CHIP SHORTAGE NEWS The Global Semiconductor Crisis: A Review of Q1 2024

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The global chip shortage has been an urgent matter for some time now. But what has happend since than and what is the current situation? In this article you will find out what's been going on since the start of 2024. Let’s take a look at some of the main developments of this quarter.

Since the emergence of the pandemic four years ago, the semiconductor and microchips industry has faced significant fluctuations worldwide, influenced primarily by factors such as supply chain disruptions and shifting consumer demands.

This led to a turbulent few years between 2020 and 2022, where supply constraints consistently hit automotive and electronics manufacturers. In the last year, however, there has been a notable improvement in chip supplies. There was a market rebound in late 2023, and this trend appears set to continue in 2024. This is supported by estimated growth figures. The global semiconductor market was valued at US$ 610.15 billion in 2023 and is expected to reach around US$ 736.40 billion by 2027, representing a compound annual growth rate (CAGR) of around 6.30 %.

What were the most important chip shortage news in Q1 2024? Below we summarize the biggest headlines from January to March.

January 2024

According to the Semiconductor Industry Association, year-to-year semiconductor market growth in January 2024 was the largest since May 2022, with a 15.2 % increase reported.

“The global semiconductor market started the new year strong, with worldwide sales increasing year-to-year by the largest percentage since May 2022,” said John Neuffer, SIA president and CEO. “Market growth is projected to continue over the remainder of the year, with annual sales forecast to increase by double-digits in 2024 compared to 2023.”

At the same time, Taiwan’s Foxconn, Apple’s biggest iPhone assembler, said that it expected its business to be “slightly better” in 2024 compared to 2023, but it admitted that it’s facing a shortage of AI chips.

"We did pretty well last year, although we had a rather large write-off in the first quarter," Foxconn Chairman Liu Young-way said in January, referring to a write-down related to its 34 % stake in Japanese electronics maker Sharp Corp. "As for this year's outlook, I think it might be slightly better than last year," Liu told reporters on the sidelines of the company's annual employee party in Taipei. In November, Foxconn said that it had a “relatively conservative and neutral” outlook for 2024.

It wasn’t all good news, though. Following Red Sea attacks by Houthi rebels, Tesla and Volvo temporarily halted some of their vehicle production in Europe because of a shortage of parts. Tesla suspended most of its car production at its Berlin facility between January 29 and February 11, whereas Volvo halted its production for three days. Though not directly related to the semiconductor shortage, this situation highlights the problem of overreliance on overseas chip supplies and is what legislative efforts such as the U.S. CHIPS and Science Act and the EU Chips Act aim to prevent.

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February 2024

India’s plans to let a 1998 digital trade deal expire led to fears of a worsened chip shortage and harm the country’s plans of becoming a global chip leader. Developing nations like India, South Africa and Indonesia were set to oppose efforts by U.S. and Europe to extend the moratorium. If no agreement was made, the moratorium was set to expire this year.

The moratorium collapse would mean tariffs on digital e-commerce and an innumerable number of transfers of chip design data across countries, raising costs and worsening chip shortages, the World Semiconductor Council (WSC) wrote to Indian Prime Minister Narendra Modi.

Following the WTO conference, however, the moratorium was extended through to the next conference in March 2026. This was achieved despite strong opposition from India, South Africa, and Indonesia, and was seen as an act that simply kicks the can down the road and creates yet more chips uncertainty for the future.

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March 2024

It was announced in March that five suppliers to Intel and TSMC have postponed or scaled back their construction projects in Arizona, citing rising construction costs and labour shortages. These setbacks came despite the suppliers' initial plans to build facilities following Intel's and TSMC's plans to build new semiconductor production facilities in the state.

These delays are occurring at the same time as the U.S. government prepares to finalise subsidies for the CHIPS and Science Act to support the growth of the domestic semiconductor industry. Financial support will only be available after the subsidies for major chipmakers like Intel, TSMC, and Samsung are decided, however. Due to rocketing costs, uncertainties surrounding subsidies are slowing down progress in building the much-needed new chip fabs.

LCY Chemical, a major supplier of high-purity chemicals to Intel, Micron, and TSMC, has decided to slow down the construction of its U.S. plant in Arizona due to escalating costs. Solvay, a leading provider of hydrogen peroxide for chipmaking, has also put the construction of its Arizona plant on hold and is awaiting further review. The same can be said for Chang Chun Group, which produces semiconductor-grade hydrogen peroxide, and KPCT Advanced Chemicals, which is constructing a high-purity sulfuric acid plant.

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The shortage is slowing, but uncertainties still exist

While it’s clear that the shortage is slowing down and has virtually ceased in some areas — we’re no longer seeing automakers suspending their production activity on a weekly basis due to chip shortages, for example — continued uncertainties risk stifling long-term progress, particularly in the U.S. where a lack of transparency surrounding subsidies has led to large-scale chip capacity projects grinding to a halt.

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