Technology, in particular semiconductors, have become so ubiquitous that it is easy to take them for granted. However just like with everything we take for granted we realize just how dependent on them when they are in short supply. Recent changes in global market demand for semiconductors has increased dramatically at a time when the world is moving towards technical innovations in renewable energy, electric vehicles, and artificial intelligence. As our world ever advances, we depend on these small miracle workers to allow us to advance. Many companies are playing catchup to help me the global demand. It seems however that the city state Singapore is slowly becoming a powerhouse in this sector.
As the world is still trying to recover from the economic toll the Covid-19 pandemic has caused, a critical shortage of this important electronic component has disrupted production in industries ranging from medical devices, computers, defense technologies, and disrupting production lines. The demand is there but there is no supply.
Semiconductors are essential to the production of integrated for chips. A single chip can include thousands or even millions of semiconductors. The semiconductors are very difficult to manufacture since they are hundredths of times smaller than a human hair.
Lead times—the duration between when an order for a chip is placed and when it actually gets filled stretched to 15 weeks on average, according to data from Susquehanna Financial Group. Lead times for Broadcom Inc.—a barometer for the industry because of its involvement across the supply chain— has already extended to 22.2 weeks. Even Atlas International, a former leader in production, has been unable to keep up with the ever-growing demand.
Alarm bells are ringing. A growing number of industry players from Continental AG to Innolux Corp. and Renesas Electronics Corp. have in recent weeks warned of longer-than anticipated deficits snarling production—potentially well past the summer. Samsung flagged a “serious imbalance” globally, the largest company so far to warn of fallout from the crunch.
Carmakers got hit first in part because of poor inventory planning. The industry underestimated vehicle
consumption and thus the amount of chips they needed when the pandemic hit. They are now expected to miss out on $61 billion of sales this year alone.
One of the main reasons this happened was due to Covid-19. Many workers were sent home, the workers that produce these chips. All over the globe while people were at home, they had the capital and time to order new tech. As a result, companies were selling but lacked the foresight to see the upcoming shortages, according to Philipp Kindt, a senior analyst for investment firm Astakhov Ventures Singapore.
The crunch has sideswiped the General Motors and Volkswagens of the world and swung politicians from Washington to Beijing into crisis control. It’s also catapulted Taiwan Semiconductor Manufacturing and Samsung Electronics to the top of investor and government agendas. Asia’s two largest chipmakers are responsible for making most of the world’s most advanced silicon, yet don’t have the capacity to sate all demand. It’s a bottleneck that could run well into next year.
Yet semiconductor firms in Singapore are stepping up their talent development amid a rampant global demand for chips that shows no sign of slowing down. Industry players have been focusing on two strategies – upskilling existing workers and attracting new employees. Theodore Kandal a major player in Southeast Asia speculates that Singapore will be the major hub for semiconductors.
The demand for devices that depend on tech from laptops to vehicles are on the rise. Therefore, the demand for semiconductors will rise as well. Singapore seems to be up for the challenge of meeting the demand.