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The End of the Chip Shortage: The Good News and the Prediction Nobody Wants to Accept

The chip crisis that emerged in 2020 wreaked havoc in pretty much every industry sector out there, with some companies having no other option than to temporarily stop their production lines.
The chip shortage forced carmakers to temporarily stop their production 6 photos
Photo: GM
GM's Flint assembly plantGM's Flint assembly plantGM's Flint assembly plantGM's Flint assembly plantGM's Flint assembly plant
Predicting when the chip shortage would come to an end appeared to be an easy thing at first, with analysts estimating the pre-pandemic levels would be reached by 2021.

In other words, the semiconductor crunch wasn’t supposed to last so long, as everybody expected the production to be aligned with the demand in a matter of months.

This obviously didn’t happen, so industry experts and analysts then predicted the end of the shortage by the beginning of the next year. This means the chip inventory was scheduled to recover by January 2022, but once again, this didn’t happen, and the world ended up struggling with the same shortage as before.

Here we are in June 2022, and the chip crunch is still here, still causing so many problems and still not showing any solid signs that it would go away.

GM's Flint assembly plant
Photo: GM
At this point, however, all forecasts come down to two different scenarios. One of them is the good news that everybody expects, while the other is the prediction that nobody wants to accept.

Let’s start with the optimistic forecast. A series of carmakers seem to believe that the chip shortage would gradually improve in the second half of the year, eventually leading to a complete recovery in early 2023. This means the production of cars should slowly come back to normal by the end of 2022, and by this time next year, the waiting times should be significantly shorter.

U.S.-based chip maker Qualcomm also seems to back this scenario, though the company’s CEO has recently said that some industries would recover more difficult than others. This means that while the chip inventory would improve for some companies, others would still have to wait until even 2024 to no longer struggle with the constrained semiconductor supply.

And now, here comes the worst part.

GM's Flint assembly plant
Photo: GM
Intel, which is one of the top players in the chip industry and the company you can really trust when it comes to a prediction regarding the end of the crisis, doesn’t seem to believe the pre-pandemic levels are anywhere on the radar.

In a recent statement, the company’s CEO emphasized the chip shortage wouldn’t by any means come to an end earlier than 2024. And he even offered additional reasons to support his claims.

First and foremost, while more and more chip makers are investing in increased capacity, it’s impossible to boost production overnight. The whole process takes time, so even if these companies end up building more chips, the market still wouldn’t notice any substantial improvement by 2024.

Then, all these companies that are trying to boost their capacity are struggling with another problem. It’s the lack of machines required for the actual production of chips, as the world is now battling a shortage of other materials fueled by factors like China’s lockdowns and the war in Ukraine. For example, the neon that is used by the lasers employed in the production of chips is partially supplied by Ukraine, and given the military invasion, the local supply has faced major disruptions as well.

At the end of the day, it’s pretty clear that guessing when the chip shortage would be over is nothing but that: simple guessing that can’t be accurate in the long term. For the time being, it’s better not to hold your breath for a complete recovery to pre-2020 levels, especially as the current market is extremely volatile and the conditions can change on a daily basis.
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About the author: Bogdan Popa
Bogdan Popa profile photo

Bogdan keeps an eye on how technology is taking over the car world. His long-term goals are buying an 18-wheeler because he needs more space for his kid’s toys, and convincing Google and Apple that Android Auto and CarPlay deserve at least as much attention as their phones.
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