Crises of the Semi-conductor industry and its Root causes in 20222

Semiconductor chips are a unit of electronics and their industrial production works as a fuel for many electronics and automotive industries. This industry is facing crises all over the world. Its production and demand issues are arising because of so many minor and major reasons. Understanding these reasons can lead to overcoming the main issues of this huge industry. The growth of the Semi-conductor industry determines the development of many other industries, businesses, and household electronics.

World globe and microprocessors against an orange background. Global chip shortage concept

The semiconductor industry is facing a shortfall some of the main causes are described below.

Demand and supply gap

After the COVID-19 pandemic, the production in almost every industry including the electric and technology industry rose drastically and so as the demand for everything related. When the demand for automotive industries rose after the pandemic it increased the demand for semiconductor chips as well as this rise was more than anticipated and semiconductor manufacturing industries were shifting their production lines to other products as well.

Chip shortage,Chip crisis, computer and car chips are gone. 3d illustration, 3d render. 3D illustration.

Semiconductor industries after facing such a huge demand have increased their production but as the demand is increasing gradually with the increase of automotive production and electronic and technological advancements are trying to meet the demands but these huge demands don’t seem to be met in near future.

Time taking production process;

The shortfall in production is due to the production process and its complexities. The lead time is four months which is already plenty of time, however, it might exceed this too, in addition to that transfer of chips from one site to another for increasing capacity adds more than six months to the process, when it comes to switching a manufacturer, it also adds up a time of more than a year because of alteration to meet the requirements. Some chips might be with different customized features according to the manufacturer which might need some alteration, licensing, or other customizations.

Project manager working with Gantt chart planning schedule, tracking milestones and deliverables and updating tasks progress, scheduling and management skills, program strategy

Change in procurement strategies

Due to unstable markets and businesses, companies have changed their procurement strategies to bear minimum losses in the market, many companies have shifted to “just-in-time” ordering techniques which help companies to cut off storage costs but it brings a challenge to semiconductor manufacturing industries as there are not many orders in advance due to which they have to meet deadlines in short times as instant orders are placed.

Measures for facing the Supply Challenge

Pandemic and other economic changes are affecting industries and businesses as well. Companies must take revolutionary steps to meet these challenges. First of all, this issue must be acknowledged that there is a shortfall in production which creates a supply gap as and when demand gets higher. The production process should be shifted more towards automation and the time lag must be shortened to its minimum possible stage.

To check whether demand will rise or lose its pace there must be a market survey conducted by companies to analyze if there is any advancement in any industry where these chips are demanded. To increase production, Manufacturers must take steps by producing different models in bulk quantity, those models which are demanded more in quantity must be manufactured earlier than orders.

However, even there is a shortfall crisis faced by companies but they are making healthy profits at this time. Companies must use their profits to overcome this crisis and must bring technological advancements to boost their production abilities. As the demand for new vehicles has been dropped since the Covid-19 crisis, but not for a longer time, it might rise shortly as and when the public will shift to buy new vehicles. As the robotic industry is also growing over time, so with the passage of time demand for these chips will grow more. The semiconductor industry must consider these changes to overcome further effects of the market over this industry. 

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