Rise and fall of semiconductor demand during the pandemic

The automotive and industrial semiconductor markets were significantly affected because of the pandemic. A decline in vehicle sales and manufacturing plant closures resulted in companies cutting back on their orders for semiconductors. This reduced demand was quickly taken up by consumer electronics suppliers who benefitted from the rise in home working and learning, with increased demand for notebooks and tablets, as well as for entertainment devices such as smart TVs and game consoles. There was also increased demand from hyperscale operators and telecommunications providers who needed to satisfy online working and entertainment needs. When demand for new vehicles did finally return, carmakers were unable to source enough semiconductors, forcing them to restrict production once more.

Shortages resulting from increased semiconductor demand

Originally concentrated in the automotive industry, the global chip shortage spread to a range of other sectors including consumer electronics, most notably smartphones, game consoles, and home appliances. As the demand for electronic devices continued to grow, coupled with the broadening range of semiconductor applications, the pressure on chip manufacturers to meet supply commitments had risen. In the first month of 2021, global semiconductor sales amounted to more than 40 billion U.S. dollars, a 13 percent increase from the same month in 2020. Increased demand, the stockpiling of chips due to geopolitical tensions like those between the U.S. and China, and extreme weather events, fueled the global chip shortage seen in 2021.

Consequences and outlook

The opening months of 2021 saw MacBook production at Apple delayed due to the global chip shortage, while Samsung warned of a “serious imbalance” in the semiconductor industry. Problems for the latter were worsened by adverse weather conditions in Texas which led to the closure of its chip fabrication plant. Sony also raised concerns, particularly the impact of the shortage on the supply of PlayStation 5 consoles – one of the most sought-after tech products of the year. PC gamers also faced challenges with a shortage of graphics processing units (GPUs): increased consumer demand and supply issues were exacerbated by a rise in cryptocurrency mining, with Nvidia and AMD graphics cards also a popular choice among cryptominers. Intel and TSMC, two of the largest semiconductor companies worldwide, have suggested the global chip shortage may continue into 2022, if not beyond, with both firms announcing a major investment in manufacturing facilities to boost chip capacity.

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