Why is the world so lacking in cores(chips)?

Why is the world so lacking in cores(chips) ?

Since the beginning of 2020, the shortage of chips has gradually appeared in the world, and it is getting worse. How serious is the “lack of core” problem? The CEO of Global Foundries Semiconductor said that the company’s chips production capacity until the end of 2023 has been fully ordered.

Moreover, according to his prediction, the problem of “lack of cores” cannot be completely solved in the next 5 to 10 years, and the global semiconductor supply chain may be in a situation of tight supply for a long time. The same situation has also occurred in other wafer foundries.

The foundry fee has increased, and the scheduled production capacity needs to be prepaid in part or in full, and the production capacity in the next one or two years has been booked out.

The problem of “lack of cores” is fully reflected in the automotive industry. According to the data of the forecasting agency AFS (Auto Forecast Solutions), as of November 14, 2021, the global automobile market has lost as much as 10.097 million vehicles due to the shortage of chip supply.

Among them, the cumulative production reduction in Europe this year is 2.859 million vehicles; the cumulative production reduction in Asia this year is 3.677 million vehicles (including 1.981 million vehicles in the Chinese market); the cumulative production reduction in North America this year is 3.152 million vehicles.

Moreover, according to the forecast of AFS, the cumulative production reduction in the global auto market this year may reach 11.263 million units. Some car manufacturers even plan to deliver products that are “short of jins and short liang”:

Li Auto lets users choose whether to deliver the 3-radar version that lacks 2 radars in advance or wait until December to deliver the complete 5-radar version; Xiaopeng Motors Announcement is issued, if the car owner chooses to install the radar after picking up the car.

he will receive the software for free, and the radar will be installed in batches from March 31, 2022; -C interface (reserved holes) and mobile phone wireless charging board models, and it is planned to be re-installed in December.

So, why is there a sudden shortage of cores, and it is so violent and unprecedented? Is it because of the sudden increase in global demand that the increase in global chip capacity/output cannot keep up with the increase in demand? Where is the problem?


A summary of the demand-side situation in the past two years

Among all terminals that use chips, mobile phones have the largest demand for chips (because first, there are many chips used in each mobile phone; second, the production and sales of mobile phones are the largest), followed by computers (including tablets) , home appliances, automobiles, etc.

Mobile phone demand side

Table 1 shows the change in sales of mobile phones, the largest consumer of chips.


Table 1: Changes in global mobile phone sales

Manufacturer 2019Q3    (million) 2020Q3




Two-year cumulative growth rate Average annual growth rate for two years
Samsung 79.9 80.2 77.0 -3.63% -1.81%
Apple 43.5 43.2 50.0 14.94% 7.47%
Xiaomi 32.5 47.1 47.0 44.62% 22.31%
VIVO 30.1 31.8 33.5 11.30% 5.65%
OPPO Calculated into other Calculated into other 33.5   0.00%
Huawei 66.8 51.7 Calculated into other   0.00%
other 100.6 94.0 127.3 26.54% 13.27%
Total 353.4 348.0 368.3 4.22% 2.11%

As can be seen from Table 1, if we only look at the sales changes in the third quarter of each year in the past three years.

The global average annual growth rate in the past two years is only 2.11%.

Considering the accuracy of statistics and the volatility of each quarter, consider By the technological iteration of chips and the increase in storage capacity every year.

The increase in the value of chips should be less than 10%.

Computer demand side

Table 2 shows the shipments and year-on-year growth rates of the top five traditional PC manufacturers in the world in 2020.

Table 2: Global Computer Shipments 2019VS2020

manufacturer 2020 Shipments


2019 Shipments


year-on-year growth rate
Lenovo 72,669 64,855 12.00%
HP 67,646 62,935 7.50%
Dell 50,298 46,546 8.10%
Apple 23,102 17,894 29.10%
Acer 20,989 17,080 22.90%
Other manufacturer 67,901 58,357 16.40%
Total 302,605 267,667 13.10%


Table 3: Global PC Shipments 2021Q2vs2020Q2

manufacturer 2021Q1






Annual growth
Lenovo 20,004 17,434 14.7%
HP 18,594 18,082 2.8%
Dell 13,976 11,994 16.5%
Apple 6,412 5,351 19.8%
Acer 6,027 4,984 20.9%
Other manufacturer 17,314 15,138 14.4%
Total 82,327 72,983 12.8%

It can be seen that the growth of the computer industry from 2020 to 2019 and the annual growth rate of Q2 in 2021 to Q2 in 2020 are around 13%. Considering that sales of computers are about a quarter of those of mobile phones, this growth rate will have less impact on chip demand.

Automobile demand side

In 2021, car production will have the most core shortage. Table 4 shows the 2020 global auto group sales rankings.



Table 4: 2020 Global Automobile Group Sales Ranking

Company Sales (10,000) Annual increase
Volkswagen 931 -14.50%
Toyota 890 -12.00%
Renault-Nissan-Mitsubishi Alliance 795 -20.50%
Hyundai 652 -10.40%
General Motors 626 -13.20%
Honda 450 -14.40%
Ford 415 -18.30%
Fiat Chrysler 390 -16.80%
Logo Citroen 291 -22.00%
Mercedes-Daimler 255 -12.20%

The international credit rating agency Standard & Poor’s recently released a report in July 2021, raising its growth forecast for the global auto industry.

Global car sales are expected to be around 83 million to 85 million in 2021, an increase of 8% to 10%.

Standard & Poor’s analysis said that after being severely hit by the epidemic in 2020, the global auto industry has gradually accelerated the pace of recovery, especially since the second half of 2020, some countries have adopted relevant support policies and stimulus measures, which has driven auto sales.

According to Table 4 and the above statement, the sales volume of automobiles in 2021 is basically unchanged from that in 2019.

Of course, the demand for computing power and power chips for new cars has increased significantly. Likewise, growth in other major chip users, such as home appliances, will be modest in 2020 and 2021.

To sum up, from the demand side of chips, the total demand for chips, equivalent to how many 8-inch wafers are needed, will be quite moderate in 2020 and 2021.

The situation of the chips supply side in the past two years

     Among the global semiconductor companies, 17 are expected to have sales exceeding $10 billion in 2021, as shown in Figure 1. Including six fabless companies (Qualcomm, Nvidia, Broadcom, MediaTek, AMD and Apple) and one pure-play foundry (TSMC). Three other semiconductor companies (AMD, NXP, and Analog Devices) will join the list of “super-suppliers” to watch in 2021.

Table 5: Sales of major semiconductor companies

Company headquarters 2020




Annual increase
Samsung South Korea 61,853 83,085 34%
Intel United States 76,328 75,550 -1%
TSMC Taiwan, China 45,572 56,633 24%
Hynix South Korea 27.075 37,267 38%
Micron United States 22,542 30,087 33%
Qualcomm United States 19,357 29,136 51%
Nvidia United States 14,659 23,026 57%
Broadcom United States 17,744 18.864 18%
MediaTek Taiwan, China 10,985 17.551 60%
Texas Instruments United States 13,574 16,904 25%
AMD United States 9,763 16,108 65%
Infineon Europe 11,225 13,616 21%
Apple United States 11,449 13,430 17%
STMicroelectronics Europe 10,178 12,574 24%
Kioxia Japan 10,553 12,132 15%
NXP Europe 8,391 10,715 28%
Jardnow United States 8,127 10,079 24%
Total 379,336 478,856 26%


Overall, mega-supplier sales are expected to grow by 26% in 2021 compared to 2020. Assuming that 70% of revenue growth comes from price increases and 30% from supply increases, then the average supply increase in the past two years is 7.8%. This growth rate fully or basically fully supports the end market growth in the past two years. The demand for chips .

So, why is there a global shortage of cores? Why is the core missing so serious?

The origin of the missing chips

  1. Huawei’s business has been sanctioned. On September 15, 2020, the date when the US ban on Huawei takes effect, chip companies using US technology will not be allowed to supply Huawei without permission.
  2. Major international suppliers started to stock up for Huawei before the sanctions took effect (a large part of the production capacity was allocated to Huawei), which affected the supply of chips to other customers and caused supply shortages;
  3. The high prices of cryptocurrencies such as Bitcoin have resulted in a huge increase in the demand for mining machines and mining machine chips (including GPUs).
  4. OEMs are not sensitive to price, and even 100% advance payment, which once squeezed the production capacity demand of other normal terminals for OEMs, further resulting in tight supply;
  5. Due to the US sanctions on Huawei, the top mobile phone suppliers have accurately predicted that Huawei’s mobile phone supply and sales will fall off a cliff,
  6. and each (Samsung, Apple, Xiaomi, OPPO, VIVO) has formulated aggressive strategies to seize Huawei’s market share is actively stocking chips and mobile phone terminals, preparing for a big fight.
  7. The stocking amount of the top five companies is far greater than the number of mobile phone sales that Huawei has reduced, making the supply of chips even worse;
  8. Due to the new crown epidemic and some other natural disasters, the world’s famous chip suppliers have been caused to stop production and reduce production from time to time.
  9. Although the percentage is small, it has a great psychological impact on the industry;
  10. Many companies, especially car companies and computer manufacturers, learn from Toyota’s experience and implement JIT (real-time supply, zero inventory).
  11. Under the impact of the above, they are forced to adjust their strategies and change the zero inventory target into a half-year inventory target.
  12. It is equivalent to increasing the demand of the entire industry by 50%/year, which is unbearable for any industry supply chain!
  13. Under the tense situation of the entire industry in short supply, middlemen also began to stock up and increase prices, making the entire industry extremely difficult.

missing chips

To sum up, the overall shortage of global chips is not caused by the surge in overall demand. Several major factors causing the shortage are gradually disappearing or have disappeared.

In addition, the world is also actively increasing production capacity, and the cycle of increasing production capacity is probably in 12 months (with ready-made factory buildings) to 36 months (starting from infrastructure construction),

considering that general international factories will reserve a certain area of ​​factory buildings (one of the authors used to have a world-leading old owner stipulated that the utilization rate of the factory buildings should be forecasted) > 85% to start building new factories), due to the ease of channel supply shortage,

channel stockpiling will gradually be released, the overall shortage of global chips will be resolved in 2022, or even faster.

The shortage of automotive chips

Compared with the overall shortage of the entire integrated circuit industry, the shortage of cores in the automotive industry has different reasons.

As can be seen from Table 4, due to the epidemic in 2020, global car sales will have a large drop of about 15%. Global car manufacturers continue to use the concept of JIT to reduce chip orders on a large scale, while other consumer industries .

The supply of chips in the field is extremely tight, so the majority of chip suppliers have allocated their production capacity to non-automotive needs. However, when the demand for car companies increases in 2021, it is too late to increase orders.

automotive chips

In addition, because the certification cycle of automotive-grade chips is 12 to 18 months, car manufacturers cannot change chip models and suppliers in time, resulting in a shortage of automotive chip supply, which cannot be alleviated in the short term.

Furthermore, car companies have also begun to increase their inventories under possible conditions for the sake of insurance, but each company has shortcomings in stocking, and there are stockpiles, but they are not complete. The demand for power chips has exploded and cannot be eased in a short time.

Therefore, automotive chips, especially automotive power chips, cannot be relieved in 2-3 years.

As the main drive modules (chips) of new energy vehicles gradually transition to silicon carbide (due to the high efficiency, high temperature resistance, high pressure resistance, and high reliability of silicon carbide), the supply of qualified and high-efficiency silicon carbide chips will be extremely limited in the next few years, and the shortage of silicon carbide chips will be The more severe it is, the longer it will last.

The relationship between foundry capacity shortage and out-of-stock

The production capacity of the top five foundries (even those that are not in the market) in 2022 are all booked out, and customers have paid in advance, especially for small and new design companies in China, and they cannot get the foundry. factory capacity. Similarly, the capacity of the packaging and testing foundries is also very tight. There is also the fact that in the past two years, the entire Chinese mainland has purchased packaging and testing capacity (equipment), which is about the sum of the past ten years.

It can be seen that in 2022, the production capacity of both wafer foundry and packaging and testing foundry will be insufficient, especially the production capacity of design companies in mainland China, but does the lack of production capacity mean that it is out of stock? According to Professor Wei Shaojun’s report on December 22, 2021, the statistics in 2021 cover 2,810 design companies, 592 more than last year’s 2,218, and the number has increased by 26.7%. In 2021, the sales revenue of 2,810 companies is expected to be 487.75 billion yuan, an increase of 20.4% from 405.04 billion yuan in 2020. Excluding double counting, the overall revenue in 2021 will be 458.69 billion yuan, an increase of 20.1% from 381.94 billion yuan in 2020.

There is no doubt that we cannot equate the lack of capacity in the foundry with the shortage of stock, if all the design companies can get the capacity they want, they will produce the amount they plan to produce (please note that this plan is It is made when the overall market is short of cores), then the market will definitely be oversupplied.


nd there will be some design companies whose products cannot be sold, or cannot be sold out. Furthermore, China does not need so many design companies. Some design companies will say goodbye to this era regardless of whether they can obtain foundry production capacity.

Just like some mobile phone manufacturers said that due to the shortage of chips, their production and sales have been affected, but the entire mobile phone market, except for very few mobile phones, is still very good to buy, it is still a buyer’s market!

Therefore, lack of foundry capacity does not mean lack of cores, nor does it mean that supply exceeds demand. However, since various design companies are stocking up at full capacity, the foundry in 2022 will still be very tight, and the tight production capacity of some process nodes and characteristic processes will continue into 2023!

At the time of publication of this article, news has come from the industry that orders received by packaging and testing foundries have begun to decline, and individual branches of some large packaging and testing factories have stopped work ahead of schedule for the New Year!

 Capacity Issues in Mainland China

Therefore, from this perspective, the effective capacity demand for foundry in mainland China will continue to increase, and the foundry capacity in mainland China will continue to be in short supply in the next few years.

Of course, considering the status and market share of mainland China in the packaging and testing industry and the production capacity and demand of packaging and testing OEMs will be relatively balanced in the next few years.

To sum up,so that the overall global core shortage will definitely be greatly alleviated in 2022. However, the shortage of automotive chips, power chips and silicon carbide chips will continue for several years!

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