Understanding 2021’s Bewildering Semiconductor Market
The semiconductor market is experiencing a very unique time, a time where two seemingly conflicting narratives are occurring simultaneously. On one hand, global demand and sales of chips and semiconductors have never been stronger. According to IDC, worldwide semiconductor sales grew to a mammoth $464 billion in 2020, a nearly 11% increase from 2019. Even more impressive, IDC predicts that the semiconductor market will grow 12.5% next year to reach $522 billion.
This growth is the culmination of several industries that are simultaneously exploding as a result of rapidly changing consumer demands. The consumer electronics industry is the most obvious example, with rising demands for ever smaller, faster, and — crucially — more interconnected products. According to Fortune Business Insights, the IoT market alone is poised to be valued at $1463.19 billion by 2027. However, other industries besides consumer electronics have seen substantial growth of their own. Healthcare has seen rapidly increasing demand for portable, more consumer-facing products as acceptance of greater options for self-care continues, and the automotive industry appears to be embracing a long-term transition toward electric vehicles as companies such as General Motors, Ford, Volvo, Jaguar, and others have each placed ambitious goals to eventually move away from the internal combustion engine.
The other side of the story, however, is not so positive. In order to attempt to match this demand spike, electronic and semiconductors have been pushed to their absolute limit, up to the point where OEMs have been forced to accept significant delays on their anticipated production schedule. Ford, for example, has been forced to halt or cut production at eight North American plants for varying periods of time through June.
This doesn’t even factor in the increased strain the COVID-19 pandemic and increased trade tensions between the U.S. and China have had on the industry; all of this combines to create an extremely concerning market that will not correct itself overnight. In fact, even though the shortage has been a regular feature in the national news cycles for most of 2021, recent trends show it is getting worse, not better; according to recent data from Bloomberg, average lead times for chip deliveries increased to 17 weeks as recently as April, up from 16 weeks in March, and their highest levels since 2017.
In an environment giving such mixed messages, OEMs across the entire business landscape must be mindful to see the forest for the trees; while optimism pervades the market and all signs point to high growth potential, such growth will not be realized without a sound, comprehensive strategy to mitigate any and all risks associated with inventory delays. This includes preemptive inventory purchasing strategies, last time buy solutions, diligent BOM monitoring, and much more.
Such inventory solutions can be found right here at Partstat! The future is bright, but the wise never waste a moment to continually improve to proactively overcome the next great challenge.