Shortage Struggles Continue - May 11, 2022
Intel recently forecast that the global chip shortage will continue until 2024. And Nintendo and Sony recently cut their video game console sales goals due to worsening global supply chain conditions.
On the bright side, Thor: Love and Thunder looks pretty fun, right?
Intel Believes Chip Shortage Will Last Until 2024
In a recent interview, Intel CEO Pat Gelsinger expressed his belief that the global chip shortage will “drift into 2024.” The executive explained that the electronic components manufacturing equipment bottleneck is the foundation of his new outlook. Last month, Applied Materials, ASML Holdings, Lam Research, and other microelectronics fabrication tool providers informed their customers that delivery times would be around 18 months.
Because of that delay, Gelsinger believes chipmakers and foundries will not be able to expand their capacity as planned. Last summer, the semiconductor industry veteran, as well as several analysts, expected the shortfall would end in 2023.
As of this writing, Intel’s forecast has not been echoed by other semiconductor sector leaders.
In fact, IC Insights recently predicted global silicon wafer capacity would increase by 8.7 percent annually this year. The organization believes ten new fabs will go online in 2022 and raise the worldwide wafer output to its highest level in six years. Moreover, TSMC recently told Nikkei Asia that chipmaking equipment delivery problems had affected its 2023 capacity expansion plans. However, the world’s largest foundry service company stated that its 2022 roadmap has no issues.
TSMC fabricates components for Apple, AMD, Qualcomm, Nvidia, MediaTek, Broadcom, Marvell, and several other leading global electronics brands. Therefore, Intel's shortage prediction is highly credible if it is struggling to outfit its factories with manufacturing tools. Especially considering that…
Sony and Nintendo Cut Video Game Console Product Targets
Sony and Nintendo have recently cut the production targets for their PlayStation 5 and Switch video game consoles despite robust worldwide demand.
Sony CFO Hiroki Totoki recently revealed his corporation expects to sell 18 million ninth-generation systems in the current fiscal year. Last November, the conglomerate declared its goal to move 22.6 million units during the same period. Totoki also disclosed that it only moved 11.5 million consoles in 12 months ending in March 2022, down 17.87 percent from its target. The executive attributed the negative change to China's ongoing manufacturing and logistics issues related to COVID-19.
Sony launched its PlayStation 5 system in November 2020, but supply chain issues have kept it from meeting demand. The console features a custom CPU and graphics components designed by AMD. That high-performance hardware has made the system widely sought after but elusive in the end-market since its launch. The company’s new forecast indicates that the situation will remain unchanged this year.
Nintendo recently made a negative revision to its long-term video game hardware sales forecast.
The corporation expects to move 20 million Switch systems in the current fiscal year, down 10 percent from 2021. Although the firm launched the hybrid console in 2017, it has enjoyed robust popularity throughout its lifecycle. Amid global coronavirus pandemic lockdowns in 2020, gamers pushed it to record annual sales of 28.83 million units. Unfortunately, supply chain interruptions caused worldwide purchases to tumble by 20 percent in 2021, even though demand did not diminish significantly.
Nintendo said China’s COVID flareups and Russia’s invasion of Ukraine had exacerbated its ongoing procurement, production, and shipping challenges.
Since supply chain disruptions are hindering the gaming industry’s most prominent players, conditions are undoubtedly more severe for midsized OEMs, CMs, and EMS providers. Although incremental progress is being made to relieve major component chokepoints, shortages will be in everyday reality throughout 2022.
Accordingly, companies should reinforce their inventories immediately because pricing volatility and availability problems will only worsen as the holiday shopping season gets closer.
COVID Lockdowns Problems – May 4, 20222
Recent citywide COVID-19 quarantines in China have caused serious production and logistics problems for the country's electronic component suppliers. And a recent surge in DDR3 demand might cause new shortage issues for OEMs, CMs, and EMS providers later this year.
China's COVID Lockdowns Disrupting Component Production & Deliveries
Since the beginning of the year, the Chinese government has locked down several major cities amid a spike in COVID-19 infections.
Consequently, corporations with manufacturing facilities in Shanghai, Shenzhen, and other areas have dealt with production shutdowns and logistics hurdles. Though Beijing is actively working to mitigate the problem, many automobile companies and components suppliers are struggling.
DigiTimes reports that recent quarantine mandates have disrupted the area's printed circuit board output.
The publication notes several ODMs have had difficulty securing their PCB orders because of the factory closures. Unimicron Technology and Career Technology had to shutter their Kunshan plants in response to coronavirus-related directives. Other firms in eastern China have avoided output disruptions by adopting "closed-loop" management procedures at their facilities. However, Chinese truckers must submit to lengthy screening when transporting goods from one city to another, which has caused delivery delays.
Along similar lines, AU Optronics anticipated COVID restrictions would curb production at its Kunshan factory by 30 to 40 percent. The affected facility made premium LTPS laptop panels and was getting certified to fabricate automotive parts. But the regional health and safety orders interrupted the site's equipment installations and raw materials shipments.
AU0 expects panel shipments to fall by 1 to 3 percent this quarter while average selling prices will decline by 5 to 10 percent.
Finally, On Semiconductor suspended operations at its Shanghai global distribution center in late April. The manufacturer, which makes automotive ICs, discrete semiconductors, and logic components, reopened the complex a week later, but its operations suffered. It had to tap alternate warehouses in Manila and Singapore to fulfill some shipments and expedite others to maintain its schedule.
Onsemi also encountered operational problems because of lockdowns in Shenzhen, Suzhou, and Leshan.
Although COVID-19 infection rates have fallen in Shanghai, China has experienced new clustered outbreaks in areas like Beijing. As such, it is unlikely that the Chinese government will roll back its pandemic containment strategy in the immediate future.
DDR3 Demand to Exceed Supply in Q3
According to DigiTimes, demand for DDR3 memory modules is on the verge of exceeding the available supply.
The site explained that interest in that low-density DRAM has ramped up recently. Taiwan-based supplier Elite Semiconductor Memory Technology (ESMT) recorded a spike in orders last month, along with an increase in requests for advanced deliveries.
Unfortunately, China's COVID lockdowns have impeded its ability to address its customers' needs due to regional transportation snarls. The firm expects its order volume to ramp up in the remainder of this quarter, provided Beijing eases its pandemic restrictions.
ESMT should manage the upswing in DDR3 purchases well as it held a $183.7 million chip inventory at the end of 2021. It also has contracts with local foundries such as Powerchip Semiconductor Manufacturing (PSMC) and Wuhan Xinxin Semiconductor Manufacturing (XMC).
That said, OEMs, CMs, and EMS companies that keep DDR3 modules on hand as part of their regular inventory might want to stock up soon.
Last month, Samsung declared it would stop taking orders for that niche component category at year's end. The conglomerate is eager to dedicate its production capacity to newer and more lucrative memory products.
The manufacturer's portfolio update and the jump in demand could create a significant shortage in that category. The ongoing unpredictability surrounding China's industrial cores and ground logistics makes that outcome even more likely.
Short-Term Challenges, Long-Term Sufficiency – April 27, 2022
Despite historic efforts to bolster global semiconductor production capacity, some segments like analog chips and microcontrollers still face severe shortages. However, significant capital expenditures and rising market competitiveness are cultivating long-term supply stability in those sectors.
Analog IC Shortage Pushing Lead Times and Pricing
According to industry insiders, the ongoing analog IC shortage is not getting better anytime soon.
On the plus side, IDMs specializing in that component type believe the bottleneck affecting the segment has eased since last year. Moreover, the biggest driver of the parts scarcity – constrained 8-inch (200mm) fab space – is being addressed. Chipmakers are seeking partnerships with foundry service providers with 12-inch (300mm) wafer output capability to make their automotive and industrial parts.
That change, and ambiguity about consumer electronics demand, should bring some stability to the analog IC sector.
In addition, SEMI recently reported that the global 200mm production capacity will rise by 21 percent from 2020 to 2024.
The organization determined that 25 new 8-inch wafer production lines would come online during that timeframe. That means manufacturers can ramp up their output of analog, MOSFETs, display drivers, MCUs, PMICs, and sensors with 5G, IoT, and automotive applications.
Unfortunately, building or expanding chip factories and equipping them with proper machinery and personnel is a slow process. It is also incredibly expensive; DigiTimes estimates foundries and manufacturers will spend $4.9 billion on 200mm equipment this year.
Until the industry catches up with demand, OEMs, CMs, and EMS companies should stockpile mission-critical chips at every opportunity.
MCU Supply Remains Tight Worldwide
Industry watchers recently determined average industrial and automotive MCU lead times now range from 32 weeks to over one year.
Infineon Technologies and STMicroelectronics informed buyers that their microcontroller units would require 52 to 58 weeks for production and delivery. Those providers noted that supplies of their 8-bit, 16-bit, and 32-bit devices are constrained.
Along similar lines, Microchip Technology’s 16-bit devices will arrive at their customers’ receiving bays for 40 to 70 weeks, while its 32-bit components will not be available for 57 to 70 weeks. Moreover, the Chandler, Arizona-based provider does not expect its output schedule to return to normal this year.
NXP Semiconductors told its customers it needs 30 to 50 weeks of turnaround time for its MCUs.
On a brighter note, Renesas Electronics has gotten its automotive MCU lead times down to 30 to 34 weeks. The manufacturer cut its delivery delays by securing additional foundry support from TSMC and outsourcing some backend production work.
In addition, DigiTimes reports that Nuvoton Technology, Holtek Semiconductor, Weltrend Semiconductor, and other Taiwanese suppliers are stepping up their MCU fabrication. The region’s chipmakers aim to meet the demand for 8-bit industrial parts and 32-bit consumer electronics ICs. The publication also notes several companies in mainland China want to break into the automotive MCU segment.
Earlier this month, Nanjing-based SemiDrive Technology launched a new series of vehicle microcontroller units to support next-generation in-cabin safety features. The firm intends to make its high-performance into volume production in Q3 using TSMC’s 22nm node.
GigaDevice Semiconductor, Sine Microelectronics, Chipsea Technology Shenzhen, Hangshun Chip, and Nations Technologies also have plans to into the sector.
All that is to say, the bottleneck affecting the global MCU industry will not be a long-term challenge because so many companies want a slice of the $21.6 billion market. After years of unprecedented volatility, the semiconductor space is moving towards a new stable paradigm. But “the new normal” will not snap into place overnight.
Pricing Volatility Continues – April 20, 2021
Memory Module Prices to Fall in Q2
Industry insiders report spot and contract DRAM and NAND prices will decrease in the second quarter of this year. The reason for the change is complicated but boils down to recent government-mandated coronavirus lockdowns in China.
Widespread disruption follows whenever Beijing orders a temporary halt to manufacturing activity and transportation within a particular area. On March 28, local leaders implemented the country’s “COVID-zero” measures in several industrial hubs, including Shanghai and Shenzhen.
Though state administrators have worked with large providers to resume normal operations, several ODMs with large facilities in the region are still getting back on their feet.
As a result, suppliers across the DRAM and NAND value chain are experiencing soft orders and weak interest. Market watchers anticipate distributors will offload their memory products in Q2, prompting a slight spot price dip. However, contract DRAM costs could climb by around 5 percent due to the fallout from a plant contamination event in February.
In happier news, DigiTimes expects production and logistics conditions in China’s industrial cores to normalize in early May amid Labor Day celebrations.
Samsung to Cease Taking DDR3 Orders by Year’s End
Samsung recently told its customers it would stop taking orders for DDR3 SRAM modules by the end of 2022. The corporation intends to continue shipping 1GB, 2GB, and 4GB memory chips through 2023, but its re-tasking its capacity to fabricate more CMOS sensors. Consequently, OEMs, CMs, and EMS firms using that brand and component type should make large purchases as soon as possible.
It is worth noting that major chipmakers accelerating obsolescence in their catalogs is a widespread trend.
Since the global chip shortage began, semiconductor corporations across the industry have started removing older portions of their portfolios. Leaders believe that dedicating their production capacity to newer and more lucrative parts is the best way forward. With the marketplace being as unstable as it is, that strategy makes a lot of sense from a financial perspective.
Unfortunately, midsize firms can be caught off guard by these shifts if they happen to miss a single crucial product change notice (PCN). For that reason, professional buyers should expand their supply chains to include vendors that make chips essential to their product lineups.
STMicroelectronics to Raise Prices Across the Board
STMicroelectronics informed its distribution partners that it would raise prices across the board in the current quarter.
The chipmaker explained that skyrocketing raw materials costs and geopolitical disruptions had pushed its overhead expenses to new heights. On top of that, the supplier is dealing with sharp increases in logistics and energy fees. Because those developments occurred in the last few months, it cannot absorb the surge in costs alone.
The Singapore-based company noted the pricing would affect new orders and its current backlog. The firm made its portfolio more expensive in Q4 2021 amid strong demand for its microcontroller units and power management circuits. DigiTimes anticipates other European and East Asian IDMs in automotive and industrial segments to follow in STMicro’s footsteps in short order.
No End in Sight – April 13, 2022
Based on recent reports, the global chip shortage will not end anytime soon. Well-sourced industry publications have reported that a variety of electronic components with data center applications will be in short supply for the rest of the year. In addition, supplies of certain NAND flash parts are becoming tighter. But even with those less than energizing developments, CMs, OEMs, and EMS providers still have solid procurement options.
Server Components Supply Limited Through 2022
Though we all deserve a break, shortages of server components like microprocessors will probably continue until the end of the year.
Market-leading ODMs Inventec, Quanta Computer, and Wistron anticipate strong sales of their networking products in the near future. Those firms believe that Intel and AMD’s recent data center CPU launches will drive purchases worldwide as companies refresh their hardware. In fact, they are already feeling the impact of that market trend on other data center components.
Inventec determined it is facing an 8 to 10 percent supply-demand gap for data center is motherboards. DigiTimes founds supplies of PMICs, discrete crystals, MCUs, cabinets, switches, and chassis backplanes are also very tight.
Because it is still 2022, the server component bottleneck does not have a single direct cause. Chenbro Micom, a Taiwanese chassis maker, is struggling to ship orders due to labor, materials, and shipping container shortages. Rising geopolitical tensions in Eastern Europe have increased the price of stainless steel, which is constraining availability across the server supply chain.
Moreover, new clusters of COVID-19 infections in the Chinese mainland have disrupted the production and transportation of data center microelectronics.
NAND Flash Device Controllers Getting More Elusive
Micron Technology and Samsung have tapped Silicon Motion Technology and Phison Electronics to help ramp up their NAND flash controller output. The top providers are responding to spiking demand from the data center providers and other high-end segments. However, supply and foundry support constraints are obstacles for first-class third-party providers.
Phison believes its 55nm flash controllers will be in short supply through next year. Market watchers estimate that the overall product category is currently dealing with a 40 percent shortfall. As a result, suppliers are pushing their older USB and SD 2.0 parts toward end-of-life to make more space for the newer, more lucrative items.
Though that trend makes sense from a business perspective, manufacturers might encounter material sourcing problems sooner than expected.
Along similar lines, Silicon Motion expects its 28nm flash controller availability will not normalize until 2023. The chipmaker is competing with automotive suppliers for foundry space, with automotive suppliers eager to make more OLED DDIs and CMOS image sensors. Despite its current production challenges, it projects 20 to 30 percent year-over-year revenue growth in 2022.
Right now, it seems pricing and availability unpredictability will likely affect this product category for at least a year. Unless something changes, OEMs, CMs, and EMS providers should consider expanding their supply chains to include an electronic components e-commerce marketplace as quickly as possible.
For example, industry-leading chipmakers, even with world-class help, will not be able to stabilize the overall NAND flash controller supply until 2023.But Microchip’s PM8609B1-F3EI32xG3 PCIe NVMe controllers are available factory direct with extraordinarily low lead time. The DDR4-2400 component features 32TB of flash memory capacity with 32 independent NAND channels. Even better, it can perform up to 1 million random reads IOPS on 4KB.
In other words, online marketplaces can help manufacturers source parts from qualified suppliers when no one else can.
March 28, 2022
Renesas Fabs Return Full Capacity Following Earthquake
The Japanese chipmaker closed its factories after a 7.4 magnitude tremblor hit the coast of the Fukushima prefecture. Three of the affected facilities reopened and returned to normal operations within a few days. However, its Naka-based fab lagged due to “work-in-progress” damage, only hitting 50 percent capacity on March 23.
The firm disclosed that the plant resumed its pre-earthquake cadence last Saturday and that it sustained a supply hit. The disaster ruined two weeks’ worth of 300mm wafers and three weeks’ worth of 200mm units. The manufacturer uses its Naka complex to make nonautomotive microcontroller units (MCUs).
As of this writing, Renesas has not publicly announced any lead time or pricing adjustments related to the tremblor.
SGT MOSFET Foundries Booked Through 2H22
Earlier this month, DigiTimes reported multiple 6-inch wafer foundries based in Taiwan had filled their capacity through the first half of 2022 due to robust demand for split-gate trench (SGT) MOSFETs.
Epsil Technologies, Mosel Vitelic, and Nuvoton Technology, among others, are running their specialty fabs at full utilization at present. The service providers have received a spike in orders from their manufacturing clients in part because of expiring IP rights. Previously, global IDM derived revenue from manufacturers that maintained SGT MOSFETs as part of their portfolios. But those corporations shifted focus to addressing component shortage-related demand for automotive components once their patents ran out.
Consequently, chipmakers pursuing positions in the consumer electronics, server, and vehicle power systems markets had to find new service providers.
Thanks to their deals with Taiwan’s specialty foundries, manufacturers including Advanced Power Electronics, Niko Semiconductor, and Cystech Electronics have stabilized their SGT MOSFET output. But other providers without fabrication contracts may see long lead times for that component type until this summer.
Demand Soft for Large-Size DDIs, But Upward Pricing Pressure Coming Soon
Breaking with current market trends, large-size display driver ICs (DDIs) are facing downward pricing pressure due to weak demand. However, that situation is not going to remain static long-term.
Currently, the semiconductor industry is still experiencing extreme volatility due to the ongoing impact of the chip bottleneck. But certain segments are normalizing as end-market demand has fallen in line with established seasonal buying patterns. In this instance, companies are not stocking up on large-size DDIs because interest in TVs, PCs, and monitors is soft right now.
In fact, outsourced semiconductor assembly and testing (OSAT) and chip-on-film (COF) packaging providers are running their DDI production lines at 70 to 80 percent utilization.
That said, market watchers expect the segment to see some upward pricing pressure in the second half of 2022.
Industry insiders expect two factors to ramp up consumer spending on big televisions later this year. One, several OEMs will introduce new 8K sets powered by robust 7nm SOCs. TVs that can support ultra-high-definition gaming and video content will likely entice buyers. And two, the 2022 FIFA World Cup, starting in late November, is anticipated to drive purchases of 4K and 8K TVs.
Under the circumstances, manufacturers could benefit from reinforcing their DDI inventories soon.
March 21, 2022 Update
Several Japanese Chipmakers Halt Production Following Earthquake
On March 16, a 7.4 magnitude earthquake struck Northeast Japan, causing two fatalities, over 100 injuries, and leaving thousands of people without water and power. The disaster also significantly disrupted the country’s manufacturers, including several chipmakers.
Renesas closed its Naka, Yonezawa, and Takasaki factories following the tremblor but partially reactivated the three sites on March 17. It reported no casualties or “significant facility damage” and said the Yonezawa plant would resume full production on March 20 while the Naka and Takasaki sites would restart on March 23. The vendor, like its contemporaries, has not disclosed the full impact of the event on its output.
DigiTimes noted the three fabs represent 40 percent of its overall capacity, and none of them produce auto chips.
Murata Manufacturing, a leading capacitor company, idled four factories after the earthquake struck and extinguished a fire at one facility. The firm has already restarted work at its Koriyama and Motomiya fabs and intends to bring its Tome and Sendai plants back to full utilization this week.
Sony paused operations at three domestic production complexes in the wake of the disaster. It plans to gradually resume work at its semiconductor laser, storage media, and image sensor production centers.
Kioxia shuttered its K1 Fab in Kitakami in the aftermath of the quake, pending an inspection. The plant is responsible for 8 percent of the manufacturer’s overall output. TrendForce reports the facility, which it operates with Western Digital, sustained partial wafer input damage. The market intelligence provider expects the affected factory’s production yields will decrease in the first quarter due to tremblor.
Last month, Kioxia’s Kitakami and Yokkaichi sites experienced a contamination incident that significantly reduced its flash memory supply. DigiTimes expects the corporation’s 3D TLC NAND prices to rise by 15 percent and its MLC NAND bit rates by 5 percent soon.
Given the widespread nature of the disaster, other price changes and availability issues are likely coming soon.
Foxconn Partially Resumes Production in Shenzhen
Foxconn recently announced it partially resumed production in Shenzhen, China, under a “closed-loop management process” on March 16. The firm’s solution involves transporting tens of thousands of workers directly between its dormitories and factories and regular COVID-19 testing. Its insulated system had enabled it to restart operations even when the city of 17.5 million remained under lockdown.
The Chinese government introduced new policies to balance its approach to the coronavirus pandemic with regional economic concerns.
Chinese officials first enacted the “COVID zero” protocol to curb new nationwide infection rates shortly after the pandemic began. International health authorities applauded the strategy for strictly limiting illnesses and deaths in-country. However, widespread semiconductor production stoppages in the country’s industrial core played a big role in cultivating the global chip shortage.
Local leaders eventually lifted the lockdowns once the nation’s case numbers plummeted. But quarantine mandates returned earlier this month when the nation’s infection rates reached their highest levels in two years. Last Wednesday, Beijing allowed Foxconn to bring its second-largest manufacturing campus back online to mitigate lockdown-related financial fallout.
The government also lifted lockdowns on multiple areas in the Guangdong province because they reported no new COVID cases for several days. That said, China reported 4,100 new coronavirus infections last Thursday, with 105 coming from Shenzhen.
Consequently, the country’s latest COVID flareup, and its impact on many local chipmakers, is still an unfolding crisis.
DRAM prices to rise in Q2 2022
DRAM will become more expensive later this year due to the ongoing impact of the global chip shortage.
DigiTimes found spot DRAM prices have risen 5 to 7 percent in Q1 2022, while contract rates fell by 7 to 9 percent. However, the publication believes the component type will experience an across-the-board cost jump in the second quarter. It attributes the change to the priorities of the semiconductor industries memory chip manufacturers. At present, the field’s leading vendors are committed to refining their process technology to improve their yields.
But that means top DRAM manufacturers are directing funding away from production capacity expansion, limiting their output. Until the bottleneck within the segment is resolved, prices will probably continue climbing.
March 14, 2022 – Update
Chinese Coronavirus Lockdowns Impacts Multiple Manufacturers
Leaders in Shenzhen, Dongguan, Shanghai, and Changchun, China, initiated strict lockdowns following a surge of coronavirus infections on March 13. Government officials took action as part of Beijing’s “zero-tolerance” approach to clamping down on new outbreaks to halt their expansion. That means nonessential businesses and public transport services in those areas will be suspended until March 20. As a result, several electronics companies with manufacturing sites in the region have paused production.
Foxconn, the world’s largest EMS provider, announced it would halt work at its Guanlan and Longhua factories. The world’s largest iPhone assembler is reassigning the orders tasked to those facilities to other plants to minimize the disruption to its operations. General Interface Solutions (GIS), Foxconn’s touch panel subsidiary, also shuttered its Shenzhen plant in compliance with the mandate.
As of this writing, Apple has not publicly commented on the lockdowns impacting its supply partners.
China’s latest COVID-19 lockdowns are also affecting several PCB manufacturers with production capacity in the country’s Silicon Valley.
Unimicron, an Apple, Intel, and Nvidia supply partner, shuttered its Shenzhen in response to the government order. But it does not expect the plant closure to significantly affect its operations because it only accounts for 3 percent of its revenue.
Avary Holdings, Sunflex Technology, Taiflex Scientific, and Global Brands Manufacture are suspending their local PCB fabs. Similarly, King Core Electronics, a Taiwanese inductor manufacturer, closed its Southeastern China production site. GEM Services, a chip packaging and testing company, closed its Shanghai factory in compliance with the COVID-19 lockdown.
COVID-19 Spike Disrupts MCU and PMIC Supply
Clustered COVID-19 infections also prompted major disruptions in Suzhou, China, which stuck multiple MCU and PMIC vendors.
HeJian Technology (Suzhou), a subsidiary of United Microelectronics Corporation (UMC), shuttered its 8-inch wafer fab from February 14-24 due to an outbreak. The facility, which mainly fabricates MCUs, PMICs, and display driver ICs, closed after a single employee tested positive for the illness. Local authorities allowed the complex to reopen once its entire staff underwent PCR testing.
UMC told DigiTimes the factory suspension had not significantly impacted its business.
In addition, Jinglong Technology, a semiconductor testing provider, and Xpeedic, an IC packaging firm, briefly closed their plants due to the Suzhou coronavirus outbreak. Sino Wealth Electronics revealed that HeJian and Jinglong’s production pauses curtailed its MCU and lithium battery management chip output. Silergy Corp., an analog component designer, also experienced manufacturing delays related to China’s quarantine mandates last month.
In January, Micron and Samsung encountered operational problems because of a COVID-19 lockdown in Xi’an, China.
The latest disruptions highlight the reality of the coronavirus’s impact on the electronics manufacturing supply chain. In recent months, the East Asian superpower has reacted to its highest coronavirus infection rates since 2021 with sweeping lockdowns. Accordingly, OEMs should anticipate component availability and pricing surges through this year.
Automotive MCU Prices to Increase in Q2 2022
The ongoing global chip shortage will substantially drive up prices for specific vehicle components this spring.
According to DigiTimes, Infineon Technologies NXP Semiconductors, Renesas Electronics STMicroelectronics, Texas Instruments, and Toshiba will increase their quotes for automobile-grade MCUs and power chips in the second quarter. It further asserts NXP, Renesas, and Toshiba will make their car microelectronics 10 to 15 percent more expensive. The suppliers are raising their fees in reaction to spikes in copper, gold, and silicon wafer costs.
Raw materials volatility has prompted component availability and pricing searches since the summer of 2021.
Market watchers anticipate the parts bottleneck will use it considerably by the middle of the year. Many top chipmakers and foundry service providers will bring new fabs online by that point. But overwhelming post-coronavirus pandemic demand for consumer electronics means materials costs are unlikely to decrease anytime soon.
WD, Micron NAND Prices Up 10 Percent
DigiTimes reported that Micron Technology and Western Digital (WD) had increased their NAND prices by 10 percent.
Earlier this month, the publication noted the firm would make the change in response to a materials contamination issue in mid-February. The corporation revealed 6.5 exabytes of flash memory had been affected in the manufacturing incident. Market watchers believe Kioxia Holdings would change its pricing because it also lost inventory in the event.
Analysts expected an across-the-board cost jump as those two providers represent 33 percent of the NAND market. But Kioxia, Samsung, and SK Hynix have kept their pricing stable so far. That said, DigiTimes sources indicated NAND availability will be disrupted until Q3 2022. By then, WD and Kioxia should close the output gap that began last month.
TSMC Raising Contract Manufacturing Fees – Again
TSMC, the world’s largest contract manufacturer, will raise its 8-inch wafer fabrication fees by 10 to 20 percent in Q3 2022. The company is also contemplating bumping up the cost of its 12-inch foundry services. It is adjusting its pricing in response to continued robust demand and inflation.
Last fall, TSMC increased its pricing for its 7nm and above nodes by 10 to 20 percent and its sub 7nm services by 3 to 10 percent. At the time, the change represented its most substantial fee adjustment in a decade but made sense in the face of intense customer interest. Three months into 2022, interest in its next-generation and leading-edge production technologies still have not diminished.
At the same time, the company’s capital expenditures have hit record highs in recent years.
In 2021, the foundry poured $30 billion into building new fabs and upgrading its existing production lines. For 2022, it intends to spend between $40 billion and $44 billion optimizing its global manufacturing footprint. And last month, its Board of Directors authorized paying $20.94 billion to enhance its chip fabrication resources further. It is also investing heavily in research to develop advanced 3nm and 2nm mass production nodes.
TSMC informed its shareholders its compound annual growth rate of the next few years should be between 15 and 20 percent. It also anticipates maintaining or exceeding a gross margin of 53 percent for the foreseeable future. But to do that, it will need to charge most of the semiconductor industry’s leading fabless providers more. Consequently, popular mobile devices, PCs, and other consumer electronics will probably become more expensive this year.
March 7, 2022 – Update
Potential Analog Chip Shortage Threatens Industry Recovery
Alix Partners, a global consultancy, pegged the industry’s revenue losses at $210 billion in 2021. However, Nissan, Honda, and Toyota recently made optimistic forecasts for the fiscal year due to the easing of supply constraints. In fact, Bloomberg Intelligence analysts noted that Japan’s top vehicle manufacturers are nearing pre-COVID-19 production levels.
Unfortunately, industry experts now anticipate a new devastating parts shortfall will impact the industry next year.
IHS Markit published a research paper indicating an analog chips bottleneck could emerge. Demand for that part type is increasing in two major sectors: mobile devices and automotive. Smartphone vendors need that category of IC to enable contactless payments, high-end audio, and sensor processing. And car companies require lots of analog microelectronics to support traditional and next-generation automobile functions.
Right now, vehicles include hundreds of analog chips to empower LED lamps, in-cabin displays, and infotainment systems. But they are also essential to newer technologies like automobile electrification and advanced driver assistance systems (ADAS). As those features become pervasive, automakers will greatly ramp up their orders to support their new fleets. IHS Markit anticipates the average car’s analog component content will be 23 percent in 2023 than last year.
Unfortunately, the semiconductor industry cannot accommodate that surge in demand and is not interested in addressing it.
Manufacturers utilize older 300nm to 65nm fabrication processes to make analog chips. However, chipmakers are dedicating 86 percent of their announced capital expenditures to advanced nodes. As a result, market experts believe a major supply shortage could disrupt light vehicle production by the end of 2023.
That said, IHS Markit speculated that demand for analog ICs from other sectors could fall over the next 16 months. If that happens, foundries will have production space available to meet automakers’ needs. In addition, Gartner forecasts that half of the world’s top 10 vehicle manufacturers will design their microelectronics in-house and outsource their production. The organization noted car OEMs, post-chip shortage, want more control over their supply chains.
Ideally, Gartner’s scenario will play out because antiacid providers cannot handle the demand created by another significant chip shortage.
Western Digital Raises NAND Prices
According to DigiTimes, Western Digital Corporation notified its customers of a price increase across its NAND chip lineup. The publication anticipates the change will impact the marketplace this quarter. The California-based corporation is responding to a cost jump it sustained due to a materials contamination at two fabs it operates with Kioxia Holdings. It disclosed that the event reduced its flash memory product output by 6.5 exabytes.
DigiTimes anticipates Western Digital’s markup will drive up NAND prices across the board by Q2 2022.
Analysts suspect the contamination will prompt industrywide disruption because Kioxia also lost 6.5 exabytes of flash memory chips. Because the two companies represent 33 percent of the NAND market, overall Q1 bit shipments could fall by up to 10 percent. Consequently, OEMs might want to stock up before materials prices substantially go up next month.
February 28, 2022 – Update
Lead Times and Components Prices Rose in February
Nikkei Asia recently reported electronic component lead times expanded greatly in February, rising by 5 to 15 weeks from October. The publication found the delivery dates grew significantly among general purpose microelectronics, with 16-bit processors hitting 44 weeks, up 15 weeks from fall 2021. It also determined that power ICs require 37 weeks to fabricate and ship out, an increase of nine weeks.
Chip costs have also trended upward lately, with Gartner noting a 15 percent hike in average selling prices last year.
The microelectronics sector has experienced extreme volatility since late 2020, when a supply-demand imbalance emerged in the automotive industry. Since then, the parts shortfall spread out into multiple sectors and devolved into a global chip shortage. Manufacturers and foundries have snapped into action to increase capacity to resolve the crisis, but state-of-the-art components have been the priority.
McKinsey & Co. determined capacity for cutting-edge ICs, made using 28nm and below nodes, grew 13 percent in 2021. However, capacity for mature products, meaning 40nm and above processes, only grew by 3 percent. That disparity is a big factor in increasing lead times and pricing for general purpose components.
Because of the widespread nature of the shortage, even the largest technology companies are struggling to procure adequate part supplies. Sony, one of the world’s largest consumer electronics companies, stopped taking orders for six of its mirrorless cameras because of the bottleneck. It also paused the manufacturing of its high-end digital photographic devices three times in Q4 2021.
Sony CFO Hiroki Totok stated the company is currently stockpiling semiconductors to prevent similar disruptions in the future. However, with component demand still outstripping production, the company still expects microelectronics to remain in short supply during the year’s first half.
Infineon to Increase Chip Production in 2022
During its most recent quarterly meeting, Infineon Technology revealed plans to increase its chip production this year. The German corporation indicated that demand for its products still outweighs its available supply, so it will expand its capacity both internally and with its manufacturing partners. It also reiterated that it is interested in pursuing automotive, industrial data center, and IoT end-markets opportunities.
The chipmaker earmarked €2.4 billion ($2.68 billion) to the effort and aimed to ramp up its 300mm node capabilities.
Nevertheless, Infineon CEO Reinhard Ploss said supplies of his company’s products would be tight throughout 2022. His comments echo recent statements from Peter Schaefer, head of the firm’s automotive unit, who noted the vendor would be ready to meet demand next year.
Foxconn Sees Supply Chain Bottleneck Easing Up Soon
In more positive news, Foxconn of an upbeat outlook on the global chip shortage.
Spokesman James Wu noted that the corporation sees greater component availability throughout the first quarter and easing “overall supply constraints” in Q2.
Although Foxconn is bullish about the chip supply chain, it still struggles with specific shortfalls. The Taiwanese manufacturer revealed display drivers and PMICs are still difficult to source.
February 21, 2022 Update
Toshiba to Bolster Power Chip Output in 2022
Toshiba announced it would build a new 300mm wafer fab on the site of Kaga Toshiba Electronics, a subsidiary it maintains in Japan’s Ishikawa Prefecture. The corporation is investing ¥100 billion ($873 million) to establish the facility and another ¥30 billion ($261 million) to set up a 300mm node production line inside one of Kaga Toshiba’s buildings. Its capacity expansion will increase its power component output by 2.5 times.
Last September, Toshiba declared its supply of power management ICs would be tight until September 2022. It explained interest from its automaker, consumer electronics, and industrial equipment customers exceeded its production capabilities. The firm wants to address the demand spike, but it is taking a measured approach to expanding its resources.
The corporation’s 300mm production line will begin operating between October 2022 and March 2023.
Its new fab will be established in two phases, with full operations to commence in March 2025. In addition, the Ishikawa Prefecture plant will feature a quake-resistant structure and dual power lines. Consequently, it will be equipped to handle events like the earthquake that took Toshiba’s Oita complex offline in late January.
MediaTek and Qualcomm to Ramp Down 4G AP Output
DigiTimes reported MediaTek and Qualcomm plan to reduce their 4G application processors (AP) production this year.
MediaTek is allocating its production resources toward 5G chips for smartphones and other mobile devices. However, the firm does not expect its prioritization of fifth-generation networking parts to impact its near-term output. Qualcomm also plans to cut its 4G AP shipments in 2020, but with a more aggressive timeline. The manufacturer intends to cut its deliveries by 10 percent this quarter from Q4 2021.
Industry analysts expect 700 million, or 50 to 60 percent, of handsets made this year will be 5G compatible.
Given how the industry is trending, MediaTek and Qualcomm’s change in priorities makes sense. However, DigiTimes noted overall 4G AP shipments are unlikely to fall this year due to robust demand in regions like Africa, Eastern Europe, Latin America, and Southeast Asia. The publication noted Chinese chipmakers like Unicon (Shanghai) Technologies intend to fill the gap in the marketplace.
That said, handset vendors should plan for mounting supply tightness for 4G hardware made by MediaTek and Qualcomm.
February 14, 2022 Update
Commerce Department’s Devastating Semiconductor Supply Chain Report
The Commerce Department’s “Results from Semiconductor Supply Chain Request for Information” is an enlightening if dismaying read.
The report determined microelectronics buyers held a median five-day parts stockpile in 2021, down from 40 days’ worth in 2019. It found that median demand among U.S.-based electronics manufacturers exceeded the available supply by 17 percent. Moreover, its respondents believe that the components bottleneck will not be relieved in the first half.
The government’s report also highlighted the specific parts categories most sought after by American OEMs, CMs, and EMS providers. Companies have the greatest need for legacy node MCUs, PMICs, RF chips, image sensors, and optoelectronic parts with automotive, medical, and networking applications.
Industry experts estimate part shortfalls cost the vehicle sector alone $210 billion last year.
The Commerce Department identified the crux of the problem as an underdeveloped electronic components ecosystem.
Its survey cited Semiconductor Industry Association (SIA) data noting that chipmaker fab utilization stood at 90 percent from Q2 2020 to Q4 2021. In addition, its respondents pegged insufficient component assembly, testing, and packaging capacity as a big issue.
Washington’s report concludes that more fabs going online is the solution to the supply-demand imbalance driving the global chip shortage. Unfortunately, component factories take years to build, equip, and staff. For that reason, the semiconductor industry’s top providers expect the parts crunch will extend into 2023.
Plus, the mounting popularity of technologies with high chip content, like 5G and electric vehicles, will increase the need for ICs over time.
The Commerce Department report made it clear Washington wants to answer the microelectronics sector’s calls for recovery and revitalization support. But the way forward is not without its obstacles.
New House Bill Earmarks $52 Billion for Chip Industry
The House of Representatives approved a $350 billion bill called the America COMPETES Act shortly after the release of the “Semiconductor Supply Chain” report. True to its name, the bill aims to make the U.S. a more competitive technology innovation hub. In particular, it sets aside $52 billion to give America’s component development and production resources a major shot in the arm.
Although the United States is a leader in IC design, it only makes 12 percent of the world’s chips. That represents a steep fall from the 37 percent of microelectronics the nation fabricated in 1990.
By providing financial support to the segment, legislators hope to expedite the establishment of new fabs across the country. The SIA estimates manufacturers must pay 30 percent more to launch and operate component factories in the U.S. than in regions like Taiwan. Intel, the world’s foremost IDM, argues that federal funding is crucial to kickstarting local microelectronics production.
However, the America COMPETES Act is unlikely to resolve the global chip shortage soon.
For one thing, the House bill contrasts sharply with a Senate bill, the U.S. Innovation and Competition Act, proposed in the Senate last June. The two initiatives differ in funding allocations, areas of concentration, and trade policy modifications. Those conflicts, and partisan divides in Congress, could delay the passage of new chip sector support initiatives.
Even if the legislation became law right away, the process of establishing more capacity is so time-intensive, Washington’s financial support cannot serve as a magic bullet solution.
Nevertheless, the U.S. government’s push to strengthen its domestic components ecosystem is a positive development. Local manufacturers will gain a more robust and accessible supply chain with more fabs in the region. Overseas companies will enjoy the pricing advantages that come with more competition. And the entire world will benefit from the greater availability of advanced microelectronics.
February 7, 2022 Update
Industrial MCU Output to Increase in Q2 2022
Last month, DigiTimes reported Holtek Semiconductor, Megawin Technology, Nuvoton Technology, and Nyquest Technology intend to boost microcontroller units (MCUs) throughput in the second quarter.
The four Taiwanese-based providers primarily want to make more 32-bit MCUs with machine tools and industrial system applications. The quartet plans to raise their quotes for those items later this year.
Moreover, their roadmaps include introducing new 32-bit products for servers and wireless chargers to capitalize on robust long-term demand.
The publication also offered good news regarding the output automotive MCUs.
Several leading carmakers had to idle their factories last year due to insufficient supplies of critical components like MCUs. AlixPartners, a global consulting firm, estimated the parts bottleneck cost the auto industry $210 billion in 2021. According to DigiTimes, the sector’s top IDMs want to outsource production to several Taiwanese backend providers to ramp up their output.
As of this writing, chipmakers in neither area have announced any new international partnerships.
SK Hynix to Double NAND Shipments in 2022
SK Hynix, one of the world’s largest memory manufacturers, announced plans to double its NAND chip shipments this year.
The South Korean corporation aims to become the sector’s second-largest flash module provider by utilizing the resources it acquired last year. The firm spent $9 billion to buy the American company’s NAND assets, including its Dalian, China fab. Its SSD division, now rebranded Solidigm, will address robust end-market demand from the server, smartphone, and connected vehicle segments.
The vendor also offered a forecast for the global chip shortage’s impact on its business, predicting a gradual easing of supply chain tightness in 2H22.
Earlier this year, AMD CEO Dr. Lisa Su predicted that IC availability would start returning to normal within the same timeframe.
Samsung and Toshiba Offer Updates on Recently Idled Plants
Samsung and Toshiba recently announced updates on fabs that recently experienced major operational difficulties.
Samsung’s Xi’an, China semiconductor plant began experiencing challenges in late December due to a spike in COVID-19 cases. Beijing locked down the bustling mainland city to halt the spread of illness, including movement restrictions. However, regional officials ended the quarantine on January 24, and the South Korean conglomerate stated its factory had restarted normal operations two days later.
Industry watchers asserted that Samsung’s coronavirus-related disruptions would contribute to higher NAND prices in Q2 2022.
Toshiba temporarily shuttered its Oita, Japan factory following a January 22 earthquake that occurred off the coast of Kyushu. The corporation later declared that the quake had damaged some of the complex’s equipment in the event. It provided an update on February 4 indicating expects to resume full production by mid-March.
Before its unexpected shutdown, Toshiba’s fab made automotive and industrial LSI chips.
At present, neither provider has offered a detailed breakdown of how their respective production interruptions will impact their output. OEMs, CMs, and EMS providers have an incentive to study market analysis generated by trusted providers. That way, professional buyers can make purchasing decisions to ensure their companies will not be left out in the cold.
January 31, 2022 Update
Electronic Components Shortage Update
On January 22, a 6.6 magnitude earthquake jolted southwestern Japan. The event injured ten people, caused a blackout in the Oita prefecture, and affected operations at two local component factories.
Toshiba suspended work at its Oita plant, which mainly fabricates LSI chips for automobiles and industrial machinery. It declared that the quake damaged some of its production lines but did not affect the complex’s infrastructure. The firm stated the facility would resume production after being thoroughly inspected.
As of this writing, Toshiba has not disclosed how the incident would impact its output.
Renesas acknowledged that the earthquake struck its Oita, Kawashiri, Nishiki, Saijo, and Yamaguchi factories, but did not damage its buildings or equipment.
Across the East China Sea, Hua Hong Semiconductor experienced a brief power outage at its Shanghai-based factory in January. The foundry service provider’s 200mm wafer fab makes IGBTs and CMOS sensors. It plans to gradually bring the complex back online and anticipates no significant impact on its business.
However, DigiTimes explained that 8-inch fab capacity is still tight due to strong demand and limited production space. The news agency noted that some providers based in South Korea have already stopped taking reservations for 2022.
It also pointed out supply constraints led to a 40 percent upswing in 200mm wafer foundry quotes last year. Unfortunately, a similar scenario seems to be unfolding in 2022.
Shifting Component Pricing Trends
In another echo of the recent past, the coronavirus pandemic is driving up costs for essential electronic components.
Late last year, the Chinese government locked down the city of Xi’an amid mounting COVID case numbers. That mandate caused labor and logistics problems at area factories maintained by multiple leading memory chipmakers. Due to the manufacturing disruption, contract and spot NAND and DRAM prices will likely go up in Q2 2022.
On the bright side, Beijing lifted the Xi’an lockdown on January 24, which will allow local factories to resume normal operations. As the semiconductor industry proved incredibly resilient following the COVID-19 outbreak, it should bounce back quickly from this incident.
Shifting gears, industry insiders forecast high-performance processors will become significantly more expensive this year. Last fall, reports emerged TSMC would increase its production fees by up to 20 percent starting in Q1 2022.
Since the firm makes AMD, Intel, and Nvidia products, its price hike will impact forthcoming premium CPU, GPU, and FPGA launches.
The market watchers expect PC demand to erode over the year, but high-end processor costs become more expensive every quarter. On the other hand, TSMC’s bleeding-edge nodes will provide the three American manufacturers with a compelling marketing advantage. Their next-gen processors will enable a level of performance, energy-efficient, and game-changing utility.
But, as always, establishing the future’s infrastructure isn’t cheap.
Finally, DigiTimes recently revealed that handset TDDI (touch/display driver integration) chip prices are trending downward. The component category experienced a decline in value through 2021 as Chinese smartphone sales plummeted. In addition, the part type is losing steam due to the growing popularity of OLED DDIs in mobile devices.
Multiple leading manufacturers in the space are looking to use OLED technology to make new cockpit interfaces through 2023. Consequently, TDDI prices will likely keep sliding this year as the marketplace continues embracing innovation.
As January draws to a close, the global chip shortage has continued to create volatility across different segments. Due to high demand, insiders forecast certain parts will be in short supply until the second half of the year or longer. Industry watchers also found that some OEMs are stockpiling personal computer parts in the face of ongoing instability.
January 24, 2022 Update
Power Chip Supplies Likely Constrained Until 2023
Earlier this month, DigiTimes reported that multiple Taiwanese-based power management integrated circuit (PMIC) manufacturers are seeing high demand. However, because foundry service provider support remains constrained, the region’s chipmakers do not plan on initiating price hikes in the near term. Instead, firms intend to prioritize making more expensive units with higher profit margins.
That suggests lower-end PMICs could be in short supply throughout 2022, with supplies normalizing sometime next year.
Similarly, the news organization noted server pulse width modulation integrated circuits (PWM ICs) and networking/communications components are tight. Leading American IDMs have informed customers that those items have lead times over six months despite softening demand. Moreover, PWM IC and WLAN vendors have raised prices for those categories.
On the bright side, DigiTimes’ sources indicate additional production capacity for server components will open in 2H22, and shipping should increase by Q2 2022.
Finally, the website noted that several laptop ODMs had built sizeable components inventories, likely due to the chip crunch. For example, Compal Electronics, a supplier for Acer, Apple, and Dell, revealed it had a parts stockpile worth $87.3 million in September 2021v. But during the same time last year, it only had $21.2 million in microelectronics on hand. By amassing a large number of chips, it has met robust notebook demand.
With Compal and other top ODMs fully stocked, chipmakers could adjust their prices or production schedules to avoid creating a market glut.
How the Chip Shortage has Affected ASML
ASML, the world’s only vendor of extreme ultraviolet lithography (EUV) fabrication equipment, has done exceptionally well recently. Last year, the corporation took in over $21 billion in revenue thanks to massive interest in its $170 million machines. Nevertheless, it has grappled with the effects of the global chip shortage.
CEO Peter Winnick said his company engages in a “daily fight” to source enough microelectronics to support its production lines. He further revealed that he regularly contacts semiconductor companies to get more parts for its suppliers. It needs a large number of components to meet its goal of shipping 55 advanced EUV systems in 2022.
But despite its reach and prominence, the chief executive noted demand for its lithography systems currently outstrips its capacity by 30 to 50 percent.
Ironically, ASML’s difficulties indicate a positive trend in the broader semiconductor industry. The corporation’s manufacturing tools are in high demand because so many major providers are expanding their capacity as soon as possible. Its EUV units will enable semiconductor giants like TSMC and Samsung to ramp up their output considerably.
As a result, the Dutch corporation will play an essential role in easing the chip shortage as the year goes on.
January 17, 2022 Update
Although 2021 is over, the world is still dealing with one of its biggest challenges: the global chip shortage.
Chipmakers, contract foundries, and world governments are building new semiconductor factories to alleviate the bottleneck. Unfortunately, the complex and costly process of establishing new production capacity means that the parts crunch will be an ongoing concern in 2022.
That means certain components will be difficult to source while lead times and prices will continue to fluctuate. But the crisis, which cost the auto industry $210 billion last year, is nearing an inflection point soon.
Susquehanna Financial Group, a global trading firm, found that microelectronics lead times hit 25.8 weeks in December, up six days from November. The organization noted the supply-demand gap across all categories reached its highest level since 2017. It also determined power management integrated circuits (PMICs) and microcontroller units (MCUs) have the longest turnaround schedules.
Similarly, GlobalData, an analytics group, recently forecast the chip shortage will remain an obstacle throughout 2022. It further anticipated that the shortfall would severely impact the automotive, smartphone, and video game console segments. The organization also warned new clustered COVID-19 flareups could disrupt the semiconductor supply chain this year.
In addition, TSMC recently revealed it would spend between $40 billion and $44 billion to expand its production capacity this year. The firm is currently building new fabs in East Asia and the U.S.; some of its capex will be spent on building out its existing facilities. As a result, the foundry can help many of the world’s leading chipmakers stabilize their output.
SEMI, a chip industry association, believes many companies beyond those three foundry service providers are expanding capacity this year. The organization anticipates global spending on semiconductor manufacturing equipment will reach $98 billion in 2022, a 10 percent increase from 2021.
As the year goes on, more and more machinery will be delivered, installed, and come online to help resolve the semiconductor field’s components shortfall.
How the Global Electronic Component Shortage Began
The global chip shortage has more than one cause, but the coronavirus pandemic is its catalyst.
After the COVID-19 outbreak began, multiple world governments initiated regional lockdowns that halted manufacturing across the globe. The production shutdowns occurred in tandem with a plunge in automobile and consumer electronics purchasing. However, demand for electronic devices that facilitated remote work, learning, and recreation spiked as the year wore on.
Amid unprecedented calamity, society adapted by embracing digitalization.
Eventually, interest in new automobiles returned, a situation that caught many OEMs, CMs, and EMS providers by surprise. Because of plummeting business in early 2021, many carmakers had canceled their electronic component orders in fear of a slow recovery. Most automakers carried small microelectronic stockpiles to minimize their overhead, but they could not address the renewed demand.
Auto companies made rush orders for microelectronics to address surging demand but ran into a severe problem. The foundry service providers that made the components that powered their vehicles had shifted to making electronic device parts. As a result, personal transport vendors and suppliers faced higher than regular lead times and manufacturing fees.
Since many auto semiconductor companies started outsourcing production years ago, few could fabricate their own chips.
Simultaneously, a fire broke out at a Japanese auto chip factory, a significant supply chain node, which seriously curtailed its output. Moreover, a severe winter storm prompted the shutdown of several U.S.-based fabs, including some that made vehicle components. The one-two punch of those disruptions worsened the chip shortage.
Consequently, the parts crunch affecting the auto and consumer electronics segments expanded into 169 sectors. The semiconductor supply-demand imbalance led to widespread factory shutdowns, product stockouts, and staggering financial losses.
When Will the Electronic Components Shortage End?
Currently, industry watchers have limited visibility regarding the shortage’s conclusion, but 2023 seems to be the consensus.
The component crunch is a long-term problem because its resolution requires the industry to establish more capacity. Chipmakers and foundry service providers can do that by spending millions of dollars to expand their existing facilities or billions to build new ones. Moreover, even when corporations are willing to make massive capital expenditures, the expansion process takes years to complete.
Nevertheless, many semiconductor companies plan to support the world’s recent digitalization by substantially raising their output.
Last year, manufacturers broke ground on 19 mass production fabs and will begin construction on ten more facilities this year.
As those plants go online, formerly constrained parts will become more readily available. Many semiconductor industry leaders expect the new manufacturing capacity to impact the supply chain in the second half of 2022. But because demand for microelectronics remains high across the board, the market is unlikely to return to normal until 2023.