The chip shortage won’t end in 2022.
In fact, according to AMD CEO Dr. Lisa Su, “There’s tremendous investment that’s happening across the semiconductor industry, whether you’re talking about on the wafer side or on some of the substrates or the back-end assets. So, we are making progress. I do believe that the first half of this year will continue to be quite tight. But the second half of this year, I think things will get a little bit better,” as quoted by Yahoo Finance.
Unfortunately, “a little bit better” may not be enough.
With far more demand than supply, millions of products – including the smartphones, and autos – are coming under pressure.
“We aren’t even close to being out of the woods,” U.S. Commerce Secretary Gina Raimondo tweeted last month. “The semiconductor supply chain is very fragile, and it’s going to remain that way until we can increase chip production.”
Worse, manufacturers that rely on chips are down to five days of inventory, according to the U.S. Commerce Department whose recent study found:
- Median demand for chips highlighted by buyers was as much as 17% higher in 2021 than 2019, and buyers aren’t seeing commensurate increases in the supply they receive. This is a major supply and demand mismatch.
- The median inventory of semiconductor products highlighted by buyers has fallen from 40 days in 2019 to less than 5 days in 2021. These inventories are even smaller in key industries.
- The primary bottleneck across the board appears to be wafer production capacity, which requires a longer-term solution.
With no near-term relief in sight, consider trading the pullbacks in the VanEck Semiconductor ETF (SMH), the iShares Semiconductor ETF (SOXX), Cirrus Logic (CRUS), Qualcomm (QCOM), Micron (MU), and Skyworks (SWKS).
