Capacity crunch warning of chip shortages in 2021

January 20, 2021 // By Peter Clarke
V-shaped pandemic sets up chip shortages, rising prices in 2021
A rebound in global markets and sold-out IC manufacturing capacity will drive up chip prices and shortages in 2021 says Malcom Penn of Future Horizons.

Analyst Malcolm Penn of Future Horizons is predicting high prices and chip shortages in 2021 with a semiconductor capacity crunch as the market is set to grow significantly by 18 percent. 

Chip supply is effectively sold out for the whole of 2021 as little new capacity will come online before 2022, he says, something that automobile makers are finding to their cost.

Penn has consistently argued that the state of the semiconductor industry always depends on four factors: global GDP; IC manufacturing capacity; the number of units produced; and average selling prices. These are what he calls the four horsemen of the semiconductor apocalypse. One of those - global GDP - fell of his horse in 2020 with the Covid-19 pandemic but for once it did not cause the customary slow-down in the semiconductor industry.


Conventionally a crash in the world's GDP such as happened in 2020 – a fall of 4.4 percent – would be the indicator of a severe recession in multiple fields of endeavour and almost guarantee a subsequent fall in the chip market. But this time some industries stayed strong and 4.4 percent collapse in GDP accompanied a 7.3 percent growth in the semiconductor market. "It has happened before, but only about three times," observed Penn, speaking in an on-line virtual version of the Future Horizons' industry forecast seminar.

Gross Domestic Product (GDP) by region and time. NI = non-industrialized, C&EE = Central and Eastern Europe. Source: Future Horizons.

With GDP set to be 5.2 percent in 2021 the V-shaped nature of the business impact of the pandemic is clear, said Penn. The recovery will be strong in Europe and the UK partly because they, with their exposure to automotive and industrial sectors, suffered the worst with GDP contractions in 2020 of 8.3 and 9.8 percent respectively, he said. This will lead to further chip shortages, he says.

Next: Capex takes time to impact

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