Inside the Semiconductor Shortage

S&P Global Ratings believes the effects are broadening, disrupting the supply, operations, and prices of the smartphone and PC makers, and also the semiconductor firms that rely heavily on contract suppliers. S&P Global Ratings believes chip shortfalls will be the major variable affecting the revenues and profits of key global entities that S&P Global Ratings covers, for at least the next 12 months.

Ford Motor Co. has extended production halts at four U.S. plants and one in Canada for an additional two weeks, The Wall Street Journal reported, due to ongoing semiconductor shortages. The outages will reportedly impact the production of the F-150 truck that the company had previously kept going with reduced content.

Global semiconductor supplies continue to grow rapidly, as discussed in Panjiva's research of April 21, but a reduction in orders during 2020 has led manufacturers to prioritize other customers. A call to arms by the Biden administration is unlikely to yield an increase in availability within the time frame of a few months.

Aluminum demand should take only a limited hit in the automotive sector over the next quarter, even as vehicle manufacturers experience production disruptions caused by a global semiconductor shortage, Novelis CEO Steven Fisher said May 12.

"While we do expect to see some impact to our automotive shipments in [the next quarter], we believe it would be relatively limited as OEMs are prioritizing their production towards larger and more high-end vehicles like SUVs and EVs that favor aluminum," Fisher said during an earnings call with analysts.

Fisher said Novelis was also in a position to divert its capacity to other customer bases, regions or end markets to mitigate any larger impact it may experience from the automotive sector beyond the next quarter. Beverage cans continue to be a strong sector where the company can redirect production, he added.

Geopolitical tensions with China persist, despite a new U.S. administration. Near-term demand outlook for the global semiconductor market appears strong; federal policy and financial support would further support growth for U.S. semiconductor firms and equipment makers.

U.S. government's advocacy for less reliance on foreign chip making and incentives for domestic manufacturing should increase capital spending among semiconductor manufacturers; however, closing the manufacturing process technology gap with Taiwan Semiconductor Manufacturing Co. Ltd. will take time.

S&P Global Ratings expects the current semiconductor market upcycle to extend beyond 2021, raising upside potential for issuer ratings. Still, despite the broadening of end markets, the semiconductor industry will continue to be subject to short-term supply-demand imbalances and in the longer term, China's ambition for tech supremacy.

As chip shortages and geopolitical uncertainties plague the tech sector, Apple Inc. is making moves to play by its own rules.