Semiconductor outlook 2022: an industry perspective

2021 was an unprecedented period — a very challenging year for many industries and for the semiconductor industry in particular.

The shortage of semiconductors that has been experienced globally is related to the fast recovery of the economy following the initial impact of the pandemic. But it is also related to an ongoing transformation of two of the markets we address, ie, automotive and industrial.

The automotive industry is moving to electrification and digitalisation. The changes in car architecture enabled by these two shifts have opened the market to new players across the value chain, changing some of the market’s dynamics and key players. Here, Asia — and China in particular — is finding success.

The industrial market is also undergoing a transformation, to meet the challenges of the ‘green economy’, of smart industry, of smart cities, of smart buildings. And these transformations are boosted by governments’ incentives accelerating the changes.

The key impact of the pandemic, beyond the short-term economic impact, has been the acceleration of those transformation trends, which reflects all industries we serve with higher-than-initially anticipated growth rates or system architecture changes.

Finally, we are also seeing changes in the global economy, which is moving from complete globalisation to partial regionalisation in some areas.

***************

Interview with Jean-Marc Chery, STMicroelectronics President and CEO

Looking ahead to 2022, which market segments are you most optimistic about? What is your company planning accordingly?

At ST, our strategy stems from the three long-term enablers — smart mobility, power and energy, and IoT and 5G — that we’d already identified and had in place years ago, and that the pandemic has made even more influential. We had seen an acceleration of these trends following the initial phase of the pandemic, and we can confirm that we will continue to see this acceleration also next year.

First, smart mobility. For ST this is about helping car manufacturers make driving safer, greener and more connected for everyone. It is also about applications that create the supporting infrastructure, such as fast charging stations for electric cars.

We have seen this trend strengthen recently with an even stronger push towards car electrification and digitalisation. Government mandates and investment programs across the globe are providing a strong push. We can see this reflected in both the forecasts for the proliferation of electric vehicles, as well as the take-up of ADAS features in the coming three years where the average growth rates have accelerated considerably versus the beginning of 2020. This in turn drives investment in infrastructure such as fast charging stations and vehicle communication installations.

Second, power and energy management. The goal here is to enable the many different industries to increase energy efficiency everywhere while increasing the use of renewable energy. This increase in efficiency is driven by smarter system design, making use of the ever more efficient power semiconductors as well as digital power control solutions.

Here again we see an acceleration supported by government mandates and investment programs in key infrastructure like electricity grids, clean public transport and the energy transition. China is investing heavily here to support this energy transition and the commitment to carbon neutrality, with an acceleration in the use of renewables such as wind, solar and hydro for electrical energy generation, solar thermal for heating, and biofuels for transport. And this is all linked to sustainability goals that we as a global community need to achieve.

Encouraging the use of renewable energy solutions by making them more cost-effective and efficient is a key element where the semiconductor industry can strongly contribute. For example, ST has committed to purchase 100% of its electricity from renewable energy sources by 2027. So this is clearly a main focus area for ST, and we are making a number of strategic investments in this area. We are accelerating our own sustainability effort and committed at the end of last year to become carbon neutral by 2027 — the earliest commitment of any semiconductor company.

The third enabler is the Internet of Things and 5G. Here we want to support the proliferation of smart, connected IoT devices. We provide the necessary building blocks and the associated development ecosystems to device creators. We provide microcontrollers, sensors, standalone connectivity and security solutions, and the analog and power management products needed for a complete system. Once again, we have seen an acceleration since last year — for example, there has been strong growth in the smart home appliances, with further acceleration forecast in the coming years. We also see an increase in the investment in infrastructure by the major cloud service providers in the next three years.

The strategy ST has been following is based on these three enablers and the developments. We make long-term investments in the key technologies needed to support the enabling trends and to contribute to a more sustainable world. The recent acceleration of these trends confirms that we have set the right strategy to serve our customers and the broader interests of society. In 2022, we remain determined to continue to make ST stronger, outperform the markets we serve, provide best-in-class service to our customers and partners, while accelerating our own efforts on sustainability.

Do you think the chip shortage will continue in 2022? In response to this situation, will there be any countermeasures from the company?

We predict the global chip shortage will gradually be improved in 2022 but might not return to ‘normal’ until the first half of 2023.

Our first priority is to manage the short term in order to avoid structural damage linked to the overstretched supply chain of semiconductors with our customers. So this is our main priority. It is a heavy task for all our management.

Then for the medium term for 2022 and 2023, first of all, we are starting to discuss with our customers the lessons learnt and how we can better plan in the future and give better visibility to the semiconductor supply chain to prepare with some flexibility. So we are working with them in order to plan our CAPEX and/or pass the information to our partners.

***************

During the coming years, ST will invest significantly in order to set up the right manufacturing base to support our customers.

This year we will spend approximately $2.1 billion of CAPEX. This includes $1.4 billion for global capacity increases well as ~$70 million for what we call strategic programs, to prepare the future. These programs include our new 300 mm fab under construction in Agrate (Italy), our silicon carbide initiatives in Catania (Italy) and gallium nitride in Tours (France).

We will increase our front-end manufacturing capacity significantly in the next four years and plan to double the overall capacity in our European fabs between 2020 and 2025. This is mainly through increases in our 300 mm capabilities but also includes selective increases in our 200 mm manufacturing capabilities for technologies that do not require 300 mm such as BCD, advanced BiMOS and ViPower.

We are also continuing our investments in silicon carbide manufacturing capacity in Catania, Italy and Singapore as well as in verticalisation of the supply chain. We plan to increase our SiC front-end manufacturing capacity 10x vs the 2017 level by 2024 as we support the ramp-up of the many customer programs we have in both the automotive industry and industrial applications.

Top image credit: ©stock.adobe.com/au/kromkrathog