gave Report revealed that the AI boom has executives worried about whether fabs can keep up. In fact, 59% of 800 global downstream industry leaders surveyed in November 2024 said supply issues are a continuing concern. They expect semiconductor demand to grow by 29 percent by the end of 2026.
The increase in demand is roughly double the growth rate expected by executives in the semiconductor industry, 250 of whom were also surveyed by Capgemini.
“General AI is driving demand for chips, and semiconductor companies are facing increasing demand from consumers who want more personalized and software-based experiences,” said Brett Bontron, Capgemini’s global high-tech industry leader. want.”
The effects of the last global chip shortage are still being felt by downstream industries.
Since the start of the current AI boom, chipmakers have made strides.
Leading graphics processing unit vendor NVIDIA announced. Record revenue of $30 billion (£24.7 billion) in the second quarter of 2024 and has a stock market value of more than $3 trillion (£2.2 trillion). Switch the manufacturer. Broadcom and a memory chip maker SK Hanks have seen similar success.
See: 1 in 10 businesses will spend more than $25 million on AI initiatives in 2024, Ceres reports
These record profits are achieved only by a few core companies that control large parts of the supply chain. NVIDIA, an American company, designs most of the GPUs used to train AI models. However, they are manufactured by Taiwan’s TSMC. TSMC and Samsung Electronics. Companies only which can make the most advanced chips on a large scale at the moment.
But it hasn’t always been plain sailing within the industry. The COVID-19 pandemic caused a global chip shortage in early 2020. Almost half (47%) of downstream organizations surveyed by Capgemini had to scale back some product or feature launches as a result.
By July 2023, manufacturers had ramped up production, and their customers had adjusted to higher expected chip supply. Productivity improvement and Demand for cooling consumer electronics It has since allowed industries to adapt and recover.
However, the Capgemini report found that 49% of downstream organizations consider the impact of chip shortages to continue through November 2024.
Geopolitical tensions are a major concern for chip-dependent businesses.
Capgemini found that only two in five organizations that rely on semiconductors are confident in the resilience of their supply chains. The main factor causing this concern is geopolitical tensions, cited by 69 percent of respondents.
Military tensions between Taiwan and China could seriously disrupt TSMC’s production, affecting supply chains. In January, it was reported that the Chinese government had launched cyber attacks on Taiwan. Double that of last year.
Similarly, other countries are imposing export restrictions on the sale of semiconductors to China due to tensions with the country, including America, The Netherlands, and Japan. Britain too Blocked most license requests. For companies that want to export semiconductor technology to China in 2023.
See: China investigates NVIDIA for allegedly breaking antitrust laws
In August 2023, China’s Ministry of Commerce announced that it would impose export controls on gallium and germanium-related commodities.To protect national security and interests“These rare metals are essential in chip production, and China produces them. 98% And 54% of the world’s supply of gallium and germanium respectively.
After the announcement of US President Joe Biden’s administration A third set of restrictions On semiconductor exports to China in December 2024, China rapidly Sales of germanium and gallium to the US were banned.closed loopholes from its 2023 export controls, and added several U.S. defense tech startups cannot do business in the country.
Concerns about fab capability lead to the search for chip autonomy
The second and third most relevant factors affecting semiconductor supply chain reliability are insufficient fab capacity and a limited number of suppliers, cited by 65% and 52% of downstream organizations, respectively.
In addition to human factors such as geopolitics, natural disasters can also disrupt supply chains if suppliers are based in only a handful of regions. A drought in Taiwan and three plant fires in Japan led to raw material shortages between 2019 and 2021. Electronic products and technology.
While one-third of the downstream organizations surveyed by Capgemini are either considering or actively seeking in-house chip design, governments around the world are seeking national capacity for semiconductor production. are spending billions to increase Semiconductor industry executives surveyed expect domestic sourcing to grow 17 percent by the end of 2026.
In recent years, the United States:
Additionally, Intel, TSMC, Instruments of Texasand Samsung – the world’s largest memory chip maker – has announced plans to build new fabs in the US.
It was announced in August 2023. The UK government will provide 100 million pounds. To boost AI hardware development and address possible computer chip shortages. Last September, Amazon Web Services announced plans to invest £8 billion in data centres. in the country in the next five years
See: UK government announces £32m for AI projects after ending funding for supercomputers
The European Union offered €43 billion ($46 billion) in subsidies to boost its semiconductor sector with its European Chips Act, which was adopted In July 2023. The block also has a lofty production target. 20% of the world’s semiconductors By 2030