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The global chip shortage has put pressure on all supply chains from mobile phones to data centers, but the Chief Investment Officer (CIO) of UBS Wealth Management believes that the chip shortage should be short-lived and most challenges will be resolved due to increased investment by leading semiconductor companies and governments. The chip shortage is expected to be completely resolved in the first quarter of 2022.
A report released by the Office of Chief Investment Officer of UBS Wealth Management on the 1st pointed out that mainland China, like other parts of the world, is facing a chip shortage. The impact on the automotive industry is particularly obvious. Many well-known global automakers have cut their full-year profit targets. Mainland automakers, which have just recovered from the low tide of the COVID-19 pandemic last year, are also struggling to support themselves.
As for the causes of the global "chip shortage", UBS believes that, first of all, the Sino-US trade tensions from 2018 to 2020 led the management of most companies to decide to postpone capacity expansion. This caused the global annual semiconductor wafer equipment investment to stagnate at around US$50 billion, and it did not start to pick up until 2020, and further rose in 2021 due to supply shortages.
Second, it takes time for increased production capacity to bear fruit, so supply has not kept up with soaring demand during the pandemic. Travel restrictions have accelerated many digital trends, leading to a sharp increase in spending on equipment such as PCs, data centers and smartphones, exacerbating the imbalance between chip supply and demand.
Third, the rise of new technologies such as cloud computing, electric vehicles, artificial intelligence and 5G has led to an unprecedented increase in the number of chips required for each device. The number of chips used in 5G mobile phones has increased by 40% compared to 4G. Compared with traditional models, the chip density of new energy vehicles such as electric vehicles has also increased significantly.
Fourth, there is a general lack of awareness of early deployment in the industry. In the past, governments did not pay much attention to the chip industry and their own supply chains. However, with the acceleration of the localization trend caused by the COVID-19 pandemic and the chip shortage, this situation has changed. Currently, governments in many countries are promoting policies that will help the development of the chip industry, but these policy measures will take time to translate into supply improvements.
UBS said the good news is that most of the challenges have been resolved due to increased investment by leading semiconductor companies and governments. This will drive supply conditions to improve by the end of the year. Therefore, UBS is consistent with the guidance given by leading chip manufacturers, believing that the chip shortage will be fully resolved in the first quarter of 2022.
UBS said that China was one of the first countries to recognize the strategic importance of semiconductors. As early as 2014, the government established the China Integrated Circuit Industry Investment Fund (CICIIF). Since then, the fund has raised huge amounts of funds to support the development of the domestic semiconductor industry. Therefore, despite its late start, China's share of global semiconductor capital expenditures has risen from nearly 6% in 2019 to 9% in 2020.
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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