According to multiple investment institutions, the global chip shortage shows no signs of alleviation, despite of increasing demand in 2021. Harlan Sur, J.P. Morgan analyst, noted that global demand for chips has been 10-30 percent higher than actual production capacity. It takes 3-4 quarters for chip foundries to boost production capacity. The ensuing packaging, transportation, and production will take 1-2 quarters. Sur said it will take one year for chips to reach targeted consumers. Back in January, TSMC, the Taiwan-based semiconductor foundry, has decided to invest USD 28 billion to upscale production capacity.
Amid global chip shortages, triggered in part by supply and demand fluctuations because of the Covid-19 pandemic as well as natural disasters , Congress authorized a series of programs and incentives for U.S.-based chip companies earlier this year. Lawmakers included the programs designed to bolster U.S. manufacturing, research, and development in the National Defense Authorization Act for fiscal 2021, which became law in January, but didn’t provide funding for those initiatives.
According to J.P. Morgan chip analyst Harlan Sur, it’s likely that funding for those programs may be included in President Joe Biden ‘s infrastructure bill, one of the next priorities for the administration. Sur expects the “Build Back Better” infrastructure plan to pass in the first half of the year, resulting in funding starting in the second half of 2021.
Sur’s team estimated the incentives and subsidies could total between $35 billion and $37 billion, with about $18 billion to $20 billion for domestic chip manufacturing and $15 billion to $17 billion for chip research and development.
