the one that started because of the pandemic in March 2020 is much deeper, particularly in Europe and the Americas. So what happened? Amid the pandemic, demand dropped, and orders were canceled. Asian factories went into a slowdown, and many closed as companies tried to figure out how to operate safely and with significantly reduced demand.

?Many Stumbling Blocks

In parallel,?automotive companies, a significant portion of the semiconductor industry’s customer base, canceled their backlog and decided to burn off both finished goods inventory and use semi-finished inventory to build what they could. Weak demand and COVID safety concerns forced the semiconductor industry to operate at a much-reduced capacity, driving utilization rates to historic low levels. During the lockdowns and the massive shift to work from home, many companies and consumers rushed to buy?PCs and tablets?in numbers not seen for many years. Plus, with schools closed, the demand for the already scarce gaming platforms increased. In September 2020, the automotive market started to recover and orders started piling up, but the OEMs and Tier 1 suppliers had burned through their inventory. The entire supply chain was empty. Companies had no parts but plenty of orders. A sort of panic ensued, leading to double booking. However, the largest broad-line providers to the automotive market, including ST, Infineon, ON, and NXP, had already cut production, and the time to restart production and deliver parts is measured in months. Making matters worse, production at TI, NXP, Infineon, and Samsung was negatively impacted by the?weather in Texas. The power outages created another panic. The?Renesas fire?caused a loss of at least six weeks of production, a lot of it for automotive and important microcontroller products. There were also worries in Taiwan over a potential?water crisis. All this caused the market to panic and customers to try even harder to increase orders. In the end, this is the industry’s worst crisis since 2008-09. But it’s not all bad news: bookings are good, and salespeople can relax because customers want everything they can get and will argue less over price.

?Semiconductor Industry Structure

Looking at the industry structure, a key success factor is a company’s market share. In this industry, no one company has more than a 15% share of the market. It’s fragmented, and no one entity controls every application. Samsung can provide parts for appliances; Hynix can provide memory for cloud computing.

But if a company doesn’t have power components or microcontrollers from Renesas, ST, or NXP, it can’t build a system. Even if one supplier has most of the parts, some other products can be missing. Qualcomm and Broadcom can be well served by TSMC, but if customers can’t get MOSFETs from ST or microcontrollers from Microchip, it’s impossible to ship a product. The core technologies may be available, but no one has enough market share to ship the entire bill of materials for any one system. The industry is undergoing consolidation but it is still relatively slow, so it remains fragmented and specialized, making interdependence worse. Supply chains are global but fragile. Firms have worked to optimize production using just-in-time and lean systems that reduce working capital and thus lower inventory. They’ve become extremely efficient and are designed to relentlessly reduce costs but are very sensitive to extreme events. Due to the criticality and interdependency at the product level, it can create a headache for customers even if one plant gets into trouble. It takes hours to produce a car, minutes to produce a smartphone, but more than four months to produce a microcontroller chip. The silicon process is such that it can’t be sped up. There are physical limits to the speed at which chips can be produced. The semiconductor industry is learning how to operate in this new era, rushing to add capacity and pushing plants and supply chains to the maximum. Meanwhile, customers are learning the hard way that chips aren’t commodities.

Moreover, former U.S. President Donald Trump’s trade war with China had a huge impact on the forward-thinking of companies. It will continue to create pressure on supply chains. That’s why Samsung, TSMC, and others are being forced by American customers to open new plants in the Americas and why the European Union is trying to force the semiconductor industry to shift more to Europe.

Semiconductors Going Forward

So when will this end? What’s strange is no one really knows. My guess is it will be at least until the end of 2021, and could stretch to Q1 2022. However, the automotive industry will only start to recover in 2022 as it suffers from the twin problems of the pandemic and the shift to electric vehicles, and the need for even more semiconductors. Autos are not likely to see the same sales levels of 2018 until 2023. This will be a great year for the chip business, which will grow at more than 20% as well as at double digits in 2022. The inflationary pressures we are starting to see as a result of the rebound from the pandemic, with capital spending increases of 30% in 2021, will eventually combine to create a natural brake on the market, normalizing supply and demand. One day, and we rarely ever know when orders will be canceled or pushed out. This is something the industry deals with after every major growth period. What goes up quickly must eventually come down.

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?THE SEMICONDUCTOR CRISIS

?GLOBAL SEMICONDUCTOR INDUSTRY OUTLOOK FOR 2023

LEADERS OPTIMISTIC ABOUT GROWTH, DRIVEN BY AUTOMOTIVE AND THE END OF THE CHIP SHORTAGE

??Industry executives have a positive outlook for 2023

• ?KPMG LLP and the Global Semiconductor Alliance (GSA) conducted the 18th annual global semiconductor industry survey in the fourth quarter of 2022. The survey captures insights from 151 semiconductor executives about their outlook for the industry in 2023 and beyond. More than half of the respondents are from companies with more than $1 billion in annual revenue. The Semiconductor Industry Confidence Index score is 56 for the upcoming year (a value above 50 indicates a more positive outlook The Russia-Ukraine war may be a contributor to the lower industry revenue growth projection. Forty-one % are concerned the war will materially impact industry revenue growth in 2023. When KPMG and the GSA conducted a?pulse survey?in May 2022, only 25 % had this concern negative). This is lower than each of the previous four years but is understandable given the economic uncertainty and geopolitical events that have arisen in the past year. ???

Global Semiconductor Industry Outlook for 2023:: A different kind of trouble ahead

Leaders are optimistic about revenue growth

• 81% project their?company’s?revenue will grow over the coming year, and half expect growth of more than 10 %. While these are lower than last year’s survey (95 % and 68 %, respectively), it is still positive given the current economic environment and perceptions regarding industry inventory levels discussed below.
• Leaders are slightly less bullish on industry revenue growth. 64% forecast the?industry’s?revenue will grow in the coming year, with 19 % predicting growth of more than 10 %. These are also significantly lower than last year’s survey (97 % and 49 %, respectively).

???Automotive takes the pole position as the most important revenue driver

• For the first time, survey respondents clearly rate the automotive sector as the most important for driving semiconductor company revenue over the next year. In correlating research, KPMG predicts?automotive semiconductor revenue will reach $200 billion annually?by the mid-2030s and surpass $250 billion by 2040.
• Wireless communications, long seen as the industry’s most important revenue driver, slip into second place in the 2023 outlook.
• Internet of Things, cloud computing, and artificial intelligence rank third, fourth, and fifth in terms of importance.
• In its first year on the survey,?metaverse?was ranked last (out of 10) in importance for driving semiconductor company revenue over the next year. It will be interesting to see how this view changes in the coming years as metaverse technology evolves and adoption increases.???

The end of the semiconductor shortage is in sight

• 65 % of the executives surveyed think the semiconductor supply shortage will ease in 2023, and 15 % believe that supply and demand is already in balance for most products. Only 20 % think the shortage will last into 2024 or later.
• As the semiconductor industry is cyclical, the survey also asked respondents when they think the next?excess?supply of semiconductor inventory will occur. Twenty-four % believe there is already an excess, and 31 % think it will occur in 2023. Another 36 % feel the surplus will happen between 2024 and 2026, while 9 % believe demand will keep increasing and there will not be an inventory excess in the next four years.
• Leaders also do not see the Russia-Ukraine war materially impacting the semiconductor supply chain in 2023. Less than one-third (29 %) are concerned with this, which is down from 39 % in the?pulse survey?conducted by KPMG and the GSA in May 2022.

????

Talent remains a crucial priority

• Talent risk is seen as the biggest issue facing the semiconductor industry over the next three years.
• Underscoring the ongoing need for specialists in this growing, cutting-edge industry, 71 % of respondents anticipate increasing their global workforce in 2023. This is lower than last year (87 %), but still a healthy expectation in the current economic climate.?
• The survey also shows that talent development and retention remain the top strategic priority for industry leaders, with 67 % naming it a “top 3” strategic priority. While lower than the 77 % mark in last year’s survey, it still clearly outpaces?supply chain?flexibility (53 %) and digital transformation (32 %) this year.
• Though still important for any business, only 15 % of semiconductor executives rank mitigating cybersecurity risk as a “top 3” strategic priority and just 10 % say the same about formalizing?ESG?reporting, despite looming mandatory reporting requirements·????????????Among geopolitical matters, the impact of the nationalization of semiconductor technology is the biggest concern on the minds of executives, as this has implications with supply chains, talent acquisition, and access to government subsidies (e.g., the enacted CHIPS Act in the U.S. and the proposed European Chips Act).
• The nationalization of semiconductor technology is also tied as the second biggest issue facing the industry over the next three years (tied with global inflation).
• ?Other top geopolitical concerns include the prominence of Taiwan in the supply chain, tariffs and trade deals, and the long-term impacts of the Russia-Ukraine war.

Please note, some of the %ages discussed here may not sum to 100 % due to rounding. G's perspectives and thought leadership on the global semiconductor industry Harnessing innovation and disruption are critical.

INSIGHTS ON TECH TRANSFORMATION, RISK, TALENT, AND ESG IN 2023 AND BEYOND

.KEY POINTS

·??????Asked whether supply chain issues with regard to semiconductors have been resolved, ABB’s Peter Voser said that he believes the worst of the chip supply crunch has subsided. “It was really an issue in 2022, specifically the first two, three quarters,” Voser told CNBC.?However, he added that slowing growth has helped balance out supply and demand.

The global shortage of semiconductors is “being sorted out” after years of disruptions to supply chains that made them a scarce resource, according to the chairman of Swedish-Swiss tech and engineering giant?ABB. Asked whether supply chain issues with regard to semiconductors have been resolved, ABB’s Peter Voser said that he believes the worst of the chip supply crunch has subsided. “It was really an issue in 2022, specifically the first two, three quarters,” Voser told CNBC at the World Economic Forum in Davos, Switzerland just concluded. “This was a real shortage of semiconductors, which affected us a lot because clearly when you’re in electrification automation and robotics, one of the key components is semiconductors, and we are using quite complex ones, so therefore Taiwan is very important but also Chinese semiconductors,” he added. I think global growth slowdown has helped on this as well, and now for the future, I’m quite optimistic.”

Chips are the brains of electronic devices and can be found in a range of products from cars to home appliances to smartphones. They’re a core piece of much economic activity, so the limitations in supply have had a ripple effect on the broader economy. 2022 was deeply challenging for ABB, Voser said, with the coronavirus in China and its related disruptions to global trade hitting the company hard. During pandemic-related shutdowns, ABB was forced to close factories in China, while hundreds of employees had to live in factories due to strict curbs on public life, he added. “We still delivered in that sense but not at the full capacity,” he said. “We weathered the storms in a certain way.” In 2023, however, Voser expects an improving outlook in China while the rest of the world experiences lower growth. “The rest of the world will see lower growth in 2023, he said. “In that sense, I am of the school [that in] the second half, China will bounce back and see growth which is higher than anticipated.” In the semiconductor space, slowing economic activity has helped balance out the shortage as a rise in the cost of living resulted in a softening of demand from consumers for pricey chip-equipped goods, according to Voser.

“I think with the global CHIPS act in U.S., and investments in Europe, we will see more. Most probably, we are going into a capacity overhang pretty soon if the economy grows slower than anticipated,” the ABB chairman said. One thing the chip shortage has highlighted is the dependency of manufacturers on components from East Asia.?TSMC, the Taiwanese semiconductor giant, is by far the largest producer of microchips. Its chipmaking prowess is the envy of many developed Western nations, which are taking measures to boost domestic production of chips. In the U.S., President Joe Biden last signed into law the CHIPS and Science Act, allocating billions to lure manufacturers to produce the widely used chips domestically. It has also sought foreign investments, convincing TSMC to spend $40 billion to produce more of its chips in the United States at two chip plants in Arizona. Voser added, however, that brewing tensions between China and Taiwan was a risk to watch moving forward. Sure, It is a risk but manageable. Having new sources of semiconductors across the world is very important, so you go from one supply source, Taiwan, and then China into multiple sources and that’s where some of the investments are really critical.”

?CONCLUSION

When it comes to increasing the recovery rate, Smilkstins highlighted the need for forward planning. A clear understanding of future demand, potential problems, and design are of particular importance. ‘The automotive industry and suppliers of semiconductors must work together to move beyond the status quo and escape the semiconductor imbalances we see today. This collaboration must entail investment in, and planning for, the future to ensure the supply of semiconductors in Europe will once and for all overcome current vulnerabilities and be independent of outside influence and risk,’ he said.?Looking to secure semiconductor supply in the long term, BMW is adopting new approaches involving direct agreements with manufacturers such as Inova Semiconductors and Global Foundries. VW Group has developed a cross-brand, cross-functional semiconductor strategy to guarantee long-term supply security. The carmaker also appreciates the need to understand the complexity of the component’s value chain, monitoring the market and production investments. The brand has effectively elevated its chosen semiconductor companies to the level of its tier-one partners.

‘Facing the transformation process and the continuously increasing demand for semiconductors in vehicles, the semiconductor topic will remain the central supply topic of the automotive industry in the coming years,’ the VW Group spokesperson said.