Experts see crunch easing a bit this year despite digital transformation, COVID-19

The global chip shortage is likely to last throughout this year, experts said.

Crimped supplies, they said, are struggling to match growing demand from makers of digital products and service providers amid accelerated digital transformation necessitated by COVID-19.

But the shortage this year will not be as severe as it was in 2020 and 2021, which devastated supply chains. Also, the shortage will not affect all chip varieties.

Ariane Bucaille, leader of Deloitte global technology, media and telecommunications industry, said in a report:"The COVID-19 crisis continues to accelerate our adoption of technology and increase our levels of connectivity via the digital world.

"There is enormous demand for chips as more and more products become digitally connected, powering everything from our multiple devices to smart vehicles. And connectivity is only going to expand with such technologies as 5G, reinforcing the rapid digital transformation all industries and businesses are currently witnessing."

The Deloitte report said customers in mid-2021 were waiting between 20 and 52 weeks for multiple kinds of semiconductors, causing manufacturing delays or shutdowns, which led to revenue losses in tens or even hundreds of billions of dollars.

By the end of this year, those lead times will be closer to 10-20 weeks and the industry will be in balance by early 2023, the Deloitte report predicted.

Amid the current shortage of chips, many semiconductor companies are beefing up their efforts to build new production capacities. In September, German chipmaker Infineon Technologies AG opened its factory of high-tech, 300-millimeter wafers, which are used in power electronics, at its Villach site in Austria.

At 1.6 billion euros ($1.81 billion), the investment made by the semiconductor group represents one of the largest such projects in the microelectronics sector in Europe.

But a resurgence of COVID-19 cases across the world is adding more uncertainty to the situation. The outbreak in Xi'an, Shaanxi province, is affecting the output of computer memory chips from US chip giant Micron Technology Inc.

Micron, which has a chip packaging and testing plant in Xi'an, said in a statement: "We are working with suppliers operating in this region that face similar challenges. We are also working with local government officials to identify solutions that will enable us to minimize impact of the situation and maintain operations at the site safely."

South Korean tech behemoth Samsung Electronics Co Ltd said its chip plant in Xi'an is still "running" and it has "temporarily adjusted" operations amid a COVID-19-related lockdown in the city.

"This decision was made in accordance with our commitment to protecting the health and safety of our employees and partners, which remains our top priority," the company said in a statement.

"We will also take all necessary measures, including leveraging our global manufacturing network, to ensure that our customers are not affected."

As for the shortage of chips used by the global smartphone industry, Chinese companies are more optimistic. Wang Xiang, president of smartphone-maker Xiaomi, said earlier the chip crunch is likely to be eased significantly in the second half of this year, based on the company's communication with supply chains.