Semiconductor production set for growth in 2022: Report

The chip crunch will ease up in 2022 as semiconductor production is set to remain strong. The automobile and electronics industries have been coping with a chip shortage since 2020. This has disrupted end-market manufacturing operations across segments.

Analysts at Euler Hermes told CNBC that the current semiconductor cycle has been firing on all cylinders since the industry emerged from its worst recession in 2019. “Semiconductor sales are expected to grow by another 9% and cross $600 billion for the first time in 2022.  That’s on top of the 26% growth to $553 billion in 2021,” they said.

Some of the biggest chipmakers in the world like TSMC have already announced plans to increase capacity. The company’s Taiwan-listed shares have surged more than 80% in roughly two years.

Analysts believe demand, prices and improved product mixture have driven up the sales. Highlighting demand, Euler Hermes analysts point out unusually strong demand for consumer electronics, such as personal computers and smartphones. They attributed the increase in prices to tight supply and demand dynamics. The analysts reasoned improved product mix to improvement in product mix for semiconductors as a result of higher-priced and new generation chips being introduced. They said the three market drivers are also expected to ease as demand growth normalizes and new production capacities come online in an accelerated fashion.

However, the analysts have also identified four risks faced by the semiconductor industry. This includes hardware sales for products like TV sets and computers taking a larger-than-expected hit from demand normalization after strong growth in 2020-21. Semiconductor demand may be hit by any period of prolonged freeze in manufacturing activity, as supply chain disruptions from the pandemic continue.

The analysts say a standstill between China and the US, in their battle for tech supremacy, with restrictions still in place for Chinese companies acquiring critical US semiconductor manufacturing tech and equipment. Furthermore, they believe an increasing frequency of unusually adverse climate events will prove to be a major challenge for the semiconductor sector, which relies on optimal capacity utilization for its profitability.

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Cristiano Amon, Qualcomm CEO, said his company would have sufficient capacity to meet demand in the last six months of 2022. Dr Lisa Su, AMD CEO, says that supplies of her company’s products will remain tight in the first half of 2022. But she predicted that the widespread unavailability of its portfolio would become less severe in 2022.

Samsung also expects its component shipments to increase by mid-2022. Head of the conglomerate’s memory division, Han Jin-man, explained their outlook is positive due to a recent change in supply chain management.