AI-powered Market Insights: The impact of COVID-19 on the Global Chip Crunch market 1/2

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What’s the impact and fallout of COVID-19 on the Global Chip Crunch market?

 

According to the United Nations, “the world economy is facing a persistent global shortage of semiconductor chips,”[1] with the situation expected to continue throughout 2021. While the shortage initially resulted from factories shutting down during the height of the COVID-19 pandemic, other factors intensified the situation.

In addition, the shortage has had a significant knock-on effect across manufacturing, including the appliance, automotive, electronics, and technology sectors.

 

  • What has been the impact of the global chip crunch on manufacturing?
  • Which sectors have been impacted the most?
  • What are the key drivers behind the shortage?

 

Leveraging complex machine learning algorithms, ReportLinker provides answers to these questions and additional insights on the overall industry and  geographical trends.

 

Leveraging Natural Language Processing to sift information

With the impact of the semiconductor chip shortage on manufacturing, the subject is a major topic across all news channel. Take, for example, the effect of the chip shortage on the automotive industry. Searching for “chip shortage automotive industry” in Google delivered 7,610,000 search results on the day this article was written, with tens of thousands being added every day.

ReportLinker allows you to hone in on what’s relevant by leveraging powerful machine learning models to sift through the mass of semiconductor industry data, selecting only what information is pertinent from reliable information sources. Our natural language processing (NLP) algorithm tags the content, presenting it as snippets you can eyeball before drilling down for additional insights, as seen in Figure 1 and Figure 2.


Figure 1. The impact of the chip crunch on manufacturers

The Straits Times reported that “Singapore companies linked to the global semiconductor value chain are making the most of the surge in demand for goods such as mobile phones, PCs, and TVs triggered mainly by the coronavirus pandemic, but risks are looming. Demand has spiked so much that the industry is fast running out of semiconductors – also known as integrated circuits, microchips, or just chips – which are the tiniest building blocks of everything powered by technology.”[1] For manufacturers—and the end consumer—that translates to supply chain shortages and increased prices.


Figure 2. Insights on the impact of the crunch in China

Commenting on the situation in the China Daily, Li Shaohua, deputy secretary-general of the China Association of Automobile Manufacturers, stated that “the global chip shortage has hurt many industries, including communication systems and medical equipment. At the same time, the imbalance between supply and demand has caused a sharp rise in the prices of various chips.”[1]

Leveraging analytics to gauge sentiment

The fact that the semiconductor shortage is becoming a significant concern to manufacturers worldwide is indicated by its increasing prevalence in articles and news feeds. Looking at the analytics shown in Figure 3, we can see that “chip crunch” has been trending for documents tagged in the semiconductor sector since the beginning of December 2020.


Figure 3. Occurrences of “chip crunch” in mainstream media since 1 December 2020

However, what makes interesting reading are the companies most affected by the chip crunch based on the number of times they’re mentioned in the press. Based on ReportLinker’s AI-driven insights, Figure 4 indicates the companies mentioned most frequently are all in the automotive sector—General Motors, Toyota, Ford, and Volkswagen.


Figure 4. Companies in the news related to the semiconductor shortage

Evaluating the most affected sectors

Why is the automotive sector being affected more than other industries? Filtering the “chip crunch” insights according to Content Type (Industry analysts) and Sectors (Electronic Component) provides a list of authoritative reports.


Figure 5. Analyst reports related to the chip shortage

Figure 6. Impact of COVID-19 on the auto chip market

As seen in Figure 6,  the onset of COVID-19 resulted in a sudden drop in demand for new vehicles as people were told to shelter at home. However, by the end of 2020, demand was higher than at the beginning of the year. Since that trend would have been expected in a typical year, why did the pandemic create a chip shortage?

Identifying drivers behind the global chip crunch


Figure 7. COVID-19’s impact on chip production

Figure 8. China’s response to US government restrictions on technology

Figure 9. Increased demand for smartphones and laptops

Figure 10. Taiwan’s drought impacts production

As indicated in Figures 7-10, there was no single thing that created the current chip shortage. Rather, several factors combined to create the problem, including a surge in demand due to the pandemic, the lack of anticipation on the part of automakers, the US-China trade war, and a range of logistics problems exacerbated by Taiwan’s drought.

The bottom line

As countries open up and people get back to their post-pandemic lives, the demand for semiconductors will steadily increase. However, based on the current shortage and the contributing factors, the global chip crunch is expected to continue for the foreseeable future.

But are there other factors contributing to the problem? If so, what will be their impact on the recovery of the semiconductor sector? Find out next week in the PART 2 of this blog.

 

Pooling vast amounts of information and intelligent, AI-based search tools, ReportLinker delivers up-to-date, indepth insights for better, more-informed decision making.

To find out what ReportLinker can do for you and your organization,

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