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News Article

5G Transition to Worsen Semiconductor Shortage

By Alfonso Núñez | Tue, 12/14/2021 - 14:42

While automotive manufacturers were hoping for 2022 to bring the end of the semiconductor shortage toward a faster recovery, the crisis might last longer than predicted due to increased microchip demand as the next generation of mobile networks arrives in many countries.

 

“We estimate that the impact of the lack of semiconductors will continue into at least 1Q22. This is subordinated to a very important issue which is the shift from 4G to 5G networks,” said Alberto Bustamante, Interim President, INA.

 

The arrival of 5G networks in Southeast Asia, which is expected to host half of the world’s 5G connections by 2025 with 675 million, means technological devices using 4G will be replaced with new devices. This will drive up demand for tech production and, once again, it will hinder automotive industry manufacturing as microchip producers prioritize supplying laptop, smart phones and video game console manufacturers. The automotive sector represents 10 percent of the global demand for semiconductors, according to Bustamante, putting it lower on suppliers’ priority lists. This was further aggravated during the early stages of the pandemic, orders were cancelled when production shut down worldwide.

 

The shortage is greatly impacting Mexico’s vital automotive sector. GM Mexico reported a fall of 43.7 percent in production during November compared to last year’s numbers, while Nissan reported a 27.2 percent decrease in vehicle output for the same month.

 

While Bustamante expects the impact to begin normalizing as early as 1Q22, AMIA Director General Fausto Cuevas does not see the Mexican automotive sector’s production to return to pre-pandemic levels until late 2023 or even 2024. By then, estimates predict 5G adoption in North America to stand at 32 percent.

 

American wireless network operators Verizon, AT&T and T-Mobile are already offering users 5G network options. AT&T beat out Telcel late last week by being the first provider to announce the arrival of the 5G network in Mexico. Details such as whether the service will be NSA (Non-Standalone or dependent on the existence of a 4G LTE network to function), SA (Standalone) or when a commercial offer will be available to the public remain unclear.  

Photo by:   Unsplash, NASA
Alfonso Núñez Alfonso Núñez Journalist & Industry Analyst