Despite demand continuing to outpace supply, or perhaps because of it, industry revenue grew by 25% in 2021 to top $500 billion for the first time.
The chip shortage carries on, but Gartner says that hasn’t stopped the semiconductor industry from growing by 25.1% in 2021 to top $500 billion in revenue for the first time.
The latest projections don’t show the chip shortage easing to any large degree until the latter half of 2023, though some industries are likely to see a return to normal later this year. Until new fabs can be built and production increased, supply will continue to outpace demand, which Gartner says is one of the primary reasons for the record-breaking profits.
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“Post”-COVID economic rebounds in 2021 caused shortages in the supply chain that hit the automotive industry particularly hard, says Andrew Norwood, research VP at Gartner. “The resulting combination of strong demand as well as logistics and raw material price increases drove semiconductors’ average selling price higher, contributing to overall revenue growth in 2021,” Norwood said.
The automotive industry isn’t the only place where average selling prices rose: Gartner said that 5G smartphone manufacturing was a major driver, with unit production doubling in 2021 to reach 555 million units.
Interestingly enough, it appears that US sanctions imposed on Chinese chip manufacturer Huawei resulted in growth for vendors like Qualcomm and MediaTek, which both saw revenue growth in excess of 50% from 2020 to 2021. “Meanwhile HiSilicon, Huawei’s chip subsidiary, saw revenue decline from $8.2 billion in 2020 to around $1 billion in 2021,” Norwood said. That’s a huge hit.
Gartner also reports that Samsung regained the top spot in the semiconductor industry (based on revenue) from Intel for the first time since 2018, with a 31.6% revenue growth between 2020 and 2021. Intel, on the other hand, only saw 0.5% growth over the same period. Gartner did not explicitly state that Samsung’s jump was due to increased smartphone production, but Samsung itself announced a more than 50% increase in its profits that has been attributed to increased chip and device sales.
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SK Hynix, Micron Technology, Broadcom, Texas Instruments, NVIDIA and AMD round out the top 10, which collectively account for more than half of the total semiconductor market revenue that Gartner reported.
As has been covered previously, the chip shortage has been driven by supply chain disruptions triggered by the COVID-19 pandemic. While other industries have rebounded, the semiconductor sector has had trouble, which Deloitte said has more to do with how it conducted business before the pandemic than the pandemic alone.
Profits may be up, but that won’t stop widespread and necessary transformation from taking place in the semiconductor industry. Chip makers have begun to pursue localized production, and digital transformation (long resisted in the industry) has begun in earnest as companies start to shift strategies from recovery to building resilience. Just don’t expect it to happen overnight.