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January 28, 2022updated 04 Feb 2022 12:54pm

Semiconductor supply chain pain: Tim Cook, SK Hynix, analysts see an end in 2022, others beg to differ

By Eric Johansson

Tech titans are still feeling the pain of ongoing semiconductor supply chain shortages in their quarterly results, but some CEOs are cautiously optimistic that the worst may soon be over. Some analysts agree that scarcities may be easing by the end of the year.

Covid-19 is often blamed for creating supply chain bottlenecks that have exacerbated the global semiconductor shortage. It also lead to soaring demand for chips as more people worked from home or isolated to abide by social distancing rules, leading many to buy new devices.

But the pandemic wasn’t the only reason behind the perfect storm that has washed over the semiconductor industry. Other factors worsening the scarcity include severe weather, factory fires and soaring demand for silicon.

The combination of all these factors hitting chip suppliers at the same time has meant they’ve been unable to keep pace with strong demand for microprocessors. The dearth of chips has affected multiple sectors, including consumer electronics, automotive and tech companies. Understandably, the question of when the shortages will be resolved is one of great concern for both industry leaders and their consumers. The answer, however, depends on who you ask.

A recent thematic research report from GlobalData noted that the strife between the US and China over the supply chain of chips and minerals will begin to improve in the latter half of 2022, potentially easing the pressure on the industry. The report forecasts the US will spend $52bn on semiconductor production over the next five years.

A Deloitte report similarly stated: “We expect shortages and supply chain issues to remain front and center for the first half of the year, hopefully easing by the back half, but with longer lead times for some components stretching into 2023, possibly well into 2023.”

Over the past few weeks executives at several big tech companies have offered their views on when the scarcity will end and what the shortage will mean for their companies.

Tech companies feel the supply chain squeeze

Tech stocks have taken a beating since the end of 2021. Apple, Alphabet, Coinbase, F5 Networks, Intel, Meta, Microsoft, Netflix, PayPal, Robinhood, Tesla and Twitter are just some of the tech companies whose shares have taken a tumble due to a combination of rising inflation and anticipation of upcoming policy decisions by the Federal Reserve. The supply chain crisis has contributed to the growing inflation.

It shouldn’t shock anyone to hear that supply chain problems were a common theme in several of the tech industry quarterly reports delivered in January.

Let’s look at Tesla, for instance. The electric vehicle giant has seen its stock tumble over the past month, pushing its market cap down below the $1tn mark it briefly enjoyed at the start of 2022. It is currently worth $832.64bn.

Supply chain woes understandably featured in Tesla’s latest quarterly results. The automaker said it was “the main limiting factor” to growth, “which is likely to continue through 2022”.

Nonetheless, Tesla CEO and casual cryptocurrency influencer Elon Musk said he expected sales growth to be “comfortably above 50%” this year.

Another company that has felt the brunt of the chip shortage is Apple. As Verdict has reported in the past, the iPhone maker has made a habit out of warning a supply chain collapse could lead to serious problems down the road.

These repeated concerns haven’t prevented Apple from consistently delivering blowout results. So this week, when it delivered its latest quarterly results, it didn’t take long for the pattern to repeat itself.

The iMac maker drummed up a record-breaking almost $124bn in sales in the December quarter. Shiny as these figures are, CEO Tim Cook’s also shared his views on the supply chain crisis. While the Apple top dog noted that “significant supply constraints” were still a problem, he told CNBC that he expected these to ease for Cupertino in the coming months.

A similar view was taken by SK Hynix when the semiconductor company reported its quarterly results this week. The South Korean company is the world’s second biggest chip maker after Taiwan Semiconductor Manufacturing Company, more commonly known as TSMC. Apple is one of SK Hynix’s clients.

With high demand and shortages prevalent, pushing semiconductor prices up, it was hardly surprising that SK Hynix had enjoyed a fourfold year-on-year increase in its fourth-quarter operating profits. Looking especially at the supply chain issues, SK Hynix also stated that it expected them to ease in the second half of 2022.

Others didn’t share this optimism. Application security company F5 Networks delivered a better-than-expected Q1 result this week, but warned that the supply chain constrains are likely to remain throughout 2022.

Intel CEO Patrick Gelsinger echoed the negative sentiment at a conference call this week, saying he expected constraints to persist this year and into next year as the “unprecedented demand” for chips continued, Reuters reported.

Unsurprisingly, given how disruptive the scarcity of semiconductors has been, entrepreneurs innovating in the supply chain sector have made out like bandits lately.

As noted by the Wall Street Journal, supply-chain technology startups raised $24.3bn in venture funding in the first three quarters of 2021, 58% more than the full-year total for 2020, according to analytics firm PitchBook Data Inc.

Freshly minted unicorns in the logistics space include ecommerce fulfilment specialist ShipBob, digital warehouse and distribution provider Stord and Flock Freight, a platform that matches shipper loads to trucks.

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