Semiconductors: The crisis and its winners

Semiconductors: The crisis and its winners

07 December 2021Reading time: 3 minutes

Semiconductors have become an important part of life and industry. It is almost impossible to imagine modern civilization without them. Nevertheless, the world is currently facing an unprecedented semiconductor crisis. Many microchips are currently in severe short supply. Not only industry such as the automotive and technology sectors are struggling with supply bottlenecks and production stoppages, but consumers themselves are also affected. PC components such as the CPU and GPU have become scarce goods.

This semiconductor problem does not only affect computers but also smartphones. This leads to frequent waiting times for new smartphones. For example, the delivery time for a new iPhone 13 Pro, even two months after release, is still three to four weeks. As a consequence, TSMC and Samsung have significantly invested to increase the production capacities.

Intel adjusts its strategy

After important production issues, Intel Corporation has increasingly fallen behind its rivals Advanced Micro Devices Inc. (AMD) and NVIDIA Corporation. This has forced the semiconductor producer from California to break new ground and take action. For example, the technology group is planning a multi-billion investment project for two new chip factories, as reported by the German newspaper Handelsblatt. Likewise, the company wants to open new sites in Europe.

These new production capacities are also necessary, as Intel has decided to no longer produce only its own microchips, but also to take on manufacturing contracts for other companies. The first successes have already been achieved and some semiconductors have been produced for Amazon.com Inc. and Qualcomm Incorporated. Pat Gelsinger, CEO of Intel, also announced that the company is still interested in renewing its cooperation with Apple. This could take the form of continuing to supply Intel’s CPUs (Central Processing Unit) or the production of Apple's own chips.

Intel is now also focusing on the GPU market (Graphics Processing Unit). According to Intel, they plan to release their own graphic cards under the name Intel Arc in the first quarter of 2022 and compete with AMD and NVIDIA in this market.

NVIDIA

NVIDIA celebrates one record after the other - be it the performance of their graphics cards or the quarterly figures. At the same time, NVIDIA’s production capacities can hardly keep up with the demand. Many new graphics cards from the manufacturer are barely available or only at very high prices. These graphics cards have a wide range of applications. For example, they are needed for professional video and image editing, as well as for 3D animations and complex calculations in astrophysics.

In private households, graphics cards are also becoming increasingly important. Due to the e-sports and crypto-mining boom, the demand has also increased strongly here.

NVIDIA is currently trying to take over the British chip developer ARM Ltd. and thus additionally strengthen its market position. ARM Ltd. develops the basic architecture of ARM-based SoC (System-on-a-Chip) and licenses it. These licenses are then sold to chip developers for smartphones, tablets and laptops. The biggest customers here are Apple, Samsung and Qualcomm, whose chips are all based on the ARM architecture.  

Stock overview of NVIDIA

The 52-week low was reached on March 8th 2021 when the NVIDIA stock traded at 115.85 USD. It reached its 52-week high on November 19th 2021 when it traded at 329.85 USD. Over the last 52-weeks, the stock price had a positive trend, especially after mid-October. Indeed, the stock price increased from 218.62 USD on October 15th 2021 to 326.74 USD on November 24th 2021.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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12/08/2022 20:34:59