Expect the semiconductor shortage to last until early 2023, Deloitte said in a new report released Wednesday. By the end of 2022, customers will still be waiting 10 to 20 weeks for multiple kinds of chips, the consulting firm predicts.
While the shortage will continue, it will be less severe, Deloitte says in its Technology, Media & Telecommunications (TMT) 2022 Predictions report. The shortage is also driving fresh investment in the industry, as demand continues to grow. Deloitte predicts that venture capital (VC) firms globally will invest more than US$6 billion in semiconductor companies in 2022. That's more than 3x larger than VC investment in semiconductors every year between 2000 and 2016.
The ongoing shortage won't hit the industry evenly, Deloitte notes. Chips made on the most advanced process nodes (3-, 5-, and 7-nanometer) will continue to be in short supply -- they're in high demand and the hardest to make. At the end of the day, Deloitte predicts the shortage will last 24 months before it recedes, similar to the duration of the 2008–2009 chip shortage.
In spite of the challenges, global semiconductor sales have been and will continue to go up. Sales increased by 20% in 2021, and they are predicted to rise a further 9% to $574 billion in 2022, according to the Semiconductor Industry Association. Chip demand for both devices and data centers spiked in 2020 and 2021, thanks in part because of the pandemic. In 2022, demand is expected to remain well above long-term trends.
Correspondingly, VC firms will make serious investments in semiconductor companies in 2022, Deloitte predicts. The predicted $6 billion in investment in the industry may seem like a drop in the buck when it comes to VC money -- VCs are expected to make more than $300 billion in investments in 2022. It's a significant amount, however, when compared to semiconductor investments over the past 20 years. This year was an aberration from the norm, when VCs invested a "remarkable" $8 billion, Deloitte noted.
In addition to high demand for new chips, Deloitte said the investments are driven by demand for new chip designs and architectures, increased government investment, growing fab capacity and relatively high tech valuations.
Most VC investments will go toward fabless companies that will be able to take advantage of the growing global manufacturing capacity. As many as 29 new fabs have started or will start construction in 2021 and 2022, Deloitte notes, spanning China and Taiwan; the Americas; Europe, the Middle East, and Africa; and Japan and Korea. As a result, global manufacturing capacity is expected to grow by 36% from 2020 to the end of 2022.
While investments in the industry are happening everywhere, current trends suggest VC money will largely flow to China. Investments in Chinese semiconductor companies tripled from 2019 to 2020, Deloitte notes. In the first half of 2021 alone, VCs from both inside and outside China invested $3.85 billion in Chinese chip companies.
As investment in the industry increases, Deloitte also predicts RISC-V processing cores will gain traction. It expects the RISC-V market to double from 2021 to 2022 -- and to double again in 2023. RISC-V is an open-source set of instructions for chip design that offers various advantages over proprietary instruction set architectures (ISAs). For instance, the savings in license fees is a benefit for startups; the lack of sanctions impacting RISC-V benefits some companies, especially those in China. Additionally, RISC-V designs are easier to modify than traditional ISAs and are compatible with a wide range of applications.
RISC-V revenue will likely reach close to US$800 million in 2023, Deloitte says, up from less than $400 million in 2021. It is expected to approach $1 billion by 2024.