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Nature (read: The shortage of extremely small slices of silicon crammed with a bunch of circuits) is healing.
After nearly two years of a steadily deepening shortage, there are signs that semiconductor supply and demand are inching back toward equilibrium. And it’s not because supply has magically increased; it’s because demand for chips is cooling off due to a snarl of economic factors, from rising inflation to slowing growth in China to a pullback in tech funding.
By the numbers: As of May, semiconductor lead time was still a record-high 27.1 weeks, per Susquehanna Financial Group data cited by Bloomberg, but that is basically flat with April and March wait times, a welcome plateau after months of increases. For context, in May 2020, wait time was just 13.6 weeks, but it had surged to 20.4 weeks one year later.
- Mercedes, Daimler, and BMW all told Bloomberg they’re able to operate at full capacity now, after weathering months of production cuts.
Meanwhile, the Wall Street Journal reports that semiconductor suppliers—after flying high throughout the crisis—could be hit hard by weakened demand as the shortage eases.
- Global semiconductor revenue hit a record-high in 2021, reaching ~$556 billion, compared to about $440 billion in 2020, per the SIA—a 26% increase year-over-year.
- Units shipped also hit a record high, with 1.15 trillion semiconductor units changing hands in 2021.
Bottom line: The semiconductor squeeze may be starting to let up, but that doesn’t mean it’s over. Reuters reported Wednesday that many companies, as well as the US Secretary of Commerce Gina Raimondo, expect the shortage to last through at least through 2023.
“It’s not perfect, but it’s better than last year,” Karin Radstrom, head of Daimler Truck’s Mercedes brand, told Bloomberg. “I try to not celebrate too early. We’re still monitoring the situation closely.”