Out-Law News | 05 Jan 2022 | 12:10 pm | 3 min. read
Semiconductors are vital components of many consumer electronic devices and devices relied on by businesses increasingly powered by and dependent on digital technologies. However, there has been a global shortage of semiconductors in recent months, and this has been predicted to last through 2022 and potentially beyond by Deloitte.
Carissa Kendall-Windless of Pinsent Masons said: “The semiconductor shortage has highlighted the vulnerability of the global supply chain, due to a number of factors, including the pandemic. It affects multiple sectors and industries – and the health and medical sector should not be forgotten. It goes beyond a business issue – people rely upon these devices to keep them well day-in-day-out, others need access to these devices during significant health events like the pandemic. The stark reality is: if a global solution to the shortage cannot be managed or resolved, there will be grave consequences across this sector.”
In the UK, the Department for Culture, Media and Sport is currently assessing the UK’s supply resilience with regards to the availability of microchips. The Association of British HealthTech Industries (ABHI) has surveyed its members on the issue as a means of feeding into that assessment. The ABHI previously wrote to the government flagging the increasing issues in the global supply of microchips, and the potential implications for the supply of medical technologies.
Problems with the supply of semiconductors were exacerbated when public health restrictions resulted in disruption to manufacturing processes and the underlying supply of raw materials. A factory fire at Renesas, a Japanese global leader in microcontrollers, in March this year impacted too. The supply-side problems have coincided with a period of significant growth in demand for the components.
Deloitte highlighted how the demand surge reflects the importance of semiconductors to manufacturers of connected vehicles, to businesses seeking enhanced data processing capabilities, and those exploring artificial intelligence and machine learning. It also highlighted growing demand for semiconductors in health care, given their presence in wearables and other medical technologies. Data from Omida, the global research company, suggests that the “medical end use market” accounted for approximately 11% of industrial sales of semiconductors globally in 2019, and 1.3% of all semiconductor sales around the world that year.
“Many vital health technologies depend on semiconductors,” Kendall-Windless said. “Examples include ventilators and defibrillators; imaging machines; glucose, ECG, EEG, and blood-pressure monitors; and implantable pacemakers. There is potential risk to millions of patients who depend on equipment and devices which use these microchips should scarcity of supply impact the ability of health care providers to repair existing equipment or access additional equipment to serve a health need, as might be the case if more ventilators are needed in response to a Covid-19 outbreak.”
Currently, most of the world’s semiconductors are currently made by two companies based in Taiwan and South Korea. However, in response to the global shortage, policymakers elsewhere have been exploring steps to boost local production of the component.
In the US, the Innovation and Competition Act that has been proposed promises to underpin a €52bn investment of public funds in bolstering US production of semiconductors.
In the EU, competition commissioner Margarethe Vestager said in November that the European Commission will consider granting state aid to support the European semiconductor market, “in particular for European first-of-a-kind facilities”. Her announcement comes after a host of EU countries, including Germany, France, Italy, Belgium and The Netherlands issued a joint declaration calling for Europe to produce its own microchips with a "significant improvement in energy performance and speed" by 2025.
Kendall-Windless said there are opportunities for the UK to support growth of the local semiconductor industry too. One project that received UK Research and Innovation (UKRI) funding last year was CSconnected, which aims to develop a semiconductor manufacturing cluster in Wales. The project is being led by Cardiff University and involves several companies within the UK’s semiconductor industry, the Welsh government, Swansea University and Cardiff Council.
She said: “It is fantastic to see policymakers investing in the semiconductor sector and seeking to add diversity into the global supply chain. It remains to be seen whether additional, more local, production capacity can be brought online fast enough to address the anticipated increase in demand for semiconductors that is predicted, and address the risks that could materialise if the shortage persists.”
According to Fortune Business Insights, the value of the global semiconductor market will nearly double to more than $803 billion by 2028, from $426bn in 2020.
Co-written by Anna Harley of Pinsent Masons.
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