The Chip Shortage
Now, if you are unaware of what I am talking about, let me give you a quick brief. As more and more things have started becoming, what we call “smart”, the demand for system-on-chips has been exceeding the supplies from manufacturers. Due to this, many of the companies are not able to purchase as many silicon chips as they need because of low supply. It is affecting the smartphone industry too as Samsung, following earlier reports, has already announced that it will not launch the Galaxy Note series this year.
Excess Demand, Less Supply
So, as per reports, in a recent call with industry analysts, the Taiwanese Semiconductor Manufacturing Co (TSMC), which is the world’s largest chip manufacturing company, stated that the severity of the current chip shortage will likely reduce in the coming days. However, the overall shortage of silicon chipsets will continue this year and may even extend to the next. The company reportedly said that it is operating at “over 100 percent utilization” to meet the current chipset demands. Moreover, citing the current situation, TSMC also stated that it will invest around $30 billion for expansion as its gross margin dropped to 49.5 percent as compared to 51.5 percent, which the company expected to achieve this year. In addition, the Taiwanese chip giant also stated that it expects revenue to grow 20 percent over last year.
Situation to Become Stable in Two Years?
Nvidia, which is one of the clients of TSMC, also commented on the situation by stating the “overall demand remains very strong and continues to exceed supply while our channel inventories remain quite lean”. Furthermore, the company added that it expects this disbalance between the demand and supply of SoCs to continue throughout this year. The Nvidia CEO Colette Kress reportedly said that Nvidia is hoping to get “sufficient supply to support sequential growth beyond Q1 [2022]”. However, it will not be able to catch up with the increasing demand. Intel CEO Pat Gelsinger also spoke about the topic with The Washinton Post and gave similar responses. As per Gelsinger, “it just takes a couple of years to build capacity,” and due to this, creating enough supply takes a bit of time. So, speaking about the chip shortage, Gelsinger said, “I think this is a couple of years until you are totally able to address it.” So, we can expect the current chip shortage to continue for at least another year before coming to a stable state. As a result, we can expect more companies to streamline their smartphone lines and other SoC-based product lines in 2022 and 2023.
