![]() While increasing capacity may sometimes help, it will not produce immediate results and typically requires a significant investment for many years before additional revenues-if any-will appear. ![]() But fab construction and production ramp-up for semiconductors are extremely costly and time consuming-often requiring a year for significant expansion or more than three years to build a new facility-which makes it difficult to increase semiconductor volumes quickly. In other industries, manufacturers often respond to shortages by increasing output. ![]() The shortage is now so concerning that it is prompting more large technology companies and major automotive OEMs to move chip design in-house-a trend that could have major implications for the market. What’s more, semiconductor companies are grappling with increased design complexity, a talent shortage, and pandemic-related issues that are disrupting the complex, global supply chain that links players in different markets. The ongoing semiconductor shortage now routinely makes headlines, especially when it forces automotive OEMs to delay vehicle production. Even with fabs operating at full capacity, they have not been able to meet demand, resulting in product lead times of six months or longer. Last year, shareholders saw even higher returns, averaging 50 percent per annum as remote work became the norm and consumers and businesses upped their technology purchases, helping to accelerate the digital revolution.īehind the scenes, however, today’s semiconductor companies are facing a host of challenges. Even before the pandemic, capital markets were rewarding the industry’s surging profitability, with semiconductor companies delivering an annual average of 25 percent in total shareholder returns (TSR) from the end of 2015 to the end of 2019. With chip demand soaring, annual revenue increased by 9 percent in 2020 and by 23 percent in 2021-far above the 5 percent reported in 2019. Based on the numbers alone, this appears to be the ideal time to be a semiconductor company. ![]()
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