Companies anticipate increasing supply bottlenecks for chips

Delivery delays and price increases are the most serious problems
China and the USA are the most important countries of origin for semiconductors
Companies call for political support for the development of a semiconductor ecosystem in Germany

Berlin, October 24, 2023 - The shortage of semiconductors remains a serious problem in Germany. 9 out of 10 companies (89%) that purchased semiconductor parts or components this year had difficulties with procurement. This is another 8 percentage points more than in 2021, when 81% reported corresponding problems. The difficulties are manifold: 97% of the companies affected are struggling with delivery delays, 93% are confronted with price increases. For 89%, certain components are partially unavailable, while 88% have seen their delivery quantities reduced. The average delivery delay for semiconductor parts and components in Germany is currently around 5 months. This means that the delay remains at a high level: two years ago it was 6.5 months. These are the results of a representative survey conducted on behalf of the digital association Bitkom among 404 companies with 20 or more employees from the manufacturing industry and ICT services - i.e. sectors that work intensively with semiconductors. 86 percent of these companies state that they use semiconductor parts or components.

Accordingly, two thirds (68%) of these companies expect delivery delays to increase in 2024 - 41% anticipate a significant increase and 24% a slight increase. One in five (19%) expect the status quo to continue. In contrast, one in ten companies (10%) expect delivery delays to decrease in the coming year. "Nothing works in the German economy without chips. Semiconductors are the basic technology of the digital economy," says Bitkom President Dr. Ralf Wintergerst. "Germany and Europe must end one-sided dependencies on semiconductors."

Semiconductors are indispensable for 83 percent

For the vast majority of companies that use semiconductor parts or components, they are indispensable for their own business (83%). 85% have already purchased semiconductors in the current year 2023 or will do so in the future. However, 39% of these companies do not even know where these semiconductors come from. Asia also dominates as a production location. One in four companies (25%) source their semiconductor components from China and 17% from Taiwan. South Korea (10 percent) and Singapore (7 percent) are also important semiconductor suppliers. On the other hand, 21% of German buyers source their semiconductor parts and components from the USA. 6 percent buy in Israel and one in twenty buyers (5 percent) state Germany as their country of production.

Price and speed are decisive when choosing a supplier

When selecting semiconductor suppliers, the country of manufacture or the manufacturer's headquarters play a comparatively minor role - economic efficiency factors are much more important: 93% describe the price-performance ratio as "extremely important". 80 percent say this about short delivery times and 69 percent about adherence to delivery quantities. The values for criteria relating to the reputation of suppliers or geopolitical tensions and trade conflicts are significantly lower: 45% say the reputation of the supplier is "extremely important", 44% the country of manufacture and 38% the headquarters of the manufacturer. Wintergerst: "It is understandable that companies that rely on semiconductors primarily choose suppliers that are inexpensive and deliver on time. Nevertheless, semiconductors are at the center of strong geopolitical interests. We should therefore build a complete ecosystem of companies around semiconductors in Germany and Europe. That way, we can reduce dependencies and are less vulnerable to blackmail if the worst comes to the worst."

Stronger subsidies for chip factories in Germany called for

This is also the view of the vast majority of companies in Germany that use semiconductor parts and components. 96 percent agree with the statement that Germany should increase support for the domestic semiconductor industry. When asked about the goals for which an increase in domestic production is important, competitiveness (100 percent), technological sovereignty (94 percent) and national security (93 percent) were named as particularly important. Wintergerst: "The digital economy, especially companies in the telecommunications and cloud computing sectors, are just as dependent on supplies as traditional industries such as automotive and mechanical engineering."

Companies take strategic measures against the chip shortage

Many companies that use semiconductors have adapted to the ongoing chip shortage and taken strategic measures to mitigate it. Many of these relate to procurement itself: 61 percent, for example, have entered into long-term agreements with suppliers or vendors. Half are looking for alternative suppliers, e.g. in other countries (52%) and almost as many (47%) have developed a multi-vendor strategy, i.e. buy their semiconductor components from several suppliers instead of just one. However, many companies have also become active in the area of design and building up their own expertise: More than one in three companies (38 percent) that use semiconductor parts or components have redesigned products and are using available components as an alternative. Almost one in five (18 percent) are building up their own expertise in the design of microelectronic components - and 12 percent are doing the same for the manufacture of semiconductor parts or components.Research and development also play a role: 15 percent cooperate directly with chip manufacturers in research and development and one in ten companies (11 percent) participates in state-funded R&D projects. Wintergerst: "Necessity is the mother of invention - this wisdom also applies to companies affected by the semiconductor shortage. Those who actively counter the crisis and build up several mainstays will become more resilient and remain competitive."

What politics can do

The vast majority of companies (94%) that use semiconductor parts or components also consider tax and subsidy incentives for orders from manufacturers in Europe to be a particularly important government measure. 86 percent are in favor of promoting training and further education measures in cooperation with the chip industry. 82% are in favor of promoting greater transparency regarding the availability of semiconductors and semiconductor supply chains. 81% call for tax and subsidy incentives for investments in chip design and production, for example. However, the shortage of skilled workers is also a serious problem for Germany as a semiconductor location, which 73% of companies believe must be countered by targeted support for the immigration of qualified workers in the field of microelectronics. "Germany must continue to facilitate the immigration of qualified specialists. This requires fully digitalized and unbureaucratic administrative processes. Some of these are still so cumbersome that they effectively thwart efforts to attract top people to Germany," criticizes Bitkom President Dr. Ralf Wintergerst. "Specialists in semiconductors and microelectronics can choose their jobs anywhere in the world. If we want them to come to Germany and create prosperity here, then we have to make Germany a really attractive place for them to live." At the same time, in order to strengthen young talent from within Germany, training centers and further education and training measures with closer local involvement of the semiconductor industry are also needed. Overall, semiconductor-using companies in Germany are not yet satisfied with the efforts made by politicians: 92% say that too little is being done to ensure the supply of semiconductors.

Can Europe catch up with Asia?

Nevertheless, companies are not conceding the international race: two thirds (69%) believe that Europe can still catch up with the technological lead of Asian countries in semiconductor production - 27% do not think so. Wintergerst: "This year, the EU Commission has approved high levels of state aid for investments in innovative production capacities along the semiconductor value chain. This ensures a more level playing field in competition with leading chip nations in Asia or the USA." If politics and industry work together, Europe could achieve the goal set out in the Chips Act of doubling the EU's global market share in semiconductor production to 20 percent by 2030. "The demand for chips is constantly increasing. Germany and Europe must and can quickly develop their own core competencies in order to become capable of acting and more independent."