Semiconductor shortage: how to deal with this capacity gap ?

Nowadays, being a semiconductor company is quite an ideal situation with skyrocketing demand and high growth potential. 

Nevertheless, those companies are facing high challenges: despite their industrial plants operating in full capacity, they are not able to respond to the high demand, talent shortage and supply chain crisis. This shortage has a strong impact, especially on all industries that require chips and electronics. Due to the fact that this shortage delays production, some companies even think about internalizing chip design, because they can’t deal with the long delays. 

How to explain this shortage?

How to explain this shortage: a lot of companies have deviated from their standard “just in time” way of producing things, deciding to stock up more semiconductors than needed, which naturally led to a gap between supply and demand. Also, a lot of companies have created deals to put more pressure on semiconductors factories by implementing a tax if the chips were not delivered at the right time. In October 2022, Joe Biden’s recent announcement about China, will create additional demand for non-chinese companies in the semiconductor industry. All these led to a crisis in the semiconductor world, making the latest front page news. 

Semiconductors actors have to deal with this growing demand and today’s situation will most likely become the new-normal, due to the EU latest regulations regarding electric vehicles. Their market is projected to achieve $1trn by 2030, which means it will double its size (source: McKinsey). The automotive, computer, and wireless industries are expected to be the main drivers of growth over the next few years. 

How to keep outperforming in the semiconductor industry? 

There is no short-term solution to deal with the current crisis, because this sector was already under pressure before the pandemic. Today with the crisis in Ukraine, new regulations regarding commercial relations with Asia, natural disasters and the shifting towards a greener transportation will most likely make the shortage to persist in the following years. Companies need to think about their growth in such a complicated context. One first important aspect to work on : relations with partners. The whole value chain has to be reworked, in order to be sure that the offer will meet the demand. 

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Agility is key to deal with higher volatility by investing towards projects and factories with more resilient supply chains, investing in new technologies such as IA or machine learning. Overall, to cope with his high demand, semiconductor companies should work on implementing advanced analytics to speed up the yield learning curve, for example, by bypassing the physical testing by combinatorial learning, it’s possible to produce more efficiently and quickly. 

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To cope with this new-normal high demand, leaders of the semiconductors' industry must work on increasing their production capacities also to meet shareholders’ expectations for high returns. In terms of CAPEX, it means a lot of investments, that, need to be done in an enlightened way in order to maximize value and ROI. Piloting those projects can be made easy by using a tool that leverages data and enables vertical and horizontal collaboration.

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