Key companies in the automotive and semiconductor industries have expressed concerns about a potential semiconductor shortage in the second half of 2025 or 2026. According to S&P Global Mobility, a shortage is likely, but only in mature nodes of 40 nanometers and above.

One reason is that a significant number of investments are being funneled into the development and expansion of fabrication facilities capable of producing advanced nodes, such as 5 nm or 3 nm, and even smaller process technologies. This shift is driven by the demand for higher performance and energy-efficient chips, particularly in sectors such as consumer electronics, datacenters and high-performance computing.

This has led to a relative underinvestment in mature process nodes, which are still crucial for industries including automotive, industrial and some consumer electronics. These mature nodes are essential for producing chips that do not require the high performance of advanced nodes but are critical for their reliability and cost-effectiveness.

Risk of chip shortage in 2025

S&P Global Mobility's electric/electronics and semiconductor team has warned of the persistent structural deficit in chip fabrication capacity for mature nodes. In 2023, the semiconductor industry faced a potential overcapacity, largely due to reduced demand from sectors such as mobile phones and consumer electronics. However, there is a significant likelihood that supply constraints could resurface if global chip demand in these sectors rebounds. This scenario underscores the ongoing vulnerability in the supply chain for mature process nodes.

The global semiconductor industry continues to grapple with a deficit in chip fabrication capacity, particularly for mature process nodes ranging from 90 nm to 180 nm. This shortage was somewhat obscured during 2022 and 2023 due to a slowdown in demand. However, the risk of constraints on automotive chip supply is expected to resurface by 2025. Several factors contribute to this looming challenge.

Firstly, automotive chip inventory levels are projected to be low by the end of 2024. This coincides with a surge in new battery-electric vehicle launches in Europe in 2025, driven by stringent new emission legislation. Additionally, demand from other industries is rebounding, as evidenced by recent market data. This resurgence in demand could exacerbate the supply constraints for automotive chips

Analog chips could become one of the bottlenecks for light-vehicle production. Analog chips typically use mature chip processes of 90 nm to 300 nm. There are technical and commercial reasons why these will continue to be produced at mature process nodes and not at leading-edge process nodes. The demand for analog chips is increasing for mobile phones and, considering the growth in vehicle segments and propulsion mix, the average number of analog chips per car is expected to increase 23% in 2026 compared with 2022.

Moreover, some car chip manufacturers and tier 1 suppliers are exerting significant pressure on chip vendors to reduce prices, with some even advocating for a return to pre-COVID-19 pricing levels. This price pressure could further complicate the supply landscape. If other industries, which often offer better margins, ramp up their orders, automotive clients may once again find themselves at the back of the queue, reminiscent of the situation in 2020.

Mainland China's strategic gamble on mature process nodes

While much of the industry's attention has been on advanced nodes used for cutting-edge applications, mainland China has strategically focused on expanding its capacity and capabilities in mature process nodes. These mature nodes, typically 40 nm and above, remain essential for a wide array of automotive applications, including microcontrollers, power management and connectivity chips.

In the event of a significant semiconductor shortage, particularly in the automotive sector, mainland China's investments could serve as an economic and geopolitical tool. By controlling a substantial portion of the supply for mature nodes, mainland China could influence global supply chains, compelling automakers and other industries to seek partnerships or concessions. This leverage could extend beyond mere economic advantage, allowing mainland China to negotiate favorable terms in trade deals or exert pressure on geopolitical rivals.

In summary, while the industry has gained valuable insights from pandemic-induced shortages and implemented more robust forecasting and process improvements, some level of disruption is anticipated. The projected shortage in late 2025 may not reach the severity or duration of the previous crisis, but a supply-demand mismatch is likely, especially if there are global demand fluctuations.

Authored by: Hrishikesh S, Research Analyst, Supply Chain & Technology, S&P Global Mobility

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