Analysts offer observations on why it happened, the industries that will and won’t be prioritized and what to expect in the short term.
The recovery of manufacturing is being overshadowed by a shortage of chips used in most devices. The shortage, which began in late 2007, is expected to continue for at least two years.
One of the reasons why foundries are not producing enough is because they don’t have the return on investment needed to satisfy the demand, said Mario Morales of IDC.
The global chip shortage is causing delays in the delivery of laptops and cars.
During the second quarter of 2020, many OEMs cancelled orders due to the pandemic. This led to supply chain disruptions and a reduction in demand for cars.
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The rise of work from home and children’s school attendance has caused a spike in demand for cloud computing services, which have caused some of the biggest names in the industry to suddenly become profitable.
The global semiconductor shortage has been exacerbated by the impact of trade sanctions and phone roll-outs.
Before the pandemic, the US placed trade sanctions on China. This affected Huawei, which was one of the largest 5G smartphone producers in the world.
Apple and other smartphone companies also placed large chip orders, which kept the foundries busy, said analyst Vani Gupta.
The impact of the pandemic on the global chip shortage was widely acknowledged by industry experts.
Demand for cloud computing services such as Amazon Web Services and Microsoft Azure is growing, and semiconductor companies are buying up stocks of these providers, O’Donnell wrote.
Mobile phone sales are still hot. Devices from Samsung, Apple, and Huawei are buying up plenty of chips.
The global shortage of semiconductor chips is affecting industries such as mobile devices and transportation.
Other events, such as an earthquake in Japan and a winter storm that hit Texas in March, have also affected the supply chain, said Sudeep Gupta, senior vice president at Gartner.
According to Morales, the industrial and automotive markets are still waiting for the recovery of legacy nodes technologies.
Even if they could get their supply chains running more efficiently, these industries could still take a long time to reach their end product, said Michael Heffernan, head of supply chain management at Intel.
The company is expected to start producing the chips for these applications in the third quarter of this year.
When you’re dealing with a pandemic, it’s hard to plan for business continuity.
Since they use legacy technologies, they’re also low priority for many companies.
Gaming companies have a tougher time sourcing their products due to their different competitive advantages, said analyst Carlos Morales.
A lot of the factors that affect business continuity planning are related to the decisions that were made by companies during the boom years, said Paul.
The companies are not crying shock because they have experience with previous natural disasters, said analyst Juan Carlos Morales.
There is no short-term solution to the current situation, according to Gupta. If supply is constrained, then prices will go up.