Analysts Predict a $600B Chip Industry

Article By : George Leopold

The semiconductor industry continues to soar, reflecting a consensus that chip technology is foundational.

This just in: Semiconductors have been elevated to the status of food, power, and transportation, according to a growing number of chip industry forecasts that at last deem chips to be a “essential” industry.

This publication recognized that fact at its founding 50 years ago. A half-century later, an indigenous industry that up and left for Asia beginning in the 1990s is gradually returning to its roots. Who knew it would take a pandemic to make us realize the profound miscalculation U.S. chipmakers made in ceding dominance in semiconductor manufacturing?

This year, according to market forecasters, manufacturers shifting operations back to the U.S. are scrambling to meet demand driven by growing electronic content in vehicles and the networking of things. At the high end of this year’s chip forecasts, for example, professional services firm Deloitte predicts the global chip industry will grow 10 percent this year, with sales for the first time surpassing $600 billion.

That bullish prediction is in line with other forecasts. For example, the World Semiconductor Trade Statistics organization pegs the 2022 global chip market at $601 billion, an 8.8 percent annual increase fueled by double-digit growth in demand for logic and sensor chips.

Those forecasts reflect a 117-percent jump in the Philadelphia Semiconductor Index since the start of the pandemic in early 2020. (We note that the City of Brotherly Love’s chip index hit a three-month low this week, tempering optimistic forecasts while contributing to the uncertainty fogging industry analysts’ crystal balls.)

Among the many uncertainties is how long it will take foundry leaders like Taiwan Semiconductor Manufacturing Co.Samsung Electronics and Intel Corp. to ramp up domestic production. Those new U.S. foundries won’t be operational until 2023 at the earliest, meaning chip shortages are likely to stretch into the first half of next year.

Hard-hit automakers such as Ford Motor Co. and Tesla have responded with fab deals and chip redesigns, respectively. Ford announced a chip collaboration with Globalfoundries in December, but the partners have yet to released details. Tesla reportedly rewrote firmware code to weather the ongoing chip shortage.

Most industry watchers agree that the only certainty in the chip sector this year is continuing uncertainty. The variables include new Covid variants that could further disrupt supply chains along with worsening political gridlock that has slowed passage of U.S. legislation designed to stimulate domestic chip production.

The other wild card is whether China will move against Taiwan, the foundry capital of the world.

The only certainty is that semiconductor technology has emerged as a strategic asset. That reality is reflected in another statistic: Deloitte estimates TSMC, Samsung and Intel will invest upwards of $200 billion through 2023 in U.S. foundry capacity.

Whether lawmakers will follow suit with billions more in tax incentives and R&D investment remains to be seen. In the meantime, the semiconductor lobby is doing its best to advance chip legislation introduced last year.

This article was originally published on EE Times.

George Leopold has written about science and technology from Washington, D.C., since 1986. Besides EE Times, Leopold’s work has appeared in The New York Times, New Scientist, and other publications. He resides in Reston, Va.

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