The Semiconductor Shortage: an Analysis of Potential and Ongoing Remediation Efforts and their Implications on the Industry & Macroeconomy

In recent months, the health of the macroeconomy has suffered due to logistical issues, inflation, and the labor market. Specifically, supply-side shocks within the semiconductor industry have dramatically affected firms’ ability to produce chipsets. The resulting destabilization is felt across innumerable downstream sectors which rely on these products for implementation into their own finished goods. This paper examines the exact impacts of these recent developments within the semiconductor industry, utilizing what-if and historical analysis to gauge how logistical issues, inflation, and increased capital expenditures will financially impact both firms within the industry and those which depend on their production. Additionally, it will utilize general hypothetical scenarios to discover what firms can do, if anything, to abate the current shortage and assuage concerns regarding future issues. The most common financial decisions, such as the allocation of funds for capital expenditure and research & development, are analyzed in-depth to ascertain how budgeting for these items must be shifted in response to widespread component and production shortages. Given vertical integration within this industry, the response of any one firm will differ greatly, as will their interactions with the supply chain. However, generalizable analysis can provide context for firm decisions regardless of the current health of the industry, leading to a more rigorous and logical examination of trends affecting both this market and the macroeconomy