CASE STUDIES

Outlook on Semiconductor Chip Shortage – Case Study | Infiniti Research

Oct 27, 2022

Overview on Semiconductor Chip Market

Based in Australia, our client provides centralized applications that enable auto manufacturers and dealers to effectively manage their inventory and keep data safe while meeting various compliance requirements. With its 10,000-strong staff and authorized software implementation partners, the business serves several thousand dealerships and manufacturers in APAC, North America, Europe, Middle East, Africa, and LATAM. In 2021, the company reported $4 billion in annual revenue. The client’s focus industry, namely, automotive, is hugely reliant on semiconductor chips used to operate vehicles.

Business situation for a leading client from semiconductor chip industry

Today, computer chips are everywhere in a car, taking charge of engine consumption, exhaust emissions, and all-important safety features. The average car has as many as 1,500 chips and this could go up to 3,000 in some models! So, any shortage of semiconductor chips would result in unavoidable cutbacks in auto production and hikes in vehicle prices. This means significant earnings cuts for various auto industry participants. All of these scenarios cannot but have a knock-on effect on the automotive software industry at large.    

Since early 2020 a variety of factors have given rise to the chip crunch. During the pandemic-induced lockdowns, sales of laptops, smartphones, game consoles, monitors, mice, keyboards, and printers surged, driven by demand from people stuck at home. The unprecedented boom in consumer goods, which include a lot of chips, began to stretch the capacities of chip manufacturers and outsourced chip foundries. Trade tensions and geopolitical conflicts, the latter limiting access to critical chip-making ingredients, have disrupted semiconductor supply chains even more.  As a result, automotive manufacturers have been struggling to find enough chips to run production at full capacity to meet demand.

With automotive chip supplies in limbo, automotive software businesses needed to recalibrate their business expectations and fine-tune their demand forecasts. Therefore, the client turned to our automotive industry experts for assistance in examining the impact of the semiconductor shortage over the longer term.

Primarily, the client looked for the following outcomes from the study.  

  • Assessment of the long-term effects of the chip shortage on various product lines, 2021-2025
  • Generation of granular market insights to help create long-term growth plans
  • Analysis of demand patterns to help improve forecasting accuracy

Our market intelligence solution

Our semiconductor market intelligence experts performed a detailed analysis of the semiconductor chip market, covering market size and CAGR 2021 to 2025. The market was segmented by industries and products that are chip dependent and by top chip-producing regions and chip makers.   Broadly, the semiconductor industry is organized into 6-7 product categories, with two of these garnering more than half of the total market revenue in 2021. The study devotes significant space to these critical product categories.

Semiconductors are all over the place, powering everything from toys and smartphones to cars and thermostats. In 2021, the semiconductor chip was the world’s fourth most-traded object (!) after crude oil, refined oil, and vehicles. In more recent times, the semiconductor industry has scaled to meet the requirements of artificial intelligence processing and machine learning, according to the study.  

APAC, North America, and Europe represent about 90% of the market for semiconductors; the Middle East, Africa, and LATAM markets are significant.  Data processing is the largest application segment for semiconductor chips in 2022, followed by communications and industrial segments. The study shows that the global semiconductor market will nearly double between 2021 and 2025. 

The report dwells into the deeper causes of chip shortage such as supply shocks brought on by the pandemic and tensions in the South China Sea. Currently, three-quarters of all semiconductor manufacturing happens in China and East Asia. The region also supplies essential materials and specialty chemicals. Besides, Taiwan accounts for most of this planet’s advanced semiconductor chip fabrication. Meanwhile, the conflict in Ukraine is prompting players in the semiconductor food chain to pivot away from large suppliers of key chip-making ingredients in the conflict zone. The medium-term goal is to seek out smaller suppliers in stabler locations.

At least 2-3 chemical compounds have emerged as promising alternatives to traditional silicon in the wafer fabrication process. The frontrunner among these “silicon alternatives” can enable faster battery charging while curbing power wastage. 

Our market intelligence experts also determined the average selling price (ASP) for six critical semiconductor product categories for the focus period. The team also determined the profitability range of 4-6 companies, each engaged in chip design, chip manufacture, packaging and testing services, as well as fabless manufacturing and electronics production.  

Our outlook on the global semiconductor chip crunch is underpinned by nearly two decades of research based on “hard numbers”. It draws on proven secondary and primary research approaches and multiple databases. We ensure our data model is free of errors and incorrect assumptions by bringing both top-down and bottom-up approaches into play during data collection, analysis, and visualization. 

Benefits for our client in the semiconductor chip industry

Our automotive market intelligence solution is helping the client identify megatrends shaping the semiconductor market and sculpt new growth models in key product categories in the focus markets.

We help our clients make smarter decisions to achieve rapid business growth

Our strength lies in the unrivaled diversity of our international market research teams, innovative research methodologies, and unique viewpoints that merge seamlessly to offer customized solutions for your every business requirement.

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