Semiconductor Market Looking on the Bright Side with Growing Demand for EVs

  • Published | 17 January 2022

Semiconductor Market Demand in Electric VehiclesSemiconductors are an essential component of modern electronic devices and modern vehicles. Semiconductor chips have enabled advancements in communications, computing, healthcare, military systems, transportation, clean energy, and countless other applications around the world. Semiconductors are also the driving force behind future technologies, such as artificial intelligence (AI), quantum computing, advanced wireless networks, and virtual power plants. Semiconductors are also referred to as integrated circuits (ICs) or microchips. Generally, these are manufactured from pure elements like silicon, germanium or compounds like gallium arsenide. During the “semiconductor doping” process, a small number of impurities or dopants are added to these pure elements to change the conductivity significantly.

Manufacturing of Semiconductor Chips

Semiconductor chips are electronics circuits with components such as transistors and wiring imprinted on a semiconductor wafer. Several of these chips form an integrated circuit (IC) when combined together. The layout is then engraved onto a photomask via computer and is projected onto the wafer. In the semiconductor manufacturing process, electronics circuits with transistors, resistors, and wiring are formed on the surface of a silicon/germanium/gallium arsenide wafer. A thin layer that includes the wiring, and other components such as transistors and resistors, are deposited on the wafer. A photoresist then coats the layer, and afterward, Photolithography technology is used to protect the circuit pattern of the photomask.

Integrated circuits are inspected and measured after production to find out if the patterns are fabricated according to design. Defects in the courses can hamper the fabrication process. Today, a single semiconductor wafer can contain more than 100 semiconductor dies. Currently, the largest wafer used in the industry is 300mm in diameters; however, companies are looking into 450mm wafers for the future.

Semiconductor chips are used in a wide range of applications, from electronic devices from mobile phones, laptops, high-speed computing devices, smartwatches, smart homes, to electronic vehicles (EVs). Moreover, semiconductor chips are an essential part of EVs. One electric vehicle, on average, requires 2,000 semiconductor chips. The growing sales of EVs have created an increasing demand for semiconductor chips worldwide.

The demand for semiconductors is surging year-over-year (YoY), predominantly owing to the rise in electric vehicle sales (including passenger cars, three-wheelers, and two-wheelers). China reported having held the majority of the electric vehicle sales. For instance, in China, Tesla sold over 56,000 electric passenger cars in September 2021 alone. Additionally, companies like Taiwan Semiconductor Manufacturing Company (TSMC), Intel, and Samsung have announced their plans to invest significantly in expanding their semiconductor capabilities. For instance, Intel plans to invest about USD 95 billion in Europe over the next decade, while TSMC is expected to construct a USD 12 billion chip factory in the US in 2021.

For decades, semiconductor industry has been able to rely on an abundance of easily machined silicon. Still, electric vehicles are helping to reduce their role in the drive for energy efficiency. Tesla has been the catalyst for this change. American automaker was the first among its competitors to deploy silicon carbide chips in production vehicles, introducing them in various Model 3 versions. The move spurred the development of the chip industry by boosting the use of energy-efficient materials in the electric vehicle supply chain.

Impact of COVID-19 on the Semiconductor Industry

In 2020, semiconductor manufacturers reduced semiconductor production in anticipation of the lockdown weakening demand, leading to a shortage of semiconductors in the market. Nevertheless, semiconductor demand has skyrocketed dramatically in the last few years, and manufacturers are attempting to keep up with the overwhelming demand.

The surge in demand for semiconductors in 2020 has led to a drastic increase in lead time (the period required for a customer, i.e., an OEM or chip designer, like AMD or Nvidia, to get their chip). Before the pandemic started, the average lead time was around 12 weeks, but now it has gone past 20 weeks. Between January to April 2021, the average lead time went up by 75% on average. The average increase in the lead time of some of the major components are: -


Current backlog


Power Management Chips

24-52 weeks

4-8 weeks

Microcontroller Chips

24-52 weeks

4-8 weeks


12-16 weeks

4-8 weeks

Memory Chips

14-15 weeks

4-8 weeks

Wi-Fi Chips

24-30 weeks

4-8 weeks

Consumer LCD Screens

16-20 weeks

12 weeks

Substrate Materials

52 weeks

20 weeks

Chip Packaging Services

12 weeks

2-4 weeks

Source- World Shipping Council

Moreover, the regional impact of COVID-19 in the Asia-Pacific, shortage of talent in the industry, reduced manufacturing capacity, increased lead time of both active and passive models, and recently, the energy crisis across Europe and the Asia-Pacific have severely affected the recovery of the global semiconductor industry.

A Lucrative Growth Opportunity Awaits Semiconductors with Growing EV Adoption

The demand for electric vehicles is surging day by day. According to the Global EV Outlook Report of 2021, 2020 has been a fruitful year for EV sales even amid the COVID-19 pandemic, registering a staggering 43% increase reaching 10 million in EV sales against 2019. Across the EV sector, battery-led electric vehicles (BEVs) had recorded over two-thirds of the total EV sales made in 2020. Additionally, Europe registered the highest annual increase by recording 3.2 million in sales for just a year.

European Alternative Fuels Observatory (EAFO) data shows that the number of new electric vehicles registered went up significantly in 2020.

Growing Number of Electric Vehicles Registered in Europe Powering the Global Semiconductor Market

Electric Vehicles Registered in Europe Powering the Global Semiconductor Market

Source: The European Alternative Fuels Observatory, commissioned by contract by the European Commission

In Europe, new cars and vans sold after January 2020 are required to meet stricter EU CO2 emissions standards.  As a result, EV sales have risen dramatically in Europe.  Paris-based International Energy Agency (IEA) states that 18 of the top 20 OEMs in Europe have committed to increasing the offer and sales of EVs. These 18 OEMs accounted for almost 90% of all worldwide new car registrations in 2020 and have announced intentions to increase the number of available models and boost the production of light-duty electric vehicles (LDVs). For instance, Volvo has announced that the company will only sell electric cars in Europe from 2030 onwards. General Motors has also announced that the company would only offer LDVs from 2035. Volkswagen, the parent company of brands like Audi, Lamborghini, Bentley, Porsche, and Ducati, announced that it had set a target of achieving 70% electric car sales in Europe and 50% electric car sales in China and the United States by 2030.

Original Equipment Manufacturers Announcements About LDVs

Original Equipment Manufacturers Announcements About LDVs

Source: International Energy Agency (IEA)

So, what next?

As the vehicle manufacturers move away from traditional vehicles to electric vehicles, the demand for semiconductors is expected to surge in the coming years owing to their extensive use in electric vehicles’ manufacturing, thereby presenting multiple lucrative growth opportunities to the semiconductor industry. However, as the world is tackling semiconductor shortages, several governments and companies are already partnering to address semiconductor shortages. For instance, the U.S. has supported Taiwan Semiconductor Manufacturing Company, Limited (TSMC)'s efforts to meet semiconductor demand. The Taiwanese company has built strong relationships with the U.S. federal and state governments to build a USD 12 billion chip manufacturing plant in Arizona. For now, it seems that companies like TSMC and SMIC (Semiconductor Manufacturing International Corporation) are focusing on meeting the current demands of both automakers and electronics manufacturers. It looks like the U.S. would try to help speed up the manufacturing process. Also, since semiconductors are vital to countries’ technological growth and economic competitiveness, the governments of China, the US, and Europe are eager to support the R&D of new chip materials.

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