WHAT'S THE ISSUE?

The COVID-19 pandemic has had a serious impact on the semiconductor industry as with so many others, with major disruptions to global supply chains. But the key question is why this sector seems to have been impacted so harshly.

As Malcolm Penn, Founder and CEO of Future Horizons analysts – a man with more than half a century of experience in this industry explains to Stephen Cole – it is also down to the cyclical nature of the business, and the time it takes to increase manufacturing.

MEET THE EXPERT

Malcolm Penn is the Founder and CEO of Future Horizons - a high-technology market research company and semiconductor industry analyst - with over 50 years industry and technology experience.

Prior to establishing Future Horizons, Penn was vice president of Dataquest (now Gartner) and founder/director of Dataquest's European operations. Before that he was manager of component engineering for ITT Europe (now Alcatel).

WHAT DOES PENN SAY?

The real problem, Penn tells Stephen Cole, is a structural one.

"The supply chain is very tightly balanced because demand changes very quickly up or down – but on the supply side it takes two years to build a new factory. So, you do go into shortages quite regularly. The industry is very cyclical."

And the problem is only exacerbated by some of the semiconductor manufacturers' biggest clients:

"The fundamental problem was that there was no slack in the supply chain system. So the automotive industry cancelled all of their orders back in the March, April time-frame in 2020 when COVID-19 hit and then when they came to reinstate them, they'd forgotten that it takes four to six months to actually reinstate those orders."

As for a solution? 

Penn says it will only happen "when companies start to buy capacity and users and suppliers get together on a very collaborative, cooperative basis."

And in the more than 50 years he's been part of the industry, that has yet to happen.

ALSO ON THE AGENDA:

- Jo Shien Ng, Professor of Semiconductor Devices at the University of Sheffield explains why there's no easy fix for the current shortages, and considers concerns over long-term sustainability.

- And with China, the US, the EU and others all announcing new plans to try to dominate the chips market, Professor Rana Mitter, Director of Oxford University's China Centre, talks to Stephen Cole about why trade tensions could make semiconductors the next geopolitical flashpoint.

FIND MORE STORIES FROM THE AGENDA WITH STEPHEN COLE HERE