In a Sept 8 report by Reuters, Intel announced it could invest as much as 80 billion euros ($123.85 billion) in Europe over the next decade to boost the region’s chip capacity and will open up its semiconductor plant in Ireland for automakers. Intel CEO Pat Gelsinger also said the company will announce the locations of two major new European chip fabrication plants by the end of the year. Reuters said there is speculation about possible production sites, with Germany and France seen as leading contenders, while Poland, where Intel also has a presence, is also in the picture. In October, Intel announced it is spending US$20 billion this year, including expenditure to be incurred for a new plant in Arizona. Most recently, on Dec 13, Intel announced it is spending US$7 billion to build a new plant in Penang, where it already has a significant presence for years.
Gold made the panners of the California Gold Rush in the 19th century rich. Semiconductors are the equivalent of gold in 2021.
Throughout most of this year, these silicon chips were worth their weight in gold, almost literally, as demand spiked and chipmakers struggled to produce enough of the precision-made silicon pieces to fulfil all their orders.
One only has to look back a few months to see news coverage of all sorts of products that are being hit by this shortage of chips. Samsung Electronics delayed its Galaxy Note smartphone to 2022, and carmakers like Audi and Nissan reported that they were forced to idle some factories as there was just not enough of the silicon to go around.
The shortage also caused prices of consumer products to spike, leading to unhappy customers who were unable to get their hands on flagship products like Sony Electronics’ Playstation 5 and graphics cards for their computers.
Of course, the chipmakers and their suppliers that keep them running saw record sales and profits. Global sales of semiconductors rose 24% y-o-y to US$48.8 billion (about $66.7 billion) in October 2021, said the US-based Semiconductor Industry Association (SIA).
Additionally, the SIA endorsed the World Semiconductor Trade Statistics’ 2021 global semiconductor sales forecast, which projects the industry’s worldwide sales to be US$553 billion in 2021, a 25.6% increase from the 2020 sales total of US$440.4 billion.
For example, the world’s largest semiconductor manufacturer, Taiwan Semiconductor Manufacturing Corp (TSMC), reported a 13.8% jump in earnings to US$5.61 billion in its 3QFY2021 ended September, while revenue came in at US$14.88 billion, a 12% rise from the second quarter and a 22.6% increase y-o-y.
Capacity expansion
The good news is that there may be some light at the end of the tunnel. Semiconductor companies have promised capacity expansion to ease this crunch, or in the words of a Bloomberg report, “to capture rampaging chip demand”.
Statista reported increased levels of capital expenditure (capex) are required across the entire semiconductor value chain to meet the demand for semiconductors from all sectors of the economy. As a result, capex is regarded as a key indicator of growth in the semiconductor industry. In 2010, semiconductor capital spending amounted to US$54 billion. A decade later, this figure has more than doubled to over US$109 billion.
