A confluence of problems, from geopolitical tensions to the COVID-19 pandemic induced lockdowns, have led to the current global semiconductor (chip) shortage. Consequently, critical industries such as automotive, medical devices, and telecom continue to bear the brunt. Against this backdrop, the recent earnings call transcripts of 30 key chip manufacturers show that supply chain issues dominate the discussions around ‘chip shortage’, reveals GlobalData, a leading data and analytics company.
Automobile sector companies such as Garrett Motion indicated a decline in sales volumes and revenues while Blue Bird mentioned a fall in its electric bus production due to chip supply shortages. Apple and other technology companies are also discussing the scarcity of silicon hampering their output and performance. In the Aerospace, Defence & Security sector companies such as General Dynamics revealed chip shortage affecting their ability to deliver certain products.
Chip manufacturers NXP Semiconductors, and Applied Materials reported rise in inventories of raw material indicating that there were no issues around material availability. Lam Research discussed cost challenges in the areas of freight and logistics for semiconductors and other critical components. Broadcom and Microchip Technology mentioned rising input costs from their supply chain and Teledyne Technologies discussed supply chain issues causing delay in the shipments of its products.
Ekta Chourasia, Business Fundamentals Analyst at GlobalData, comments: “Chip supplies appear to be an area of concern across many sectors, with automobile sector particularly reporting a decline in production and sales. While the chip manufacturers seemed to have enough raw material inventories, they were not able to meet customer requests mainly because of the rising supply chain issues and costs.”
In response to the rising chip supply shortage, companies are looking at various alternatives. For example, Teslareduced the number of chips in the cars and is looking at alternative chips and changing the structure of the packs going into its vehicles. XPeng is looking at in-house technologies to address the chip supply shortage along with alternative chips. Tata Motors is reprogramming and redesigning vehicles for other chips.
Chourasia concludes: “Chip manufacturers like Applied Materials and Keysight Technologies have already reported improvements in supply. However, companies expect that the demand for chips will continue to outpace supplies. Systems on Chip technologies, product redesigns for alternative chips that are easier to procure, and manufacturers working to increase supplies through alternative vendors are all steps in the right direction to narrow down the gap.”
