The semiconductor crisis. An explanation

This paper describes the ongoing crisis in the global semiconductor market. It has a specific focus on identifying its causes and the policies the major global players have taken in response to it.

Read the report’s key messages and download the document for further information.

• Global demand for semiconductors is growing significantly (+26% in 2021), but supply is lagging behind. This has led to delays in delivery and price increases.
• Excess demand can be explained by three structural factors:
  •  the acceleration of 5G;
  •  the electrification of cars;
  •  the growth of the Internet of Things.
• In addition, there are cyclical factors at play:  
  • the increased demand for technology due to the pandemic and
  • a misjudgment on the part of the tech industry that excess demand was temporary and could be managed through stockpiling. These factors were compounded by the Russia-Ukraine conflict, which poses a threat to supply chains through various channels.
• The production chain is highly concentrated and features high levels of specialisation and interdependence among producer countries. This can lead to significant issues in the event of trade or geopolitical tensions.
• Europe absorbs 20% of the world's semiconductor requirements but accounts for only 10% of production, with a high dependence on foreign supplies.
• In Italy, there are around 1,900 enterprises in a sector that is very concentrated: the 17 enterprises with production in excess of €50 million make up over 50% of the domestic market. The areas with the greatest expertise are Catania in Sicily, L'Aquila in Abruzzo and Monza-Brianza in Lombardy.
• The major economies, including the United States and China, are already taking action to support the supply chain. The EU has adopted the European Chips Act, a package that aims to double production capacity across member countries.
• The Italian Government has intervened through its recovery and resilience plan (PNRR) with sector-specific measures potentially worth up to €1.1 billion. The Ministry of Economic Development (MISE) has also set up a fund with a budget of €150 million in 2022, rising to €500 million per year from 2023 to 2030.
• Given the strategic importance of the sector and its connection to other production segments, greater self-reliance and the expansion of production capacity are a driver for the long-term growth of the country as a whole.