Any shortage of something implies either too much demand relative to supply or too little supply relative to demand. The current semiconductor chip shortage is a function of very strong and accelerating demand outpacing supply, with the gap exacerbated by successive and unexpected supply shocks. Recognizing this issue will have major implications for the global economy for years to come, we have positioned select investments in our portfolios to leverage both the problem and solution.
From a demand perspective, there are both longer-term secular and shorter-term cyclical drivers at play in the current environment.
In June 2018, the Fundamental Growth and Core team wrote a paper entitled, “Secular Growth & the New Data Economy”, which highlighted key secular growth drivers of the Data Economy, including AI, IoT, 5G, and the Cloud. Since publication, those underlying trends have strengthened and related secular growth has accelerated. At the time, we noted that by 2021, approximately 10% of the useful data created in the world would likely be stored — this is equivalent to about 7.2 Zetabytes (ZB) of data. As can be seen in Figure 1, we now believe 13.8 ZBs of useful data will be stored by the end of 2021, and Applied Materials — one of the leading semiconductor capital equipment companies — sees the bulk of that created by machines in the Industrial Internet of Things (IoT).