If you said the semiconductor shortage will last until Q2 2022, you would be correct, according to Gartner

Chip in if you want more chips, analyst house suggests

Gartner indicated today the ongoing chip shortages are likely to persist until the second quarter of 2022 as production simply can't keep pace with orders.

Problems began with getting out enough of those semiconductors we all rely on but don't have a lot of fanfare, and then grew to affect supplies for personal and data center computers as well as systems in other industries for all sorts of reasons. There's a demand for machines and devices as people stay home in the pandemic; factories paused their component orders during the coronavirus outbreak and are now scrambling for parts; some manufacturers hoarded parts; and disasters and lockdowns held up output.

In a research note, the analyst house stated:

The chip shortage started primarily with devices, such as power management, display devices and microcontrollers, fabricated on legacy nodes at eight-inch foundry fabs, which have a limited supply. The shortage has now extended to other devices, and there are capacity constraints and shortages for substrates, wire bonding, passives, materials, and testing, all of which are parts of the supply chain beyond chip fabs. These are highly commoditized industries with minimal flexibility and capacity to invest aggressively on a short notice.

Foundries are also upping wafer prices, leading to higher price tags on completed components, Kanishka Chauhan, principal research analyst at Gartner, said.

The analyst biz expects severe to moderate shortages during 2021, with a return to normality not occurring until well into next year. Some suppliers have already painted a grim picture, suggesting capacity will not be able to meet demand before 2023.

Alan Priestley, Gartner VP Analyst, told The Register the usual laws of supply and demand were at play here with prices rising due to shortages. He said a combination of "demand and lack of capacity" would increase prices for computer makers, but tinkering with configurations might keep things apparently stable.

"PCs," he said, "might still stay at the 499 price point. But what you get for that 499 might change."

Ken Lamneck, outgoing president and CEO of reseller giant Insight, last week told investors on a conference call for its Q1 financial results: "Supply constraints due to chip and display shortages are now expected to continue through the balance of the year. We continue to see healthy hardware booking trends that are up significantly year-over-year so far in the second quarter."

There is no question we will see price increases on devices

"There is no question we will see price increases on devices," he added, "because of the semiconductor shortages as obviously those prices are increasing for the OEMs."

Slightly ominously he added: "So those will be passed through."

"Now for us," he went on, "that's a positive situation because it's higher ASPs (average sales prices) for us and we do have systems to make sure that it's immediately passed through to our clients."

Noting that while the effect might be perceived as inflationary, Lamneck stated "that's really just due to the constraints more than anything else."

Despite the shortages, worldwide semiconductor revenues grew to $464bn in 2020, up by 10.8 per cent on the previous year, according to IDC, and were forecast to hit $522bn in 2021.

A chunk of that growth is expected to come from automotive semiconductors (as well as the usual suspects of 5G and computing) and it is that sector that seemingly struggled the most to obtain supplies when it tried to restart assembly lines paused at the start of the pandemic. That said, IDC reckoned "the impact is being felt across the board in semiconductors manufactured at older technology nodes," and the effect continues to ripple throughout the industry.

What to do?

Gartner's analysts have suggested mitigations including the obvious – extending supply-chain visibility to beyond the supplier and to the silicon provider – as well as preemptively investing with chip foundries in the hope of gaining a bit of leverage. Diversifying suppliers and tracking growth projections to highlight inventory issues coming down the road is also a good idea.

However, with demand showing no signs of slowing down, Gartner has warned shortages are set to continue well into the next year. Others fear it might take a little longer to sort out. ®

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