ABB Chairman ‘Optimistic’ About Worldwide Chip Shortage Easing Down Soon

Memory chips by South Korean semiconductor supplier SK Hynix are seen on a circuit board of a computer in this illustration picture taken on Feb. 25, 2022. (Reuters/Florence Lo/Illustration/File Photo)

The chairman of Swedish-Swiss engineering giant ABB is expecting the global semiconductor shortage to ease soon, but believes diversifying the chip supply chain is “very important” as China–Taiwan tensions remain a “risk.”

The semiconductor shortage was “really an issue” last year, specifically the first two to three quarters, Chairman Peter Voser said in an interview with CNBC on Monday at the World Economic Forum in Davos, Switzerland. “This was a real shortage on semiconductors, which affected us a lot because clearly when you’re in electrification automation and robotics, one of the key components is semiconductors, and we are using quite complex ones, so therefore Taiwan is very important but also Chinese semiconductors.”

“But if I look today at it, I think it’s now being sorted out. I think global growth slowdown has helped on this as well, and now for the future, I’m quite optimistic.”

COVID-19 in China and disruptions in international trade hit ABB business hard last year. In China, the company was forced to shut down factories during lockdowns. Voser expects a “more normal environment” in China this year.

However, he sees the simmering tensions between Beijing and Taipei as an ongoing risk. Taiwan is home to the Taiwan Semiconductor Manufacturing Co. (TSMC), the largest microchip manufacturer in the world. As such, any threat of disruption to the supply of chips from Taiwan is bad news for the various global businesses that depend on TSMC.

“Having new sources of semiconductors across the world is very important, so you go from one supply source, Taiwan and then China, into multiple source, and that’s where some of the investments are really critical,” Voser said.

Easing Chip Supply Situation

In a Jan. 3rd survey (pdf) by professional services firm Accenture, which polled 300 global semiconductor executives, 77 percent of respondents were expecting the supply chain to be free from COVID-19’s “lingering effects” only in 2024.

Electronics and automotive industries have been forced to scale down production following “persistent chip shortage.” New vehicles can contain up to 1,000–3,500 chips. The report notes that there are “signs” that the chip shortage is easing.

“October 2022’s reported lead times were 25.5 weeks, compared with 26.3 weeks in September. The highest lead times of 27.1 weeks was in May, compared with the 24.4 week delay in the previous October,” the survey report said.

A report (pdf) published by the major accounting firm KPMG in the second quarter of 2022 that surveyed C-level executives from semiconductor firms found that 83 percent of respondents expect chip shortage to end in 2023. Eighteen percent estimate the shortage to end only in 2024.

“Manufacturing expansions are planned in Europe and elsewhere, and brand-new foundries are being built by several companies in the United States, notably in Arizona, Texas, and Ohio,” the report states.

“However, much of this capacity will not be online until at least 2024 and will require skilled technical talent to operate it, of which there is an ongoing shortage.”

US Chip Manufacturing

The United States has taken the initiative to boost its presence in the chip manufacturing sector. Last year, for example, the Department of Commerce stated that a long-term solution was needed to make sure that the issue of semiconductor supply does not pose an economic and national security risk to the country.

In August 2022, the CHIPS Act was passed. Introduced in spring 2020 during the time of the Trump administration, the CHIPS Act is aimed at attracting investment in semiconductor innovation and production.

Between May 2020 and December 2022, more than $186 billion worth of semiconductor manufacturing investments spanning a 10-year period have been announced. Collectively, these projects are expected to generate more than 34,000 jobs.