Chipmakers warn of continued supply chain disruptions up to 2023

Inventories ‘are at a historic low’ warns German chipmaker Infineon, while STMicroelectronics says prices will rise for the next two years

In its financial report for the quarter ending 30 June, German chipmaker Infineon warns of a continuing ‘difficult supply environment', with inventories at a ‘historic low', and with resource problems exacerbated by Covid-19 in key supplier countries such as Malasia.

"Demand for semiconductors is unbroken, as they play a key role in enabling the energy transition and digitalisation. Currently, however, the market is faced with an extremely tight supply situation," said CEO Reinhard Ploss.

"Inventories are at a historic low; our chips are being shipped from our fabs straight into the end applications. Under these circumstances, any pandemic-related restrictions on manufacturing, such as those recently imposed in Malaysia, are especially grave."

Despite the strong demand for semiconductors and an increased profit margin, Infineon's profits grew just 1 per cent, below analysts' expectations, owing to the supply line issues.

Car-makers have been particularly badly affected by global chip supply problems, which have been caused by adverse weather conditions in Taiwan and factory fires in Japan combined with the pandemic and booming demand.

Analyst firm Ifo said that the German automobile industry has been affected by shortages of ‘intermediate products', with 83 per cent of car companies saying they'd been impacted in July compared with 65 per cent in April.

"Semiconductor bottlenecks in particular are likely to continue for a while," said director Oliver Falck, who said that suppliers were deliberately stocking up on supplies to mitigate any shortages.

Last week, chief executive of Geneva-based chipmaker STMicroelectronics, Jean-Marc Chery, told Reuters the chip shortage would likely continue until the first half of 2023.

The price of the company's chips has increased 5 per cent compared with a year ago, Chery said, predicting the combination of continued high demand and a disrupted supply chain would lead to further rises for the next two years.

"It's not like in the past, when everyone was waiting for Microsoft to release a new operating system that would drive demand for many more computers," Chery said.

"What we have is global shift ... with massive orders for components."

STMicro will only be able to meet 70 per cent of its orders this year, Chery went on, although he foresees the situation easing after that as the company invests in more production capacity.