As the semiconductor chip shortage is a dynamic situation globally, it is crucial to for business leaders to understand how it changes on a continuous basis.

The global semiconductor shortage will persist throughout 2021, and is anticipated to the normal levels by the 2Q of 2022, reveals Gartner. This shortage will rigorously disrupt the supply chain ecosystem and will constrain the production of several electronic types of equipment in 2021.

The foundries are raising wafer prices, and in turn, chip-makers are increasing the device prices. The chip shortage began primarily with devices, including power management, display devices, and microcontrollers – fabricated upon legacy nodes at 8-inch foundry fabs and it has a limited supply.

The deficiency has now extended to various devices, and there are capacity constraints as well as shortages for substrates, passives, wire bonding, materials, and testing. These all are a part of the supply chain, beyond the chip fabs.

In fact, these are highly commoditized sectors with minimal flexibility or capacity to invest aggressively over short notice. Spanning most categories, device shortages are forecasted to be pushed out until the second quarter of 2022.

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However, the substrate capacity constraints could potentially expand until the fourth quarter of 2022. As a result, Gartner recommends that OEMs dependent on semiconductors need to take key actions to mitigate risk and revenue loss amid the global chip shortage:

• Extending supply chain visibility –The chip shortage makes it vital for supply chain leaders to broaden the supply chain visibility beyond supplier to the silicon level. This will be critical in projecting supply constraints as well as bottlenecks.
• Securing supply with companion model and pre-investments– OEMs with smaller and critical component requirements need to partner with parallel entities and approach chip foundries or OSAT players as a combined entity – to gain leverage.
• Tracking leading indicators– While no relevant parameter will project how the shortage situation will further change, a combination of relevant parameters can help enterprises in the right direction.
• Diversifying supplier base– Qualifying a varied source of chips or OSAT partner will need additional work and investment. However, it would go a long way in reducing risk. Even strategic and tight relationships with distributors and traders can help to find the small volume during urgency.

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As explained by Gaurav Gupta, research vice president at Gartner in the company blog post – “Since the current chip shortage is a dynamic situation, it is essential to understand how it changes on a continuous basis.”

He also said, “Tracking leading indicators, such as capital investments, inventory index, and semiconductor industry revenue growth projections as an early indicator of inventory situations can help organizations stay updated on the issue and see how the overall industry is growing.”

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