In 2021, the global semiconductor chip industry accelerated by a 25.6% rise into 2022 and is on track to reach about $600 billion dollars by the end of the year. The need is greater than ever for chips and the imbalance between supply and demand is the top issue for the industry. The 2022 Semiconductor Industry Outlook shares, “Chips will be even more important across all industries, driven by increasing semiconductor content in everything from cars to appliances to factories, in addition to the usual suspects—computers, data centers, and phones.” Through the pandemic and supply chain shortages, the semiconductor industry is now viewed as an essential industry.
As the Chip Shortage Continues, Improvements are Made:
Now, 2022 will not have the same shortage experiences as 2021, but we should be prepared for delays up until the start of 2023 to allow chipmakers, distributors, and end customers to have the opportunities to work together to transform their legacy supply chain into a digital supply network. “To find their footing in 2022, semi companies should move to a digital capabilities model and should redesign their traditional organizational silos to create a more connected and integrated model—one that encompasses their customers, talent, and suppliers across all tiers, channel partners, and internal facilities. They should also work to adopt better customer connections, synchronized planning, dynamic fulfillment, supplier collaboration, operations command centers, and digital development.” (Semiconductor Outlook).
As we work toward adding new capacity in technology, there are many already in progress for production. An analysis of Gartner data shows that “most advanced nodes (10 nm and under) will grow 24% year over year in 2022; intermediate nodes (14 nm to 45 nm) will grow 14%, and mature nodes (65 nm and above) will grow by 9%. Although much attention has been paid to more advanced nodes, it’s worth noting that even in 2022, mature node manufacturing is expected to account for nearly 64% of global chip output, measured in wafer equivalents.”
Industries are being Transformed:
– Automotive Semiconductor Market:
In the current market, the increase in vehicle production is a direct reflection of the growth of the automotive semiconductor industry. “The global automotive semiconductor market size is expected to reach USD 63.92 billion by 2028. The market is expected to expand at a CAGR of 6.2% from 2021 to 2028.” With the growing focus on vehicle safety, electric cars, radar chips, engine control units (ECUs), and emerging technologies such as 5G and IoT capabilities, the demand for automotive semiconductors continues to increase.
– Cloud demand: the demand for servers is increasing in 2022
Cloud is the powerhouse that drives digital transformation in today’s world. As the need to have a cloud service that can provide desired business and technology outcomes increases, IT leaders are taking initiative to transform their digital journey. The growth worldwide has users spending 494.7 billion in 2022 on public cloud services. Gather research shows, “Infrastructure-as-a-service (IaaS) is forecast to experience the highest end-user spending growth in 2022 at 30.6%, followed by desktop-as-a-service (DaaS) at 26.6% and platform-as-a-service (PaaS) at 26.1%. The new reality of hybrid work is prompting organizations to move away from powering their workforce with traditional client computing solutions, such as desktops and other physical in-office tools, and toward DaaS, which is driving spending to reach $2.6 billion in 2022. Demand for cloud-native capabilities by end-users accounts for PaaS growing to $109.6 billion in spending.” With an increase in end-user spending, the demand for cloud servers hits the highest levels it has experienced in the industry.
Table 1. Worldwide Public Cloud Services End-User Spending Forecast (Millions of U.S. Dollars)
| 2021 | 2022 | 2023 | |
| Cloud Business Process Services (BPaaS) | 51,410 | 55,598 | 60,619 |
| Cloud Application Infrastructure Services (PaaS) | 86,943 | 109,623 | 136,404 |
| Cloud Application Services (SaaS) | 152,184 | 176,622 | 208,080 |
| Cloud Management and Security Services | 26,665 | 30,471 | 35,218 |
| Cloud System Infrastructure Services (IaaS) | 91,642 | 119,717 | 156,276 |
| Desktop as a Service (DaaS) | 2,072 | 2,623 | 3,244 |
| Total Market | 410,915 | 494,654 | 599,840 |
– Artificial intelligence and Robotics:
With innovations and creativity at an all-time high in the world, the use of AI-equipped robots is changing the way we do work. As everything becomes “intelligent” in the semiconductor industry, it is evident the supply doesn’t meet the demand needed. As per the latest data collected by Statica, in 2025 it is estimated that revenues made from artificial intelligence (AI) related semiconductors worldwide will reach 65 billion U.S. dollars, an increase from the 17 billion U.S. dollars generated in 2017.” Hiring talented tech professionals has been another challenge in keeping up with the demand for high-performing AI chips (GPUs, FPGAs and ASICs) needed. AI impacts the growth of the semiconductor industry in two ways:
- Building demand for innovative technologies
- Enhancing the product fabrication process
AI is the newest wave of technology – cognitive computing and machine learning – must process and analyze vast amounts of unstructured data, requiring tremendous processing power. Only cutting-edge chips with smaller node sizes can supply the kind of high-performance computing the next generation of AI technology will require. As technology continues to rapidly advance, companies that are rapid adopters of AI are in the market race for increasing investment in semiconductor technology.
The Future of Work:
All of the growth in the chip market cannot be done without skilled professionals able to develop, design, and engineer the technology. The semiconductor industry is feeling the effects of the “Great Resignation” where 4 million American workers quit their jobs in August of 2021 alone. There was already a shortage of tech professionals in the industry, but since, it has caused delays in products being accelerated to market because of the lack of resources of the company. This pain point has caused major chip manufacturers to enhance their work/life balance, employee assistance, and well-being programs to better support their organizations.
“In 2022, the semiconductor industry will experience continued strong growth, even as it takes steps to address chip shortages, hire specialized engineering and design talent, and bolster its supply networks using advanced digital solutions.” Semiconductor Engineers are accelerating market growth through creating innovative technologies! Are you looking for your next big project?
