For the chip industry, global supply crunch will push the next target to $ 1 trillion

Chip companies have had the best sales year so far — blamed on a global semiconductor shortage and growing demand – and industry executives expect that total to double and more than $ 1 trillion in less than a decade.

For the first time in 2021, the industry’s total annual sales increased by $ 500 billion, slightly higher than the global smartphone industry by some estimates. The epidemic has accelerated digitalization trends, for example, when people distribute movies and video games and companies demand all kinds of digital devices – all chips.

The industry’s struggle to meet its demand has led to supply shortages, which have led to national accounts in chip production, the opening of government subsidies, and a historic wave of investment. In an industry known as boom-and-booster cycles, it has sparked competition for expansion.

It took 50 years to become a half-trillion-dollar industry. It only takes eight to 10 years to reach a trillion dollars, ”said Tom Howwillfield, CEO of Global Foundation. Ink.,

One of the world’s largest contract-makers in an interview.

Global chip sales have grown by 25 percent over the year 2021 to a record $ 583.5 billion, according to the study. Inc.

Afternoon factories could not meet demand. Long-term deficit is expected to increase the semiconductor industry’s revenue by 9% this year, Gartner said, surpassing the historical average growth rate.

Last week, Samsung Electronics Co.

He expressed optimism that the memory-chip business would continue to thrive, noting that the shortage of spare parts and supply chain challenges had not diminished. Intel Corporation

“2022 will be better,” said Pat Gelsinger, chief executive of the company.

The past history of the semiconductor industry concerns some analysts. Customers sometimes over-order and pause purchases, which has a history of major ups and downs. Skeptics worry that overcrowding, supply chain disruption and widespread global economic risks could lead to future unrest.

Industry officials say the semiconductor industry expects explosive growth and high inflation. Computers, smart phones, data centers, and cars continue to dominate semiconductors, and many products require chips. The shortage of chips has led to closer ties between buyers and sellers, with industry officials saying wildlife fluctuations will reduce the risk.

Most of the sales growth will be driven by price, high-end chips, power tools such as machine learning and high-performance computing, said Peter Hanbury, an expert at Bay and company partner semiconductors.

The shortage continues. The Biden administration warned last week that U.S. manufacturers had reduced their stockpile of key chips by five days – compared to a 40-day supply a few years ago.

Globally, the average waiting time for semiconductors is more than 25 weeks, according to Susquehanna Financial Group LLP, which is more than 10 to 14 weeks.

According to Taiwan del Guy, the price of silicon wafer for the production of semiconductors is expected to be between 5% and 15% on average. Semiconductors Research Director at Counterpoint Research – Based on Tech-Market Researcher.

Investments made by chip makers to increase production capacity may not be implemented immediately, limiting supply. But with the advent of new chip factories online, Bain predicts that the industry will be at risk of over-production by 2025.

The semiconductor industry is projected to reach $ 692.5 billion in sales by 2025, and demand by $ 1 trillion by 2030, said Andrew Norwood, vice president of research at Gartner. This is today the size of the global fast food industry.

It took 50 years to become a half-trillion-dollar industry. It only takes eight to 10 years to reach one trillion dollars. ‘

– Tom Cowfield, CEO of Global Foundation

According to Dutch manufacturer ASML Holding NV, chip makers are currently working on adding equipment to increase production, costing more than $ 300 million each.

In a recent revenue call, CEO Peter Wennck said customers prefer fast shipping. Demand is 40 percent higher than the company can produce, and he says it will remain that way for the time being.

“From 2024 onwards, we want to be in a position to meet the needs of our customers,” Mr Wennk said.

Chip-industry optimism is expected to reach at least $ 146 billion in capital spending by 2021, according to Gartner. That is more than double the cost of the industry five years ago.

A global chip shortage is affecting how fast we can drive a car or buy a new laptop. WSJ visits a factory in Singapore to see the complex process of chip making and how one manufacturer is trying to overcome the shortage. Photo by Edwin Cheng for Wall Street Journal

The US government is trying to encourage domestic chip investments after seeing its production shift to Asia. According to a trade group of the semiconductor industry association, decades later, the United States increased its share of the world’s semiconductor to 37%.

Although the United States has made a profit in the industry by producing industry-leading chips that use a range of 10 nanometers or less, the cost of the chip industry is unlikely to restore US market share. In five years, the US is estimated to have 27 percent of such production capacity, up 16 percent from last year, according to Counterpoint.

Intel plans to expand eight new factories to $ 100 billion in Ohio soon. The company is committed to expanding its investments in Arizona, New Mexico and Europe.

“Looking at the second half of the decade, we see an opportunity to grow our business,” Gelsinger said in an interview.

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Competitive chip makers are similarly investing heavily. Taiwan semiconductor manufacturing Co.

It has a capital expenditure of up to $ 44 billion this year alone. Plans for expansion in China and Taiwan are under construction at a cost of $ 12 billion in Arizona and Japan at a cost of $ 7 billion. Chairman Mark Liu recently announced that TSMC is considering a new chip factory in Europe.

Global Fundriss said investments should increase by 1.6 times by the end of next year, by 1.6 times. “It is not enough for the needs of our customers,” says Mr. Kaufield.

South Korea’s Samsung has recently announced a $ 17 billion investment in Taylor, Texas, to boost domestic capacity. Last year, Samsung said it would invest more than $ 205 billion over the next three years, and chip-making is a priority. Texas Equipment Ink.,

Micron Technology Inc.

And others have promised chip-investment.

Customers welcome the plans. “A lot of chips are being built, which is great,” Tesla said. Inc.

Chief Executive Officer Elon Musk said the company had suffered from last year’s shortages “chip hell.”

Write Jiyoung Sohn at and Meghan Bobrowsky at

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