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Semiconductor Industry News - December 2022 Update

Semiconductor Industry News - December 2022 Update

Black Friday sales went big

Sales Boom Over Black Friday and Trepidation Sets in as 2023 Creeps Closer - December 9, 2022

2023 is only a few weeks away and with it comes both excitement and anxiety for what awaits us in the new year. Recovery of the global supply chain is on everyone’s wish list and with growing fears of excess, that might just be a gift that’s not under the tree this year.  

Concerns over growing stockpiles transforming into excess have been piling up. Back-to-school shopping had marked a poor turn-out with low consumer demand. Worries that holiday shopping would reflect the same poor numbers had PC manufacturers racing to advertise promotional cuts. Based on Black Friday and Cyber Monday, those plans might have paid off.  

That said, well-performing sales don’t mean we’re out of the woods yet. 2023 might bring less consumer spending if everyone empties their wallets now. If that happens, that might lead to a monumental surplus across all sectors of industry.  

Black Friday Success Gives Hope to Future Promotional Cuts to Ward Off Excess

PC demand might have spent the last few months dropping, but even inflationary prices didn’t stop this Black Friday from being a success. In the U.S. alone, Americans spent an average of $325 USD on holiday purchases. This is up 8% from 2021, an unexpected increase as consumer spending power has weakened.  

According to the Wall Street Journal, more shoppers were out in stores over Thanksgiving than last year. Many retail experts are taking this as a sign that consumers are returning to pre-pandemic shopping behavior. Between Thanksgiving and Cyber Monday nearly 197 million shoppers in the U.S. visited stores or shopped online.  

As a result, the jump is expected to total between $942.6 billion and $960.4 billion. The almost four-decade high inflation will no doubt contribute to this increase in total money spent. National Retail Federation CEO, Matt Shay, says the weekend’s large sales reveal that Americans, despite inflation, are eager to take advantage of bargains and deals.  

Shay sees continued increase in spending over the coming weeks as the shopping season isn’t done yet. A bigger turnout is expected if certain factors continue, that being a strong job market which is currently trumping recession fears. While Americans are spending big, that doesn’t mean they spend without thought either. The better the sale, the more likely consumers will spend.  

This is good news for the PC market that has been slashing production amid growing excess stock. Planned promotional cuts should be taking place throughout this month and, if the deal is good enough, a spike in demand from holiday shopping could eat through excess stock.  

While the outlook is good, there are still worries that once the shopping season ends the period that follows could be one of little to no consumer demand. As Shay says, this might be a case of “by now, pay later.” NAND Flash revenue was down 24% in Q3 2022, and DRAM sales were down 40% in the latter half of 2022.  

Excess, despite this peak, is still a major concern for OCMs and OEMs alike. Covid-19 lockdowns in China have been rising and while U.S. sanctions have already disrupted that area of the global supply chain, these lockdowns might be a powerful second blow. With excess stock already casting a massive shadow, mitigation and selling off excess should be a top priority.

Crystal Ball Forecast: What Will 2023 Bring to the Supply Chain?

The forecast for 2023’s electronic supply chain is anything but stable. The automotive semiconductor shortage, Covid-19 lockdowns, and recent legislation have continued to wreak havoc on the supply chain. Its fragile recovery has faced disruption after disruption over the last few years. At the start of 2022, on the verge of Ukraine’s invasion, no one knew how the year would exactly end.  

Now, with 2022 almost over and 2023 about to begin, we’re all wondering what the next year has in store. As it turns out, expectations of what could happen are mixed depending on what industry you’re looking at.  

While predictions on when the shortage would and will end have been consistently mixed, there is one underlying truth. Closure of the supply-demand gap continues to shrink, even if it is centimeter by centimeter. Shortage persistence continues, that’s true, but despite the disruptions of 2022 none have sent the global electronic supply chain spiraling backward. Barring any major economic disruptions, we should stabilize through 2023 in most sectors.  

Automobiles, unfortunately, will continue to grapple with chip scarcity. Most other sectors could be forced to reckon with a large surplus of semiconductors before there is even a chance to balance supply and demand. Excess is set to become the next global supply chain villain in the coming year.

Selling it sooner rather than later, while the shortage still lingers, is an advantage you don’t want to ignore.

Mushrooms in electronics? More likely than you think!

China Striking Out in Europe as Scientists Find New Semiconductor Material in Mushrooms - December 2, 2022

Circuit boards made from bonafide toadstools, actuators that utilize the walking dead, and layoffs at Nexperia Newport are how the industry is kicking it off in December. Talk about a nightmare before Christmas!

In a continued effort to restore domestic semiconductor manufacturing, the European Union is looking to pass their own Chips Act in 2023. Like many others, the EU hopes that the investment of $43 billion euros will bring chipmakers back to the continent. While Europe waits for that measure to pass or those not in the EU that means taking drastic measures now.  

What are those measures? Blocking and reversing previous sales of chipmaking facilities to outside nations.  

Nexperia Denied Purchase of Welsh Semiconductor Firm

Last week, Germany denied the sale of Elmos Semiconductor’s wafer fabrication plant to a subsidiary of China-owned Sai Microelectronics. The decision was made due to “security concerns” and a desire from the German government to be far more critical of purchases in sensitive areas of business, like semiconductors.  

This week, the Department for Business, Energy, and Industrial Strategy (BEIS) in the United Kingdom blocked the complete takeover of the largest producer of semiconductors in the UK by Chinese-owned manufacturer Nexperia. The semiconductor plant at the center of this debacle, Newport Wafer Fab in South Wales, was bought by Nexperia in the summer of 2021 for $63 million. The plant, renamed Nexperia Newport, has been operating under this new arrangement since 2021.  

Now, in a final order given by the BEIS, the secretary of state cites national security concerns about such a takeover. In a statement by the secretary of state, “technology and knowhow that could result in potential reintroduction of compound semiconductor activities at the Newport site, and the potential of those activities to undermine UK capabilities,” contributed to the decision. The UK government has ordered the sale to be reversed and is now investigating the matter.

The sudden reversal has shocked Nexperia’s UK boss, Toni Versluijs, who plans to appeal the decision. While Nexperia Newport is not the largest chipmaking facility on a global level, the concerns about the takeover revolve around the future of the UK’s chipmaking industry as some products are used in defense. Something that could be influenced by a company’s ownership under a geopolitical rival.

These actions, while sudden, do not come as a complete surprise. Over the last few years, countries across the globe have been doing what they can to bolster domestic semiconductor production. Reliance on one geopolitical area, that being Taiwan and South Korea, has been looked at more critically since the global semiconductor shortage threw the global supply chain into disarray. As a result, many countries, including the UK, have been doing what they can to protect and expand what number of chip-making operations they have.  

Like the U.S., the European Union is currently hearing a proposal on its very own Chips Act which aims to address semiconductor supply shortages and funding to the industry. The proposal is seeking to gain a $43 billion euro investment to revitalize Europe’s semiconductor industry. As companies and governments alike wait for these new laws to pass, it is clear actions like this might become more commonplace.  

The downside to Nexperia Newport’s sale reversal would be the loss of jobs that comes as a result. However, revitalization efforts within the semiconductor industry will increase jobs in the market sector. As those projects wait on the sidelines, the loss of jobs might continue in the intermittent. It is unlikely the job losses will continue throughout domestic semiconductor improvement.  

After all, advances are still happening every day within the industry.  

Form-Fit-Function Fungi? Scientists Make Chips Out of Shrooms

You read that right, scientists have found a new alternative to plastics in batteries and circuit boards in forest fungus. As scientists strive for cleaner and renewable energy sources, researchers at Johannes Kepler University, Austria, found a solution for non-degradable materials in electronics.  

The replacement for plastic in flexible and stretchable electronics, mushroom skin.  

This was not an out-of-the-blue decision to experiment with mushroom skin either. A team member had been studying the use of fungus-derived materials in various areas. Particularly, that of the Ganoderma lucidum mushroom. Its skin proved to be a candidate for a substitute substrate in electronic components.  

Team leads, Doris Danninger and Roland Pruckner, discovered that the Ganoderma lucidum mushroom forms “a compact protective skin made of mycelium, a root-like network, to protect its growth medium.” While less insulating than plastics, the mushroom skin provided a safe and successful environment for the electrical circuits. The skin can withstand temperatures exceeding 200 Celsius or 392 Fahrenheit with a thickness like paper.  

Biodegradable skins, like mushrooms, would be a sustainable and degradable material for short-lived electrical circuits. The environment needed to grow these mushrooms is as green as the skin substrates themselves. Typically, mushrooms require wood to provide a stable growth environment and there is plenty of waste wood in the world if this ever scaled to a mass-production level. Though, the team acknowledges that it is far off in the future.

Sustainability in electronics is not limited to substrates made from organic material either. As clean energy initiatives continue to rise across the globe, electric vehicles being an example of this rising trend, so too do the efforts to explore more sustainable options.

Perovskite solar cells are far more powerful conductors than silicon. Since its own scientific breakthrough in 2013, researchers and manufacturing startups have worked hard making this sustainable option closer to a mass-produced reality. Today, companies like Oxford PV that has created perovskite solar cell panels at its factory in Brandenburg an der Havel, Germany.  

Most of these efforts in sustainable alternatives to plastics, silicon, and other materials have had some measure of success. The challenge lies within the feasibility of mass production for these materials. Perovskite and mushroom skin have proven themselves to be not only capable of reproducing the same results as their counterparts but are also more efficient.

The drawback is how practical these alternatives can be overall. An example that stands out is the use of dead spiders as necrobiotic grippers by researchers at Rice University, Texas. While the results of the study are immense to the study of necrobiotics in real-life scenarios, as the sider gripper could easily manipulate the moving of components on a circuit board, the practicality of a mass-produced effort is insurmountable.  

There is hope that with these studies the research might lead to another alternative that lies somewhere in between. Where a new material that possesses the efficiency and sustainability of the current material, such as mushroom skin, can be developed from these current tests. The new material might not have all the same capabilities as mushroom skin, but enough paired with some degree of biodegradation to replace harmful plastics.  

It will take some time to see, but these efforts are not only promising but happening more often. 2023 will no doubt have some of its own surprises up its sleeves.

Asia-based EV companies take world by storm

Germany Seeks to Fortify Domestic Resiliency as Asian Companies Target EV Dominance - November 25, 2022

The challenges of the shortage are still being felt today. As the market suffers the sudden change from scarcity to abundance, domestic semiconductor manufacturing and its importance remain at the forefront of everyone’s minds.  

As chipmakers grapple with constraints and excess across the market, plans to increase facilities remain unchanged. In some cases that means purchasing existing facilities rather than constructing new plants entirely. However, it might not be that easy as world governments become increasingly concerned with bolstering domestic capabilities.  

Germany Blocks Sale of Chip Facilities to China-Owned Dutch Chipmaker

Fortifying domestic semiconductor manufacturing has become a topic of economic and security importance for numerous countries. Germany is no exception. The German government has announced its recent prohibition of Chinese-subsidiary Silex purchasing German chipmaker Elmos Semiconductor’s wafer fab plant which focuses on automotives.  

Germany’s economic minister, Robert Habeck, reported that while Germany desires to build a stronger relationship with China it should be done on a broader level. The country plans to exercise “particular sensitivity” on transactions in critical sectors, such as semiconductors. This comes as no surprise after Covid-19 lockdowns in China devastated the global supply chain.

This decision came after Germany’s chancellor, Olaf Scholz, said “that Germany needs to lower its reliance on China in areas that are risky and one-sided,” as reported by The Register. The statement by Scholz went on to say that investments should be scrutinized, and the country’s supply chain broadened.  

The German government’s decision comes on the heels of Taiwan’s $3.5 million investment in Lilit a Lithuanian startup. This will be part of three planned investments by Taiwan in Europe’s high-tech industries totaling $10 million. Taiwan’s Industrial Technology and Research Institute will be working with Lithuanian electronics manufacturer Teltonika. The focus of these partnerships will center around semiconductors, EVs, and laser development.  

U.S. sanctions and the German government’s refusal to the purchase has increased China’s frustrations. On top of this, U.S. sanctions have cut off China from ASML Holding NV, one of the few manufacturers of sophisticated lithography machines necessary to make midgrade semiconductors. ASML also manufactures one-of-a-kind equipment that makes the most cutting-edge chips.  

ASML has reported that the total impact of U.S. sanctions on China will only impact 5% of its backlog. Most of its advanced ultraviolet lithography machines aren’t sold to China anyway, only its older machines, so it’s unlikely this will have a major effect on either company or the country. However, this does add to China’s struggle to break into the European electronic market.  

While these minor stumbling blocks are frustrating now, it is likely they will become more impactful as EVs continue to rise. Since EVs utilize more of these advanced chips access to wafer fabs and equipment like ASML’s will be necessary.  

Asian Chip Companies Dive into EV Market

Automakers have been facing the brunt of the shortage for the past few years. Whether gasoline, electric, or both, demand for vehicles has done nothing but boomed. Despite the shortage and its impact, consumers are eager to get their hands on a new car.  

EV sales continue to climb. Even during the worst lows of the shortage and even still as automakers grapple with continued allocation issues, consumers continue their orders. Due to the unprecedented level of demand, hundreds of eager car buyers are currently on waitlists. It is unknown when their purchase will arrive, but a guess is anywhere between 2024 to 3 years from being placed on a waitlist.  

Due to this demand, OEMs are investing in increased production to quickly catch up. Japanese MLCC manufacturer Murata plans on investing $305 million for the construction of a new factory in Jiangsu, China. This is part of Murata’s decision to begin increasing MLCC capacity by 10% annually. As of December 2020, Murata Manufacturing has been devoted to extending its automotive market portfolio.  

Taiwan’s Apple suppliers, Foxconn and Pegatron, have taken steps over the last year to break into the EV industry. Last year, Pegatron’s $164 million investment was just the beginning of its foray into the EV landscape. Foxconn is looking to continue building supply chain resistance and finds that producing components for EV manufacturers, like Tesla, is the best way to do it.

China is currently dominating the EV market sector as enthusiasm for electric transportation is unmatched by any other country. With continued support from the government in its regulations and policies for EV adoption, the automotive battery management system has spiked. Chinese battery manufacturer CALB has leaped to new highs as battery swapping, a big aspect of China’s EV scene, grows in popularity.  

Alongside CALB is EV manufacturer and power swapping station start-up NIO, China’s EV powerhouses are making waves in European markets. With so many players leaping full force into the EV market, chipmakers are racing to increase capacity for EV components. This relief will hopefully catch up with demand as consumer product orders drop overall.

A series of promotional price cuts for holidays

A Christmas Miracle? Chipmakers Cut Prices for Shopping Season to Unload Excess Inventory - November 18, 2022

The results are in! Q3 revenue and global sales were not kind to chipmakers and PC OEMs alike.

Suppliers have experienced negative year-on-year (YoY) growth across the board. Only a few suppliers saw positive growth from underlying circumstances. To combat these losses and get rid of excess inventory, many PC vendors are considering a series of price cuts and promotions for the upcoming end-of-year season. Though, there might not be enough holiday magic to pull off that kind of Christmas miracle.  

Series of Price Cuts Might be Coming Before New Year

Weak consumer demand has been rising for the past few weeks. Now, as the end-of-the year shopping season has come along, PC suppliers are looking to launch a series of price cuts to clear out excess inventory.  

According to EE Times, “global PC shipments have fallen 15% year-on-year in Q3 2022.” This drop in demand is being attributed to the continued weakness in the consumer market from inflation costs and worries of a recession. Since this drop has resulted in some component shortages being resolved, original equipment manufacturers (OEMs) and original design manufacturers (ODMs) aren’t too generous for their view for Q4 2022 and Q1 2023.  

Despite promotional activities from large scale OEMs, PC purchases continue to dwindle. Suppliers will resume destocking rather than adding more inventory even as the holidays arrive. This is due to the back-to-school season, another peak sales season for PC devices, falling short this year. The same results are expected for the upcoming end-of-year shopping.  

Economic uncertainty among promotional price cuts has affected the PC market revenue by lowering average selling prices (ASPs). Many PC vendors have seen negative growth throughout Q3 into Q4. HP saw a 26.5% YoY decline in Q3, and Dell saw a 20% YoY decline. Lenovo saw 16% YoY from enterprise spending offsetting the weak consumer demand.  

Apple was the only one that came out of Q3 higher with 7% YoY growth. This can be attributed to Apple’s product launch in late Q2 once shipments refilled after China’s Covid-19 lockdown. Though even with this slight sunny spot, experts believe that recovery for the PC market won’t be possible until the latter half of 2023.  

Experts say the PC products that will make it through Q4 2022, and the first half of 2023 will be Arm-based PCs and gaming PCs. Now that consumer demand is softening, highly sought items that have been on backorder for the length of the pandemic will become more readily available such as Microsoft's Xbox and Sony’s PlayStation.  

While the outlook is guarded, refocusing on enterprise targeting and spending has aided PC vendors to survive the lows of the Q3. By shifting promotional efforts to a different market sector, there is a chance the blows expected of Q4 could be significantly lessened.  

Keeping an eye on market trends will be necessary for the next few months. Demand, as it has done throughout the last few years, can change almost overnight. Having the tools to monitor the market and sell unneeded excess, if necessary, will help manufacturers get through this hectic holiday season.

TSMC Remains Confident for 2023 Amid Sales Drop, New Facilities Continue Construction

Semiconductor sales continue to take a dive.  

As of Q3 2022, semiconductor sales were down 3% in comparison to last year and 6.3% from earlier this year. TSMC has been affected by a slew of canceled orders from many of its top 10 clients, more than expected throughout Q3. This is a result of “a range of macroeconomic headwinds,” said John Neuffer, the Semiconductor Industry Association (SIA) president and CEO. Despite these negatives, both TSMC and Mr. Neuffer remain positive.  

“The long-term market outlook remains strong,” Neuffer continued. Boosting this assessment are record-breaking highs for silicon wafer shipments in Q3. SEMI statistics reported that worldwide silicon wafer shipments reached a new record high of 3.74 billion square inches (MSI). This is up 2.5% YoY according to Anna-Riikka Vuorikari-Antikainen, the chairman of SEMI SMG and CCO of Okmetic.  

“The silicon industry continues to show quarter-over-quarter shipment increases,” Vuorikari-Antikainen said. “As the role of silicon wafers is fundamental in the broader cyclical industry, we remain confident in long-term growth.”  

Semiconductors rely on silicon wafers, the fundamental building material for most semiconductors. If this market continues to reach new highs, it is unlikely that the semiconductor industry as a whole, despite the downturn, will fall for long. In fact, it’s not hurting everyone to the same extent either.  

NXP Semiconductor has experienced revenue growth throughout Q3 thanks to their diversified portfolio of industrial, automotive, and consumer chips. While the 5nm nodes used in consumer products, like Apple phones, are falling, the 90nm nodes used in automotives are still in high demand.  

It should come as no surprise that despite the negative sales growth of semiconductors, plans to forge ahead with new facilities have not stopped. TSMC has just recently finished its $12 billion dollar plant in Arizona and is expected to start production of Apple’s A- and M-Series chips in 2024. Coming on the heels of this project is Arizona’s newest investment plan to continue to boost its semiconductor manufacturing facilities.  

Arizona’s $100 million investment will be used to fund building out the state’s infrastructure alongside its skilled workforce. These steps will aid in the research and development of semiconductors.  

Even with the latest impacts from softening demand the semiconductor industry will recover. In the meantime, during this period of excess, selling it off is the fastest and easiest way to recover lost cost. During this holiday season, as other OEMs enact protocols to digest inventory, others that are still having trouble obtaining chips can do so at lower cost.  

The easiest way to buy excess inventory at low prices? Through Sourcengine’s digital marketplace.

Demand for SIM cards is dropping

The Chip Shortage is Quickly Becoming a Chip Glut - November 11, 2022

Shrinking consumer demand that started trickling in during Q3 2022 has grown into a tsunami-like force. Chipmakers are facing a plethora of canceled orders as chip orders change from a hot ticket item to an untouchable abundance.  

Globally shipped orders for PCs and other consumer electronics, such as smartphones, are reducing previous expectations of possible growth and shipments. 5G chips are expected to plunge by 100 to 120 million units as consumer spending decreases resulting from inflationary prices.

Concerns over a shortage-turned-glut have given way to an actual period of glut that’s arrived far faster than expected.

Shortage Turned Glut Throwing Wrench into Vulnerable Recovery

Now the tables have turned, chips that were sparsely available only a few months ago have become excessive. As if overnight, semiconductor manufacturers went from being sold out to dealing with “unsold stockpiles” of inventory. Chipmakers struggling to find production capacity are now dealing with shrinking demand and canceled orders.

Even TSMC, which came out of Q3 2022 better than its competitors, is facing significant reductions in orders from tech giants Qualcomm, MediaTek, and more. These manufacturers are dealing with up to “six months of stockpiles” from the peak of the shortage in 2021 and, at the time, soaring demand.

These supplies could last manufacturers well into 2023, if demand had continued onward. Now? These chips might deteriorate before they ever have the chance to go to market. Prices for components haven’t dropped either, warding OEMs off and rushing to cancel existing orders. For those that can’t large amounts of excess inventory are piling up leaving many struggling of how to get these unwanted chips off their hands.  

For the many struggling with excess inventory, there are ways to sell it and recoup costs. In order to regain most of the cost, OEMs with too much inventory must act sooner than later to get their excess to market. For those that don’t know where to start, some digital component marketplaces can help.

Despite these complications, chipmakers including Intel, Micron, and Texas Instruments are not slowing down in new facility plans. Even with excess piling up, semiconductors will always be needed and getting these facilities online sooner than later is still a top priority. Some market sectors will be grappling with the shortage for another year to come, such as automotive OEMs.

To prevent a stressful period of excess from derailing recovery, manufacturers across the global supply chain should work together to send excess inventory to those that are still battling constraints. If you don’t have the time, find a seller to do it for you.  

Softening Demand Hits Phone SIM Cards

Globally shipped SIM cards will be down 8.5% year-on-year in 2022, thanks to continued constraints and Covid-19 obstacles. The biggest hurdle comes in the form of rising average selling prices for SIM cards as a result of inflation. Worries over a global recession have impacted the demand for phones and most consumer electronics.  

With the reduction in consumer spending power, the large portion of sales that usually comes from consumers within the SIM market will be nothing short of impactful. The market is already adjusting for 2023 by lowering its year-on-year growth expectation of 7.2% to 1.8%.  

Beyond inflation and continued supply chain constraints comes another issue, that of Apple’s new eSIM-only smartphone devices. The 14 Apple eSIM-only devices will be limited to the U.S. after their launch in the fall of 2022. How the eSIM-only smartphone will impact the SIM card market is unknown and it will take a year of their release in the U.S. to gain a better perspective.

However, if that succeeds, Apple plans to expand the eSIM-only smartphone range into other global market regions. Should that occur the SIM card market will be facing significant reductions in global shipments. During the first year of Apple’s release in the U.S., alone experts forecast SIM card supply to drop between 50 to 60 million.  

If that is only the tip of the iceberg, we need to start preparing the life jackets now.  

Passive component demand is falling

Passive Components See Demand Drop and Component Research Takes Off - November 4, 2022  

Demand slumps continue to build across the electronic components industry. This month passive component suppliers noticed a decrease in demand for customer orders. As with other consumer electronics trends, this revelation is not entirely unexpected. The downward trend is in response to recession concerns, but sanctions have exacerbated China’s drop in chip imports.  

In North America, the U.S. organization American Semiconductor Innovation Coalition (ASIC) prepares to announce its semiconductor research proposals. These proposals aim to take advantage of CHIPS and Science Act funds set aside for component research. This comes at the same time the U.S. space industry announces their upcoming research on transistors for spacecraft power efficiency.  

The drop in consumer demand might be able to reallocate chips to other sectors that have been struggling for the last few years, including aerospace. However, complications may still arise during this geopolitical fragile environment. To avoid further complications, experts are telling supply chain professionals to digitize so trouble does not occur.  

Passive Orders Slow and China Stops Battery Orders Amid Crunches

Passive component suppliers, including American Taiwan-based manufacturer Yageo, are beginning to experience cooling orders.  

As inventory adjustments begin with many mass-market ICs, many experts see the consumer electronics industry facing corrections throughout the first half of 2023. As this happens passive component suppliers like Yageo, have seen commodity products fall 50-60% in Q3 of 2022.  

Experts predict that MLCC and chip resistors will continue to see capacity and average selling prices (ASPs) drop over 2023’s first and second quarters. Uncertainty over the pandemic and electricity use restrictions combined with Covid-19 lockdowns in China alongside inflationary pressure has resulted in an uncertain outlook for 2023.  

Yageo saw an increase in its cumulative 2022 revenue of 14.1% but, like other passive suppliers, is unsure of 2023’s turnout. 25% to 30% of its total revenue comes from Yageo’s passive lines and dropping demand might have a greater impact than previously expected. Yageo and other passive suppliers are ramping up shipments for automotive applications, as automotive OEMs are still hunting for chips.  

By refocusing their production on automotive components, Yageo and other passive suppliers might lower or nullify the lost revenue from their passive lines over 2023. This refocus would help mitigate some of the possible production stalls automakers have planned for 2023.  

One step forward but two steps back. China-based suppliers have stopped taking new battery orders amid automotive chips and battery delays. This battery shortage rose in 2022 as the Chinese energy industry rapidly developed. The batteries currently in the highest demand are 280Ah battery cells that utilize fewer components than 50-100Ah cells, which saves on costs.  

Unfortunately, many automakers, such as EV battery manufacturer CALB, use these components that go into the batteries and the batteries themselves. While stopping orders will prevent further disruption within the supply chain–erasing the chance for companies to double orders which leads to more strain–production stalls might be inevitable.  

Experts forecast that shortages of the future could be long-lasting and more impactful than the 2020-2022 global chip shortage. We are still struggling with the effects of this shortage and will for some time to come. As technology continues to improve and become further integrated with numerous industries consistent strategizing and monitoring of market trends will be even more pertinent.  

The U.S. Prepares to Hear Semiconductor Research as Space Industry Eyes Transistors  

The American Semiconductor Innovation Coalition (ASIC) is preparing to lay down its proposal for the $11 billion investment of the CHIPS and Science Act. The ASIC is an association of over 150 technology companies, U.S. national laboratories, universities, and nonprofit organizations involved in semiconductor manufacturing.  

All members of the coalition worked together to develop a plan on how the National Semiconductor Technology Center (NSTC) and Advanced Packaging Manufacturing Program (NAPMP) will be implemented. The NSTC and NAPMP along with three new Manufacturing USA Institutes is where the $11 billion in funds will be invested.  

The ASIC plans on utilizing existing resources that support the research, development, education, and prototyping of semiconductors. These resources are the Albany NanoTech Complex and SUNY Poly’s College of Nanoscale Science and Engineering. These sites will be used with large semiconductor partners including IBM, GlobalFoundries, Samsung, ASML, and Lam Research. With this aid, the Department of Commerce Industrial Advisory Committee member and Vice President at IBM Research, Mukesh Khare, believes the NSTC and NAPMP will be completed and equipped in a quick six-month period.  

These existing and established facilities will decrease the cost and time it would take to construct new ones. IBM’s involvement is expected to add decades worth of leading semiconductor research to the program to build upon immediately. These recent steps come timely as U.S. military researchers begin to inquire about radiation-tolerant high-voltage transistors with high performance and small size.  

These transistors are to enable high-conversion-ratio-point-of-load power converters for the space industry. This project, called the Space Power Conversion Electronics (SPCE), has been announced by the U.S. Defense Advanced Research Projects Agency (DARPA). The challenges of this project, and for many components utilized in the space industry, are to achieve both high-performance and high-voltage while being radiation-tolerant.  

Most components that are tolerant of aerospace conditions are limited in overall point-of-load efficiency to less than 60%. To avoid burnout these radiation-hardened silicon lightly doped-drain MOSFET (LDMOS) transistors operate at maximum voltage far below the device’s breakdown voltage.  

SPCE is looking to overcome these technological drawbacks and is calling on researchers to investigate possible alternatives which includes gallium nitride (GaN) and silicon carbide (SiC) that have greater bandwidths than most LDMOS.  

With both the SPCE and ASIC developing proposals for future component research, the U.S. is taking a running start to reestablishing itself as an electronics powerhouse.  

Supply Chain Trouble Solved with AI and Analytics

The global supply chain of electronic components is both a fragile and complex beast. The semiconductor shortage throughout the pandemic illustrated just how intricate the supply chain is. Winter storms, fires, Covid-19 lockdowns, and more had long-lasting impacts on the supply chain’s ability to recover.  

Due to the vast quantity of data that makes up the supply chain, it is difficult to keep track of current complications while forecasting potential future challenges. Unexpected events happen and will continue to do so. These can take the shape of weather conditions, trade bottlenecks, and labor strikes. Any one of these can result in disruption and decrease the efficiency of a supply chain’s operation.  

In the face of such unpredictability, using tools to sort through such data and offer solutions to possible disruptions is imperative to make smart and effective decisions to combat headaches. Data analytic tools that provide insights into market trends can help supply chain professionals build supply chain resilience.  

Visibility and transparency are key as lack of which usually comes from incomplete data. AI and analytic tools can provide a much wider range of visibility that can spot certain opportunities, such as users that lack components and those that have too much. These opportunities can help resolve supply chain issues quicker and with users struggling from either lacking or excess inventory.  

As technology becomes more advanced, the use of smart tools to keep track of the extreme amount of data will be necessary. AI and other analytical tools can sort through data faster and more efficiently in greater volumes. As the supply chain recovers, companies and other supply chain professionals should implement and adopt these tools now.  

So that when complications arise in the future, one is prepared and ready to understand the information provided. The other option if you do not have the time? Find a market intelligence tool that takes little time to learn and use.  

Chip production tools

First Made-in-India Chips Rollout as EV Sales Dominate in Europe - October 28, 2022

Global recession fears might have cost semiconductor manufacturers big in shared market value, but that doesn’t mean the bad times will stay forever. Semiconductors are a necessary cornerstone in dozens of industries and will continue to be so as technology advances. As such, even with cooling demand, many countries are still bolstering incentives to draw chipmakers to their shores.  

India has been working hard to attract numerous clients with incentive programs and subsidies. Recently, an Indian-based company took the first step to help launch the country closer to its semiconductor goals. Meanwhile, recession woes have done little to dampen the mood in the EV market.  

Electric vehicle sales are expected to grow larger year after year as many automakers shift gears to an entire lineup. Some are doing better than others. While the world works toward stabilization from the effects of the shortage, it’s important that auto brands embrace electricity sooner than later.  

If not, they might just be left in the dust.  

Polymatech Kicks-off India’s Semiconductor Production

The first made-in-India semiconductors are being rolled out in Tamil Nadu, where India’s own Polymatech has started production. While on its initial run, the company’s main manufacturing plant in Kancheepuram, Tamil Nadu is producing over 400,000 chips daily. Chips that have already being released to the market.  

Polymaytech plans to increase production steadily until it attains its planned output of 1 million chips per day. Annually, Polymaytech wants to produce at least 300 million of its opto-semiconductors and memory modules. These chips are also completely packaged in both high temperature co-fired ceramic substrates (HTCC) and chip on board (COB). These chips and their packaging were designed and developed by Polymatech.  

This is a huge development in India’s plan to become a self-sufficient semiconductor hub in the future. Polymatech’s aims are to become one of the largest chip manufacturers in Asia by 2025, bolstering the Indian government’s goals. On top of the growing list of companies looking to extend their reach into India's large economy with trained personnel, Singapore’s IGSS Ventures is looking for an Indian-based partner for its foundry fab investments.  

India is quickly becoming a competitive destination for dozens of electronics manufacturers setting their sights beyond traditional locations, such as China. After strict Covid-19 lockdowns disrupted production in many of China’s provinces, many companies are diversifying their supply chains. As the second-largest market in the world for domestic smartphones, bigger players like Apple, Samsung, and Google are eyeing the generous incentive program.  

With other electronics manufacturers close behind, Apple plans on starting production of the newest iPhone in India in 2023. India could reach their goal of expanding electronics manufacturing from $75 billion U.S. now to $300 billion annually by 2026. India will have to keep advertising itself as a solid location for manufacturers as other countries, like Vietnam, are working to increase their own global output.

Renault Sees EVs Reach 40% of Total Car Sales

An EV tomorrow becomes more and more likely every day. As automakers slash production across the board, the demand for electric vehicles grows by contrast. French carmaker Renault has recently reported a startling increase in their EVs and hybrids through 2022. Electric vehicles and hybrids made up 40% of total sales in Europe, double what it has been over the last 2 years.

Fabrice Cambolive, Renault’s COO, told reporters during the pre-Paris auto show that the brand would be well-positioned to manage its shift to electric vehicles by 2030. As of Q1 2022, the electric vehicle lineup makes up a third of Renault’s models which is up from the quarter they possessed in 2021.  

Renault’s new strategy for electric vehicles is something other automotive titans are looking into ever since Tesla and Chinese EV makers started dominating in Europe. With further changes coming in EV legislation, like Europe’s planned ban on gasoline-powered vehicles by 2035, legacy automakers like Stellantis and Volkswagen that have been losing to EV newcomers must adapt.

The expected slowdown of demands, fueled by global recession fears, will only temporarily affect electric vehicle growth. This upward momentum is forecasted to rocket as developments are made in EV battery range, charging stations become more available, and more bans are signed into law across the globe. Chinese manufacturers, in contrast to European EV leaders like Volkswagen and Mercedes, are continually launching wide ranges of new and affordable electric cars.

Renault, Volkswagen, and Mercedes are closer to the higher end of the market, while foreign brands such as Great Wall Motors' European brand Ora attack the lower end of the market. However, with a wide range of EV models, brands like Ora are positioned to tackle any sector of the EV market. These competitions are planned to increase once automotive components continue to stabilize as the shortage winds down.  

How Sanctions are Impacting the Semiconductor Market

Last week, the semiconductor market lost a combined $240 billion in market value. Weakening demand set the stage for a drop in chip sales but a significant blow came from new restrictions placed on China by the Biden administration. These sanctions dealt a massive blow to both the Chinese semiconductor industry and the global chip market.  

These sanctions have had immediate effects on numerous electronics manufacturers. ASML Holdings, a company that designs and manufactures the tools that go into making semiconductors, immediately cut ties after the sanctions were enacted. California-based KLA Corp. and Lam Research Corp. have both suffered since the restrictions with both ceasing installation of equipment for Chinese chipmaker, YMTC. American talent based in China are leaving or have left former positions at the risk of losing citizenship if they remain.  

Companies that still wish to continue exporting or purchasing from China will require licenses to do so. The reason the effect of the Biden Administration’s sanctions has been so far-reaching is the intricacies of the global supply chain. America might not have the semiconductor manufacturing prowess as before, but many leading-edge chips are designed by American companies. It is very likely that most chips produced around the world use some kind of tools or design an American company has made.

As one of the most complex industries out there, in both volatile market conditions and 500 processing steps, it’s not surprising that these sanctions have delivered such a massive blow. While the semiconductor industry is tenacious in its ability to recover from shocking upsets, this one will take time to adjust to.  

A line of empty EV charging stations

China’s EV Plans and Billions Lost from Chip Makers - October 21, 2022

The tides are starting to turn. Chipmakers are seeing large drops in revenue and sales as 2022 ends. While some manufacturers are faring better than others, changes are being felt all over the electronic components industry and beyond. Signs of a global recession appear week after week, but the semiconductor industry will still grapple with constraints from the shortage throughout 2023.

As chip sales cool, EV continues to grow, as it did throughout the shortage. An EV future is coming and for some countries, it is already here. The challenges of today won’t be tomorrows. We need to look at the shifts happening in the market to prepare.

How China is Preparing for an EV Future

Legislation and financial incentives have encouraged and boosted the sales of electric vehicles over the last few years. Even with the effects and delays of the semiconductor shortage, demand hasn’t lessened but bloomed. The European Parliament is considering a law to ban the sale of gasoline-powered cars by 2035. California and New York have already passed similar laws that ban the sale of gasoline-powered cars by 2035.  

China’s Hainan Island will be the first province in the country to ban the sale of gasoline and diesel-powered cars by 2030, joining the ranks for an electric future. Global sales of EVs surpassed 10 million in 2022 and are expected to reach over 65 million by 2031. As governments continue to pass laws that limit or prohibit the sale of gasoline-powered cars, demand will only grow.  

As of right now, many countries aren’t prepared for the infrastructure of an electric future. The roll-out of charging stations has been a constant thorn in the side of every region that wants EV accessibility. Though some are doing far better than others. China, Hong Kong, and Taiwan have the lion’s share of installed charging stations.  

The Netherlands, Germany, the United Kingdom, and France together make up 10% of installed EV charging stations and connectors. At 5% are the combined numbers of South Korea and the U.S. It’s important to note that China’s charging stations are only single connectors, as opposed to multiple connectors used in the U.S. and Europe, due to regulations. Volume alone, however, doesn’t solve the problem.  

There might be a solution that tackles both the charging wait time problem and the single connector issue. It’s called battery swapping and it’s a large business in China. It’s faster than charging wait times and easier to have numerous batteries at a station where Chinese charging stations are limited to one connector.  

Battery swapping is one way China is tackling the challenge of EV rollouts and new infrastructure. These solutions are not one-size-fits-all either. The U.S. is unlikely to use battery swapping to the same extent China is due to the country’s own regulations as it would require EV manufacturers to standardize battery design or make vehicles “swap-compatible.” Start-up NIO Inc, a battery manufacturer focused on battery swapping, continues to grow with help from government subsidies.  

As China continues its foray into battery swapping to solve the EV charging challenge other countries similar in both economy and population, such as India, are taking note. A few other battery-swapping companies are beginning in Europe and the U.S. but are nowhere close to the same 2 million swaps NIO Inc has completed.  

As EV use continues to rise it will be important to watch what each country and their respective provinces or states do to aid consumer adoption. If we can all learn from trial and error now, there will be a far less rocky road ahead of us.  

Plunges in Orders and Drops in Earnings Worry Semiconductor Manufacturers

Concerns about a global recession are increasing as semiconductor manufacturers see a “breathtaking” drop in demand. Samsung Electronics and Advanced Micro Devices (AMD) posted disappointing numbers as they missed third-quarter sales goals. The signs are piling up that an economic downturn is in the future. With that comes sales slumps and another problem, what to do with the excess chips.  

AMD forecasted a $6.7 billion target for Q3, this week that dropped to $5.6 billion. The company cites soft PC chip sales that have dropped 40% year-over-year in Q3. Samsung Electronics saw a 32% drop in operating income. While not all bad, as embedded processing chip sales rose 29%, these drops are exacerbated by rising material and shipping costs.  

Companies that hoarded chips during the shortage are now canceling or postponing orders in the face of weakening demand. To add to that, restrictions on exports from China by the U.S. have cost the global semiconductor market value $240 billion in losses across shares in South Korea, Japan, and Taiwan. Geopolitical challenges are only the tip of the iceberg for the industry’s problems.

Texas Instruments, NXP Semiconductor, and Microchip Technology are close behind as Citi cuts estimates on their earnings forecasts. The concern, like with Samsung and AMD, is the glut that is soon to follow once the shortage ends. PC shipments have been seeing the worst numbers since the 90s with little to no hope of reversal.  

TSMC, which came out of Q3 better than most, had warned its clients in July of excessive inventory. Many chipmakers, TSMC and AMD among them, had warned of a grim outlook for the latter half of 2022. Signs of those predictions coming to fruition continue to roll in. Excess will be a challenge after the shortage, whether it ends tomorrow or in 2024.

Despite cooling demands, we are not out of the shortage yet. As we end 2022 and go into 2023 it is pertinent to keep a close eye on market shifts to formulate a plan. One of the problems that caused the shortage was the number of canceled orders by companies expecting weak consumer demand. If we don’t want to repeat history companies need to watch the signs, fulfill orders not cancel, and prepare for any outcome.  

We’ve gotten through the worst of the shortage, and we will get through the uncertainties of the future.

A crane lifting construction materials

Semiconductor Giants Are Investing Big to Lure High-Paying Buyers - October 14, 2022

The semiconductor industry is a big business. In 2021, the semiconductor industry made over $595 billion in sales with 26.3% growth from 2020. Electronic components of all shapes and sizes will continue to be used to an even greater extent than they are now each passing year. Why? Simple.

The world continues to embrace digitalization. Digitalization includes automation and AI software, which saves both time and increases cost-effectiveness. The semiconductor industry will remain a billion-dollar industry for the foreseeable future. No matter how different the semiconductors of tomorrow may look.  

This comes with a catch. In order to make billions in sales, most semiconductor manufacturers must spend billions to do so. Semiconductor facilities take talented and skilled staff to run the expensive machines used to craft these tiny powerhouses. The semiconductor shortage showed world governments how important these tiny components are to national and economic security.  

Lucky for them, many semiconductor manufacturers are ready to expand their operations across the globe.

Micron Pledges in New York, Texas Instruments in Texas, and Japan Builds Up Foundries

Micron announced on Tuesday, October 4th, 2022, that it plans to spend upwards of $100 billion in the next 20 years. The goal is to build a large factory in upstate New York. This deal is a good sign that the federal incentives put in place by the CHIPS and Science Act are working. As the $52 billion dollar package of grants and subsidies should help Micron with its goal.

Chief executive of Micron, Sanjay Mehrotra, said: “without the CHIPS Act, we would not be here today.”  

Micron plans to build in Clay, New York with preparation for the site beginning in 2023. Over the next 20 years, Micron says the project will generate over 50,000 jobs in total with up to $500 million to be spent on community and workforce training. New York pays one of the highest incentive packages at $5.5 billion for support and is no stranger to semiconductor manufacturers.

Micron would be among GlobalFoundries and before that IBM in Albany, New York. Meanwhile, Texas Instruments has started to expand its facilities in Richardson, Texas.

The new fabrication plant, called RFAB2, will be another 300-mm wafer fabrication plant. It will be connected to the first plant, RFAB1, and boasts 15 miles of automated delivery systems to move wafers between the facilities. The Richardson fabrication plants are reportedly set to manufacture more than 100 million analog chips a day.  

This isn’t the only plant Texas Instruments has in the works either. There are 6 plants in the pipeline that will stretch across Texas from Dallas to Sherman with one plant going out of state to Utah called LFAB.  

The U.S. isn’t the only one pushing for increased domestic semiconductor production either. After talks between U.S. Vice President Kamala Harris and senior executives from a dozen Japanese technology groups in relation to the CHIPS and Science Act, Japan will increase subsidies up to $320 million to Micron.  

In July, Micron pledged $644 million to Western Digital Corp and its partner Kioxia for expanded production in Hiroshima. It will be joining TSMC which pledged $7 billion for the construction of a manufacturing plant in Japan in collaboration with Sony. The Japanese government has agreed to subsidize half of the $7 billion investment.  

Though building new manufacturing plants isn’t the only thing these semiconductor manufacturers are investing in.  

Samsung Electronics Introduces 5-Year Plan to Catch TSMC’s Lead

In order to pull ahead in the race to the top, Samsung Electronics announced on Tuesday, October 4th, 2022, that it will triple its advanced chip capacity by 2027 to meet demand. The technology Samsung is aiming to produce is transistors that are only 1.4 nanometers wide. Executive Vice President Moonsoo Kang said the company plans to triple its revenue by 2027 from numbers in 2021.

The plan to get there? Making technological leaps and more inroads in the U.S. market for outsourced chips. This will be done by starting mass production of the second-generation 3nm chips in 2024 followed by 2nm parts in 2025. Then finally the 1.4nm chips will follow two years later.  

Part of this plan is helped by the decision to manufacture in the U.S. as Samsung starts to develop a new plant in Taylor, Texas. Samsung has an existing plant in Austin, Texas but this new plant is likely to be devoted to the 3nm technology goal.  

Samsung Electronics is trying to play catch-up with TSMC after the latter scored a deal with NVIDIA to produce the RTX 40 graphic cards which require a 4nm process. Samsung Electronics is coming in late to the foundry business but believes 3nm production will be the game-changer. The company has poured 3 times the resources into 3nm production than earlier tech generations.  

TSMC is still the favored heavy-weight champ in the chip-making business. Things change and by 2027 there might be a new favorite depending on how these plans turn out.

An image of numbers on the DOW Jones board.

Government Incentives to Aid Semiconductor Manufacturing but Will it be Enough? - October 7, 2022

It costs a lot to build a semiconductor fabrication plant. Everything from the equipment to the personnel that them are short supply but high demand. To invest in that kind of project it’s going to be a pretty penny. For the past few years and after the extreme effects of the chip shortage, world governments are finally putting the money where their mouth is.  

Administrations around the world have been formulating incentive plans to attract large-name clientele. These efforts to establish a domestic semiconductor presence are in the billions. India made the news last week for raising its former $10 billion investment to $25 billion. China has spent upwards of $180 billion since 2015 in support of domestic semiconductor fabs. U.S. Congress recently authorized the passage of the America Competes Act which includes the $52.7 billion CHIPS Act.

Time will tell if these plans are enough.

What Does the CHIPS and Science Act Mean for the U.S. Domestic Semiconductor Industry?

The CHIPS and Science Act has one fundamental goal: to bring U.S. semiconductor production back home. Early this year, the Biden Administration discussed the importance of semiconductor accessibility in the State of the Union Address. Secretary of Commerce, Gine Raimondo, called it a “national security risk,” urging Congress to act.

Now the CHIPS Act has been signed into law. So, what does that mean for the semiconductor industry in the U.S.?

For starters, it means Intel will be fulfilling its promise to dedicate $100 billion toward its planned mega-site in Ohio. In the State of the Union Address President Biden made earlier this year, Pat Gelsinger pledged $80 billion on top of the $20 it planned should Congress sign the Act into law.  

The CHIPS Act is part of a larger bill called the America Competes Act which possesses over $250 billion in funds. $54.2 billion will be subsidized for chip plants as well as chip research and development. There will be a 25% tax credit for the building and equipping of these chip plants which equates to $24.3 billion in support. That’s quite a start.  

The U.S. Department of Defense (DoD) is praising the passage of the CHIPS Act. While the concern over chip accessibility was already a concern of the DoD, the shortage reignited those fears. Hopefully, those concerns will be doused soon as Intel began construction in Ohio on September 9th, 2022. The Biden Administration hopes the CHIPS Act will increase production back to 1990s levels.  

U.S. chip production in the 1990s was around 40%. Now it is barely 12% with leading-edge chip development coming in at a startling 0%. The change was mostly due to government incentives in other countries that drew manufacturers away from the U.S., which previously had none, in the first place.  

Should there be this much concern over foreign vs domestic chips? The answer is a resounding yes. An investigation done by the U.S. Department of Commerce, found that over-reliance on foreign chip supplies resulted in heavy tolls to the U.S. economy.

The CHIPS Act has already started to draw in some big names to the U.S. Such as TSMC. The Taiwan-based company has already started building in Arizona. As groundbreaking begins across the country, more might be looking to join in.  

Though this might not come at a good time.

Intel, NVIDIA, and More Semiconductor Players Take a Dive on the DOW

Global sales of semiconductors are starting to slow. The large percentages of year-to-year growth we’ve gotten so used to are beginning to dip into single digits. As sales drop so do numbers on the Dow Jones, and everyone’s taking the hit.

Intel, NVIDIA, and AMD, all semiconductor rivals, have dropped 50% in the past few months. This decline is all thanks to a variety of things. Supply shortages aren’t good for anyone, even if semiconductor sales have been the strongest they’ve ever been in the last few years. The Covid-19 lockdowns in China only added stress onto a fragile and recovering supply line.  

Worse still are the concerns of a global recession sparked by inflation costs driven by the war in Ukraine. The Philadelphia Semiconductor Index or SOX is down nearly 40% this year. All thanks to a myriad of supply chain disruptions that have cooled the demand for semiconductors.  

This could be further proof that the semiconductor shortage we’ve all had to live with for so long might soon reach supply-demand stability. While there’s no guarantee, as market stocks usually fair the worst in September and October, manufacturers could use the slump to play catch-up. Especially if a global recession does occur within the next year.  

A global recession isn’t the only concern that chipmakers are having to deal with now either. As manufacturers adjust to inflated prices, some companies are flat out refusing to pay the hikes.

Apple to TSMC: No, We Won’t Pay Your 6%  

No, that’s Apple’s reported answer to TSMC.

In August 2022, TSMC was rumored to be taking price hikes into consideration. The semiconductor shortage and the new rising inflation has already spurred other manufacturers to raise their product prices. Some even started to do so in 2020. TSMC? Not so much.  

In fact, TSMC has been very slow to raise their prices over the past few years. The original planned price hike was that of 6% to 9%, depending on the fabrication process. This was later revised from 3% to 6%. The more advanced the chip the higher the percentage increase.  

These plans were expected to go into effect in 2023 but have rolled out a few months sooner. This isn’t a completely out of the ordinary action, but Apple’s reported answer does come as a surprise. Which brings up another question. If Apple flat-out refused the price hike what does that mean for TSMC’s other clients?

Apple makes up 25% of TSMC’s orders, which makes its response, if true, a little harder to negotiate around. This answer, according to some, isn’t unexpected. Apple reports less-than-stunning sales numbers for the iPhone 14 this year and might be covering for the lost revenue.

It is important to note that neither company has released any official statement on the rumor.

As the year comes into its final three-month sprint, the forecasts for the industry change daily. It will take more developments and keen eyes to prepare for what 2023 might have in store.

Funding Increases for Semiconductor Manufacturing Across the Globe – September 30, 2022

Semiconductor manufacturing has become a hot topic over the past few years. The pandemic-fueled shortage of electronic components has put a spotlight on the once overlooked importance of these small powerhouses. In the months since, having uninterrupted access to chip production has become a prominent issue. While world governments have given corporations access to incentives for increased production in the past, the number of programs along with their budgets currently are breaking into multi-billions.  

India’s Semiconductor Investments Reach $25 Billion

Junior IT minister Rajeev Chandrasekhar reported on Wednesday, 9/22, that the total investment India is now expected to court will hit $25 billion. As explained in an article by Reuters, the incentive is meant to boost local manufacturing of chips and display panels. Prime Minister Narendra Modi’s government is trying to attract more hefty investments under a $10 billion incentive plan. All these steps are aimed to make India a key player in the global supply chain.  

These comments came hours after an announcement from the government which raised fiscal support for new semiconductor facilities. The government aims to cover 50% of all project costs and will remove the maximum ceiling for permitted investments. This step is to provide incentives for display manufacturing.  

Previously, Prime Minister Narendra Modi’s administration agreed to cover between 30% to 50% of the costs for building new display and chip plants. With Wednesday’s announcement, the administration will now cover 50% of the capital expenditure needed to create semiconductor packaging facilities. The decision, Chandrasekhar said, is in response to “the multiple incentive packages and programs that have been announced by various countries.”

Just last week, the mining conglomerate Vedanta Resources and Taiwan’s Foxconn, an Apple products manufacturer, signed a pact with India’s Gujarat to invest $19.5 billion. This investment will be sent to India’s western state to build semiconductor and display production facilities.  

Vedanta Resources and Foxconn are the third companies to announce a chip plant location in India after the semiconductor consortium ISMC and Singapore-based IGSS Ventures announced their own semiconductor facilities plans for Karnataka and Tamil Nadu respectively. While Foxconn announced the intention to move into India’s semiconductor market earlier this year, it has now made the plans official.

Vietnam Becomes New Target Location for Big Investors

As India lands Vedanta Resources and Foxconn, Vietnam is being assessed as the next country to move up in the supply chain. Not with just any company either, the U.S. company Synopsys known for its silicon chip design tools. According to reports, Synopsys is set to continue investments in Vietnam along with shifting its engineer training into the country.

This doesn’t come as much of a surprise; Synopsys has 2 offices in both Ho Chi Minh City and Da Nang. There are a total of over 400 employees currently employed in either office with plans to add 300 to 400 more in the coming years. Vietnam has been reported, along with India, to be better outsourcing options for OEMs, CMs, and EMS providers. Synopsys isn’t the only big-name company scouting new locations either.  

In August 2022, Roh Tae-moon, the CEO of South Korea’s Samsung Electronics informed Vietnam Prime Minister Pham Minh Chinh of the decision to test manufacturing ball grid array products. This would be done at their plant in the Thai Nguyen Province before moving to commercial production in July 2023. Samsung Electronics has completed 85% of its research and development center in Vietnam and is expected to be completed by the  

Amkor Technology, a supplier for Samsung, Qualcomm, and NVIDIA has recently signed a deal for a $1.6 billion semiconductor materials manufacturing factory in the northern province of Bac Ninh. However, Samsung Electronics, Amkor Technology, and Synopsys aren’t the only ones in Vietnam either.

Companies such as Renesas Electronics and Intel have been in Vietnam for years now. The number of great semiconductor engineers in the country reaches the thousands. According to microchip engineer, Dang Luong Mo, these engineers are producing chips for companies such as the U.S., Taiwan, Japan, South Korea and more.

Europe Union’s Semiconductor Industry Ambitions – July 19, 2022

Europe Union member states local few chipmakers have made major strides toward boosting the region's semiconductor supply chain. In the last few weeks, top manufacturers based in the area have announced plans to build new fabs, open new R&D facilities, and expand their existing capacity with government support. And major players in the European Union want to make more big moves in the coming years.

STMicroelectronics and GlobalFoundries Partner to Build Wafer Factory

Switzerland’s STMicroelectronics and America’s GlobalFoundries announced plans to build a 300mm wafer plant in Crolles, France, earlier this month. It’s set to reach full capacity in2026 and will produce 620,000 silicon wafers annually.

The jointly owned factory will use both manufacturers ’technological resources to make 18mm components with automotive, IoT, industrial, and communication infrastructure applications. Notably, it will use the California-based firm's innovative 22FDX fully depleted silicon-on-insulator (FD-SOI) process to make microelectronics with next-generation performance and ultra-low energy consumption.

GlobalFoundries and ST will split the plant's output 58/42percent and will build it near the latter company's Crolles 300mm fab. Because of its location, the new plant will benefit from the area’s existing production framework.

Market watchers expect the factory to bring in over$1 billion in revenue. The facility will also provide Europe’s many carmakers with greater access to electronic components. Ideally, that will mean lower part costs and fewer supply chain disruptions for the continent’s OEMs, CMs, and EMS providers.

ST and GlobalFoundries received "significant financial support" from the French government to build a new factory. And that's not the only investment Paris plans to make in its domestic semiconductor industry.

France’s Multibillion-Dollar Chip Sector Investment Plans

French President Emmanuel Macron recently unveiled along-term electronic components initiative called “Electronique 2030” to bolster the region’s IC development and manufacturing resources.The program will direct capital toward constructing new chip factories, educating and training workers to staff those facilities, and researching and developing new microelectronics technologies.

Electronique 2030 follows on the heels of the similar EuropeanChips Act. The legislation is intended to make the European Union responsible for 20 percent of the world’s semiconductor production by 2030.

Paris is kickstarting its project with €10 billion in funding for 150 startups, universities, research organizations, and 15industrial providers. Murata, Renault, Continental, and Valeo are among the corporations that will receive public capital. The initiative is already contributed toFrance’s production capacity as it provided €5.7 billion to ST andGlobalFoundries’ Crolles plant.

President Macron revealed that wafer fab is only the tip of the iceberg.

Electronique 2030 aims to support the construction of over12 manufacturing sites. If everything goes to plan, France’s semiconductor production will increase by 30 percent in the next five years. That will enable the European republic to have greater digital sovereignty. It will also further its “France 2030” strategy, which aims to revive its industrial economy.

As it happens, France is not the only EU country that will see its chip manufacturing resources blossom in the near future.

Bosch Dedicating €3 Billion to Expanding EU Semiconductor Ecosystem

Germany’s Robert Bosch GmbH announced plans to spend €3billion expanding its semiconductor research, design, and manufacturing capability. The corporation will establish new R&D centers in Reutlingen and Dresden. It’s also adding 3,000m² of clean room space to the €1billion Dresden wafer fab it launched last year and a 3,600 m² production area to its Reutlingen factory.

The firm has earmarked €400 million to complete its capacity expansion by 2025.

The automotive component supplier reportedly intends to use its new resources to make products using 40mm to 200mm nodes. Although those manufacturing processes are far from state-of-the-art, the strategy makes sense. Experts anticipate the average car's chip content cost to rise from less than €200 to €400 by the decade's end. The company can substantially grow its revenue by expanding its lagging edge automotive parts market share.

Like STMicroelectronics and GlobalFoundries, Bosch isn’t funding its construction projects independently. It will receive €3 billion from the EU and German governments as part of the European Chips Act.

Right now, the trade bloc has a long way to go catch up with chip design and production powerhouses like the U.S. and East Asia. But its recent efforts to boost its domestic resources suggest it will achieve semiconductor independence sooner rather than later.


A Chill in the Air? – July 11, 2022

Softening demand for consumer electronics is beginning to impact several top chipmakers negatively, but the situation could change soon. And semiconductor companies are considering moving their production capacity outside China following recent disruptive events.

Weak Consumer Electronics Demand Is Hurting Component Manufacturers

Bloomberg recently published an article highlighting the fact that semiconductor manufacturing represents the worst-performing S&P group, falling 40 percent year-over-year. Major players like Intel and Micron Technology expect their earnings to take a hit in the medium-term. And some market analysts believe the sector is entering a major down cycle.

At the same time, it’s important to acknowledge that the sky is not falling within the industry.

Market intelligence experts anticipate chipmakers will see a 19 percent increase in annual profits this year. That outlook makes sense in the context of the wider electronic components market. Although shoppers might hold off on upgrading their iPhones this year, demand for high-performance computing (HPC) server processors is robust. After all, cloud service providers must keep supporting the societal digitalization that began after COVID-19 reached pandemic proportions.

In addition, interest in electric vehicles (EVs) is robust now and is on track to become even stronger.

Bloomberg stated that global EV adoption reached a tipping point recently. Within the last six months, 5 percent of new automobiles sold in China, Europe, and the United States have been battery-powered. It predicts that one out of every four cars purchased in 2025 will be an EV. Those rapid changes to the landscape will require automotive manufacturers to significantly ramp up their electronic components purchases as EVs have a much higher chip content than internal combustion engine personal transports.

Foxconn, the world’s top EMS provider, knows which way the wind is blowing and intends to capitalize on the transition. Last month, the firm revealed it would mass-produce EV parts in 2023-2024 to capture 5 percent of the emerging market. The iPhone assembler's new roadmap indicates its faith in the future growth of the vehicle electrification revolution.

Unfortunately, consumer electronics provers are likely facing a difficult road ahead as the components marketplace undergoes a global transformation.

Electronics Manufacturers Contemplate Moving Capacity Out of China

China has long been the world’s center for electronics manufacturing for many years. However, Caixin reported that the paradigm might change due to recent events, most notably the country’s recent COVID-19 flare-up.  

The publication explained that the region’s low labor costs, strong talent pool, and industrial infrastructure have made it very appealing to device vendors. But rising geopolitical tensions and increases in employment expenses have diminished its perceived value. Moreover, local leaders’ use of strict lockdowns to combat record-high coronavirus cases disrupted the operation of many leading manufacturers.

Consequently, some companies want to create more capacity in India and Southeast Asian countries.

In April, Apple and its foremost EMS provider Foxconn began manufacturing its iPhone 13 series in India. The Big Tech giant started producing its flagship product in the nation to diversify its supply chain outside of the Chinese mainland. Its decision was influenced by New Delhi’s Make in India program, which incentivizes foreign companies to establish new capacity in-country.  

Similarly, Vietnamese exports reached $153.2 million in the first five months of 2022, up 16.7 percent year-over-year. The region has directly benefited from the push for supply ecosystem expansion. It’s now home to factories maintained by 23 of Apple’s top 200 part vendors, an increase from 17 suppliers in 2018.

Despite signs of the capacity relocation trend accelerating, Beijing isn’t concerned with losing its status as a top worldwide production hub. Its Ministry of Commerce pointed out its comprehensive manufacturing resources, including domestic raw materials sources and low shipping costs, are unparalleled. Also, the nation’s industrial cores offer greater fabrication capability than any other country.

China’s leading position within the global electronics industry is unlikely to be challenged within the next two years. But India and Vietnam becoming better outsourcing options for OEMs, CMs, and EMS providers could shake up the global supply chain near the end of the 2020s.

A technician in full personal protective equipment holds a silicon wafer while standing inside a laboratory.

Wafer Funding & Equipment Procurement Problems – July 5, 2022

A holdup in funding the $52 billion CHIP Act has jeopardized several major U.S. production capacity projects. And chipmaking manufacturing equipment lead times have reached 2 ½ years.

No Funding, No Wafers, No Chips?

Several major contract chipmakers have announced plans to establish significant manufacturing facilities in the United States. The sector’s top players sought to address the infrastructural problems revealed by the global chip shortage and better serve the American market. However, recent issues securing government funding are jeopardizing the nation’s production capacity expansion.

Intel suspended work on its $20 billion Ohio foundry because the CHIPS (Creating Helpful Incentives to Produce Semiconductors) Act hasn’t been funded. Congress passed the legislation in early 2020 with the intent to provide the U.S. semiconductor industry with $52 billion in financial support. But because Washington hasn’t dispersed the capital, the IDM’s construction project has taken longer than expected.

Intel has indefinitely delayed the groundbreaking ceremony for its Midwestern facility until the CHIPS Act is funded. However, the corporation still intends to start building the plant in late 2022, with production set to commence in 2025.

TSMC has expressed similar concerns about securing federal financial support for its $12 billion Arizona fab. The world’s biggest pure-play foundry revealed that the project had become more expensive than initially anticipated. Although the company has received $200 million in state funding, its executives have said the factory would only be feasible with Washington’s help.

The Semiconductor Industry Association (SIA) found that building a fab in the United States is 25 to 50 percent more expensive than in other countries.

The holdup in semiconductor sector funding has put another U.S. chip production project at risk. GlobalWafers, a Taiwanese firm, announced plans to build a $5 billion silicon wafer factory in Texas last week. The plant is intended to support Intel, Samsung, and TSMC’s local facilities and will produce 1.2 million wafers monthly. However, U.S. Commerce Secretary Gina Raimondo noted that the factory may not get built if the CHIPS Act isn’t funded soon.

Since experts believe demand for electronic components will double within the next ten years. Hopefully, Washington will help component makers operating within its borders capitalize on that explosive growth sooner rather than later.

Chipmaking Equipment Lead Time Hits 18 to 30 Weeks

TrendForce recently reported that lead times for semiconductor manufacturing equipment had hit 18 to 30 weeks. The organization noted that extended delivery turnarounds will delay several planned production capacity expansions in 2023. Ultimately, the holdup will reduce the predicted growth of next year’s worldwide IC fabrication resources from 10 percent to 8 percent. TSMC, UMC, SMIC, and GlobalFoundries are affected by the delays, which are impacting mature and advanced node machinery.

The market intelligence provider noted that chipmaking machines had been delivered in 3 to 6 months before the COVID-19 outbreak.

However, the coronavirus pandemic disrupted the production of the industrial control chips used to make part fabrication tools. Moreover, the global health crisis created widespread logistics bottlenecks that are still causing severe transportation gridlock. Russia's war in Ukraine is also a major contributor to the upending of the industrial supply chain.

On the plus side, TrendForce believes the lead time delays will not impact production capacity growth in 2022. The consultancy also pointed out that the disruption will not impact deliveries of extreme ultraviolet lithography (EUV) equipment. That means firms utilizing cutting-edge tools to fabricate electronic components should be able to keep their manufacturing schedules on track.

Unfortunately, the industry's procurement issues will likely extend the global chip shortage into 2024, as Intel CEO Pat Gelsinger forecast in May.


China Moves Closer to Semiconductor Independence - June 28, 2022

China is closer than ever to achieving semiconductor independence thanks to robust government support and private sector growth. And UBS Global Research anticipates that the global electronic components market has a bumpy road ahead.

Semiconductor Independence within Reach

The Chinese government has prioritized achieving semiconductor independence in the last few years to assert digital sovereignty and strengthen the country's technological and economic resources. But tight restrictions on technologies critical to advancing electronic component research, design, and manufacturing had hindered the initiative.

However, recent developments indicate that China is closer than ever to realizing its long-term ambition.

Beijing tackled the issue by offering land grants, tax abatements, and financial incentives to local and international chipmakers to establish a domestic microelectronics ecosystem, and that strategy is bearing fruit.

Related: Sourcengine’s Semiconductor Industry Lead Time Report

Shanghai's government held an event in April called the Global Investment Promotion Conference that concluded with 16 semiconductor companies securing capital. Local leaders agreed to financial back companies that make fundamental chip production materials like photoresists and silicon wafers in-country. The city's Lin-gang Special Are, a free-trade zone, has reportedly brought in over 40 chipmakers and $22.5 billion in investments interested its financial incentives and has 100,000 acres of underdeveloped land. 

In addition, Bloomberg revealed that China's domestic component makers are expanding rapidly despite significant geopolitical and public health hurdles. Cambricon Technologies, a processor design company, grew its revenues by 141 percent over the last four quarters. Yangtze Memory Technologies is negotiating with Apple to become one of its flash memory suppliers. And it is launching a new fab later this year to meet demand.

The nation's top radiofrequency component, communications chip, and optoelectronics vendors have enjoyed significant double-digit growth in 2022.

Similarly, SMIC, China's largest pure-play foundry, expanded its quarterly revenue by 67 percent year-over-year despite a major COVID-19 flareup. Even under lockdown conditions, the corporation kept its fabs running thanks to government intervention and air deliveries of raw materials from Japan. It's also mitigating the impact of global inflation on its margins by inking new deals with its clients.

Last year, China spent $431 billion on importing integrated circuits. The region's lagging-edge technological resources will keep its microelectronics spending in the twelve-figure range for many years to come. But its commitment to semiconductor independence will eventually bring about a global paradigm shift.

A Bumpy Road Ahead

UBS Global Research recently offered a forecast for the electronic components space with positive and negative aspects.   

The investment bank's analysts predict that macroeconomic instability and weak downstream demand will end the semiconductor market's two-year growth trend. Taiwan's IC industry, which had a 66 percent share of the contract chipmaking market last year, will feel the impact of that change soon. The group anticipates the sector will contract by 5 percent year-over-year in 2022 and 10 percent in 2023.

UBS also reported that chip inventories have "drastically" expanded in the last 18 months. Chipmakers will likely see a drop-off in orders as the sector emerges from two years of shortage conditions. Despite those warnings, the firm has a lot of optimism for the semiconductor field in other areas.

Related: Datalynq - Next-Generation Case Management & Market Intelligence

The multinational bank's analysts conducted a study recently that indicated Chinese smartphone sales will significantly rebound in 2H22. Moreover, it anticipates that the mounting global popularity of electric vehicles will bolster microelectronics earnings. In fact, it projects that EV demand will generate more value than the server, mobile device, and personal computer segment by 2026.

Ultimately, UBS asserts that the semiconductor industry will hit a long stretch of smooth blacktop once it clears the current rough patch.

Two fingers ominously hold a pushpin over a fully inflated balloon.

Chip Sector Balloons Popping – June 21, 2022

TSMC recently revealed that the $12 billion fab it's building in Arizona is more expensive than expected. And several consumer electronics manufacturers have signaled that demand will remain soft throughout 2022.

TSMC’s $12B Fab is More Expensive Than Expected

During a recent shareholders meeting, TSMC Chairman Mark Liu revealed that establishing its $12 billion chip factory in Phoenix, Arizona, has become “more costly” than anticipated. The executive didn’t get into specifics about the issue but noted that the higher expenses are “manageable.” The plant is expected to commence production in 2024.

Last month, Nikkei Asia covered some of the difficulties the foundry has faced with its Arizona capacity expansion. TSMC initially planned to bring chip fabrication equipment into the facility in September 2021. However, construction problems forced it to delay those plans until early 2023. It’s also struggled to recruit skilled engineers, which is an industry-wide problem.

Nevertheless, Liu expressed enthusiasm about the plant’s success and a commitment to getting it built “no matter what.”

He asserted that Samsung and Intel's U.S. fabs would help cultivate a robust supply chain within the nation. Moreover, he commented that the global inflation trend disrupting the semiconductor sector will lessen over time, and his company’s capacity utilization is high despite an “inventory correction.” The foundry adjusted to softening demand for consumer electronics parts by taking on more orders for automotive and high-performance computing components.

TSMC has the resources and wherewithal to get its Arizona manufacturing complex up and running in the next few years. It had over 6,000 contractors working on its Phoenix location in May and has teamed with local colleges to fill out the factory’s staff. But Intel CEO Pat Gelsinger warned that limited semiconductor manufacturing tool availability is hampering the industry’s efforts to expand capacity.

That means TSMC’s Phoenix factory may not start making chips as scheduled.

Major Electronics Companies Signal Consumer Demand Has Dwindled

Several major electronics companies have indicated that consumer demand has declined due to macroeconomic and public health challenges.

Samsung reportedly slashed its smartphone production quotas because of a soft global handset market. DigiTimes stated that the conglomerate expects its annual mobile device shipments will fall by 270 million to 280 million units. As a result, its LSI division is considering cutting its image sensor orders from its third-party foundry service providers. The firm’s change of plans has negatively impacted camera module and circuit board vendors in South Korea.

Similarly, Acer CEO Jason Chen recently said the global supply of laptop computers exceeds interest. He further observed that a looming worldwide recession had replaced the global chip shortage as the segment’s biggest challenge. Asus and Hewlett-Packard are concerned that weak interest in consumer electronics will negatively affect their sales.

Market watchers also believe China’s protracted COVID-19 lockdowns dampen demand for gadgets, home entertainment products, and white goods. Because the country recently ended its quarantine mandates and population centers like Shanghai, locals could revitalize the market later this year. With the holiday season and new product launches approaching, a winter sales boom isn’t out of the question.

However, Intel recently told analysts that the uncertain global economy would contract its revenue. Since the world’s largest PC processor manufacturer believes that the era of ballooning consumer electronics revenues is about to end, OEMs, CMs, and EMS providers should prepare for the pop.

A Stronger Semiconductor Supply Chain - June 14, 2022

ASML will invest $200 million in expanding its American R&D and manufacturing facility. And Shanghai, and China’s overall manufacturing sector, are recovering quickly from the region's recent COVID lockdown.

ASML’s $200M US Expansion

ASML Holdings recently announced plans to spend $200 million expanding its facility in Wilton, Connecticut. The capital infusion will go toward building out its research, development, and manufacturing capabilities. It will also go toward adding 1,000 new employees to the site's headcount.

ASML Wilton is the Dutch company's largest outpost based in the United States and employs more than 2,000 people. CEO Peter Winick said the lithography machine manufacturer would bring on 3,500 workers this year to meet intense demand. Last year, it hired 6,000 new team members to handle a surge in business that pushed its annual net sales to $19.4 billion, up 33 percent year-over-year.

The corporation’s tools are highly sought after because they can fabricate chips that are more sophisticated than anything else in the market. Its top-of-the-line systems cost $200 million, but major players like TSMC, Samsung, and Intel are happy to pay up to stay competitive. ASML’s technology played a critical role in helping the semiconductor sector's leaders make transistor miniaturization breakthroughs and generational leaps in component performance.   

The firm’s decision to invest $200 million in its American production complex is prudent from a business perspective. Its three biggest clients are in the process of establishing new fabs throughout the United States. As those factories come online, the corporation’s expanded complex will be able to provide more robust and faster support.

That means OEMs, CMs, and EMS companies with a presence in the U.S. could experience shorter lead times and more consistent availability in the future. Since ASML’s roadmap likely includes significant construction and recruitment programs, its capacity expansion will not happen overnight. But once it’s complete, the global semiconductor supply chain will be stronger.

Shanghai’s Post-Coronavirus Recovery

Beijing recently lifted the COVID-19 lockdown that Shanghai had been living under since April.

Bloomberg reported that conditions improved but are not yet back to full strength in the world's foremost electronics production hubs. Firms are restarting their normal operations after long stretches of “close-loop” methods that require staff to work and live on campus. Moreover, ground transportation and maritime shipping work are still delayed due to lockdown-related port congestion.

Despite those challenges, Shanghai’s manufacturing sector is on the road to recovery. Companies with factories in the region expect to make up for lost time in the second half of 2022. That’s good news for OEMs as demand for consumer electronics traditionally peaks as the holiday season approaches.

In addition, Caixin Global revealed that China’s overall manufacturing activity is on the rise.

The publication’s purchasing managers index (PMI), compiled by IHS Markit, increased from 46 in April to 48.1 in May. Along similar lines, Nomura Holdings anticipates the country’s manufacturing PMI will reach 50.3 this month, which would be the first time it's grown since February.

Local authorities could impose another lockdown if Shanghai experiences another sharp upswing in COVID-19 cases. The area’s recent revival could face a major setback in that scenario. But Premier Li Keqiang recently said that Beijing must find a balance between public safety and economic concerns when addressing the pandemic.

Ideally, China’s government and business leaders should be able to revitalize Shanghai and the nation’s other industrial cores ahead of 2023.

Three brand new SUVs sit in a car factory during the manufacturing process.

Driving Into the Future - June 7, 2022

Foxconn is preparing to become a major player in the global automotive semiconductor market. NIO, China's fourth-biggest car manufacturer, reportedly wants to build an auto plant in the United States.

Together, these two events could significantly change the makeup of the electronic components market.

Foxconn Bringing Automotive IC Fabs Online in 2023-24

Foxconn recently announced its plans to begin in-house mass production of automobile ICs.

The Taiwan-based EMS provider will fabricate silicon carbide (SiC) parts for onboard electric vehicle chargers in 2023. The following year, it will start making SiC power modules for the LiDAR system and a selection of MCUs and PMICs. The firm plans to use wafer factories it acquired from Macronix and Sharp, with help from some Malaysian contractors manufacturers, to realize its roadmap.  

The company, Apple's chief device assembler, wants to make electric automobiles for the world’s top carmakers.

Foxconn is investing NT$15 billion ($510.6 million) to establish a place in the global EV market. It has also worked aggressively to expand its automotive technology portfolio. Last year, it announced a joint venture with Yageo to develop electronic components with applications in multiple sectors, including personal transport. It co-founded a new company with Stellantis to create new digital cockpit technologies.

The manufacturer hopes its big bet will greatly boost its revenue and diversify its business.

Foxconn aims to capture 5 percent of the global EV market by 2025. It anticipates that part of its business will generate NT$1 trillion ($34.43 billion) in annual revenue. However, its forecast is dependent on a yearly automobile output of 500,000 to 750,000 units.

That means it must ink significant contracts with the auto industry's most prominent players to achieve its goals.

On the other hand, the corporation could appeal to car companies that are eager to change how they do business. Auto conglomerates learned the value of having partners that maintain dedicated production capacity after the global chip shortage.

Last year, McKinsey & Company estimated that the global market for automotive semiconductors was $50 million. While significant, the segment is far below the computing and data storage ($225 million) and wireless communication ($170 million) as overall revenue contributors. But the consultancy asserts that demand for vehicle electronic components is growing and will translate to $150 billion in revenue by 2030.

Foxconn needs to make a name for itself as an IC supplier. As it happens, the multinational EMS firm may have a major business opportunity soon.

NIO Might Be Coming to America

NIO, based in Shanghai, has played a key role in mainstreaming EVs in its home market. DigiTimes reports it now has plans to make a place for itself in the U.S.

The firm’s vehicles have slick contemporary designs and next-generation features consumers want. It also introduced battery swap stations that enable drivers to enjoy long trips without extended recharging stops. In fact, the automaker's brand is so strong that it increased its sales sequentially last month by 38 percent, even amid widespread local COVID lockdowns.

NIO began recruiting staffers with experience establishing production lines in America. As of this writing, the company has not confirmed interest in expanding its footprint into the West. But it's working to secure ISO and ASE international vehicle safety certifications. And it won approval to test its autonomous cars in California.

Despite its past success, the automotive corporation would face serious challenges trying to compete in the United States market. Its biggest hurdle is supply-related; due to ongoing geopolitical tensions, importing equipment, car parts, and electronic components could be prohibitively expensive.

However, NIO might be able to tap Foxconn for assistance in clearing the obstacles to its expansion. When the car company establishes a factory in the U.S., the Taiwanese company's fabs will be online. That means it could source parts to power the technologically sophisticated features of its sedans, coupes, minivans, and SUVs.

Plus, NIO could end up strengthening the global supply chain by funding Foxconn's efforts to become a top chip vendor. As a knock-on effect, automotive OEMs, CMs, and EMS providers worldwide will benefit from greater parts availability and more competitive pricing. 

Manufacturers Cutting Output - May 31, 2022

Earlier this month, Toyota stated it would be cutting its automobile output by 100,000 units in June. Qualcomm and MediaTek slashed their short-term orders for new mobile device components a few days later. Unfortunately, those very different corporations probably made those decisions for the same reason; COVID-19.

Toyota to Reduce June Vehicle Output by 100,000 Units

Toyota announced plans to cut its June automobile production goal by 100,000 cars because of the chip shortage.

Previously, the Japanese automotive giant said it would produce 850,000 automobiles next month. However, its manufacturing schedule took a major hit because of the recent coronavirus spike in China’s industrial cores. The carmaker revealed that Beijing’s lockdown of the Shanghai region seriously affected its supply chain; it temporarily halted work at multiple factories last month due to parts bottlenecks.

Toyota dealt with unprecedented adverse conditions last year due to the one-two punch of the pandemic and the chip shortage. Industry watchers estimate the global automotive sector lost $210 billion in revenue last year because of those challenges. This year, the auto sector was trending toward recovery until the COVID resurgence emerged as a major roadblock.

On a related note, Bosch began renegotiating its supply contracts in response to recent geopolitical crises in late May.

The automotive components supplier revealed that Russia’s war in Ukraine has significantly increased its raw materials and logistics expenses. China’s coronavirus quarantine mandates have disrupted work at its Shanghai and Taicang plants. As a result of that intense pricing pressure, it’s passing on its higher costs to its partners.

Given Bosch’s influence on the marketplace, OEMs, EMS companies, and CMs should expect similar price hikes from other electronic part vendors. And if Toyota can’t get enough semiconductors to make enough cars to meet demand, expect more intense availability tightness soon.

Mobile Device Chipmakers 5G Cut SoC Production Orders

Qualcomm and MediaTek have cut back their orders for 5G chipsets for the second half of 2022.

Qualcomm reduced orders for its premium Snapdragon 8 processors by 10 to 15 percent with its foundry partners. It also intends to cut the prices for that product line by 30 to 40 percent later this year. The firm wants to spotlight its upcoming Snapdragon 8 Gen 2 lineup.

Along similar lines, MediaTek slashed its mid-and entry-level SoC orders by 30 to 40 percent for Q4.

Both companies are probably reacting to the abrupt 14.1 percent contraction of the Chinese smartphone market in Q1. According to IDC, the region’s shoppers lost interest in buying new mobile devices due to the coronavirus surges and a lack of dazzling new product features. Therefore, Qualcomm and MediaTek’s component production cuts make a lot of sense.

The industry’s top smartphone processor manufacturers made a lot of money selling chipsets to Oppo and Honor, two of China’s leading consumer electronics companies. Cutting back production ahead of the traditional holiday season sales boom period is good business. Neither firm would benefit from having excess inventory on hand going into 2023.

Qualcomm’s price cut could create a major opportunity for OEMs, CMs, and EMS providers. Firms might want to stockpile the chipmaker’s high-quality and relatively new parts for future NPIs.

Inflation Comes Full Circle – May 25, 2022

Earlier this month, the Federal Reserve Bank of St. Louis published a blog outlining the relationship between the global chip shortage and the recent surge in inflation worldwide. To make a long story short, the electronic components bottleneck negatively impacted almost 40 percent of the manufacturing sector. The disruption of fabricated goods hit a tipping point in the summer of 2021 and has driven the price of everything from gasoline to food to 40-year highs.

Recently, the inflation trend has come full circle and is starting to push chip prices to multi-year highs.

Foundry Service Fees Are Skyrocketing

Samsung is best known as the world’s largest supplier of memory modules, but it’s also a leading foundry service provider. The South Korean conglomerate uses the advanced IC production technologies it spent billions of dollars developing to make components for Big Tech giants like Apple and Qualcomm.

Samsung will probably charge more for its services due to rising inflationary pressure.

Bloomberg reported the corporation might raise its contract production fees by 15 to 20 percent depending on chip sophistication level this year. Although it utilizes state-of-the-art technology to make high-performance smartphone processors, that's not the segment of its customers that will feel the biggest financial blow.

Instead, the firm wants to charge more to make legacy node electronic components for its clients. From a financial perspective, the firm being is very prudent. Last year, it committed to spending $17 billion to establish a massive, cutting-edge foundry in the United States.

To be financially viable, that facility needs to run 24 hours a day, seven days a week, because even a brief shutdown can have multibillion-dollar consequences. And the next-generation silicon chips it produces must bring in the highest return on investment possible.

Therefore, Samsung has a powerful incentive to cut costs in its foundry services portfolio so the less lucrative chip production nodes are on the chopping block. Unfortunately, especially for OEMs, CMs, and EMS companies whose designs are dependent on older microelectronic devices, the firm is not an outliner.

The Way the Wind is Blowing

First, the bad news: chipmakers are raising prices across the board because the business of making chips is getting more expensive.

According to market insiders, prices of raw materials, machinery, and chemicals used to make electronic components have gone up 20 percent. There is no one driver for the industrywide volatility. A confluence of events, including rising geopolitical tensions, had exacerbated a problem that emerged when the world embraced digitalization to overcome the difficulties introduced by COVID-19.

As a result, TSMC, the world’s largest pure-play foundry, plans to raise fees between 5 and 8 percent this year. The firm intends to initiate the price hike later this year, a change that follows the 20 percent fee bump it made last year. Industry insiders have said its higher costs will impact customers that utilize its older and newer fabrication technology.

United Microelectronics Corporation (UMC), another market-leading provider of outsourced electronic components, also plans to raise its fees. 

For OEMs, CMs, and EMS providers with endless reservoirs of cash, this worldwide trend among foundries will be a severe problem. In the near future, essential and cutting-edge electronic components will be harder to find and more expensive.

However, there is a newly launched market intelligence platform that exists to help manufacturers mitigate the impact of shortages and accelerated part obsolescence. It offers robust design and redesign risk analysis, real transaction data-based forecasts, and historical insights regarding component availability and pricing that can’t be found anywhere else.

Even better, Datalynq is offering a limited-time 30-day free trial right now.

A stylized image of India as a printed circuit board.

Make (Chips) in India - May 19, 2022

In 2017, the Indian government launched an initiative called “Make in India” designed to bolster the nation’s manufacturing capabilities through government funding and foreign direct investment (FDI).

New Delhi has recently increased its focus on developing a multifaceted electronic components ecosystem in the country, announcing a $10 billion incentives plan to enhance domestic IC design, fabrication, and packaging resources.

Due to recent events, it has gotten a lot closer to realizing that world-changing ambition.

India Government Officials Approach TSMC, Samsung is About Establishing a Local Fab

Rajeev Chandrasekhar, India’s Minister of State for Skill Development and Entrepreneurship and Electronics and Information Technology of India, told Bloomberg he has been pitching his country as the site of the next great global chipmaking hub.

The former Intel engineer has a difficult road ahead. But not because of limited interest from the industry.  

On the contrary, the world’s leading pure-play foundry service providers are currently on a production capacity spending spree. TSMC earmarked $40 billion to $44 billion to upgrade and expand its chipmaking resources this year. Samsung announced plans to dedicate $15 billion a year to launching new fabs and research centers across the world through 2030 and promised to triple its foundry resources by 2026.

Moreover, Intel intends to reassert its dominance in the microelectronics sector by significantly expanding its output worldwide. The corporation is in the process of establishing a $20 billion IC fabrication complex in Arizona, another $20 billion fab in Ohio, and an €80 billion ($93.9 billion) cutting-edge chip ecosystem in Europe.

TSMC, Samsung, and Intel have not recently announced new plans to establish silicon wafer manufacturing facilities in India. The problem is that those firms need specific infrastructural features at a location before making plans to build a foundry. If those resources are unavailable or inconsistent, chip yields could be affected, and a $10 billion plant could turn into a financial black hole with shocking speed.

That is the issue Chandrasekhar is grappling with right now. But recent circumstances have occurred that could make his job a lot easier as a huge wave of FDI capital could be on the way.

Apple Suppliers Might Move to India

Most of Apple’s suppliers conduct most of their manufacturing and assembly work in China. Compal, Pegatron, Quanta, Wistron, and Foxconn production sites with internal fabrication capabilities in China. Those providers have also experienced severe operational disruptions recently as a part of China’s COVID-zero protocol because they have sites in affected provinces like Shanghai and Jiangsu.

Apple announced that the coronavirus pandemic’s impact on its supply chain would curtail its Q3 2022 revenue by up to $8 billion.

The Economic Times reported Foxconn, the iPhone company’s biggest device assembly partner, had plans to ramp up output in its Chennai, India, plant significantly. A few weeks before its partner made that declaration, the EMS provider secured approval from regional leaders to turn 40 acres of land inside its local campus into a manufacturing site. It also intends to expand the facility’s headcount by nearly doubling its on-site staff due to an upswing in domestic smartphone purchasing.

Ming-Chi Kuo, an analyst with TE Securities, believes that development will kick off a new trend among Apple suppliers. The market watcher thinks the impact of China’s COVID lockdowns re-energized old considerations regarding reshoring manufacturing sites in India.

Even though Shanghai recently lifted coronavirus restrictions in six districts, the stop-start production issues in the region could prompt bigger systemic changes throughout the electronic components industry. And those shifts could reorient the global semiconductor supply chain around India.

A stylized digital image representing the country of India as a printed circuit board.

The Silver Lining – May 10, 2022

After years of unprecedented supply tightness, market analysts believe global silicon wafer output will increase this year. Moreover, many Chinese tech firms are looking to utilize TSMC’s advanced chip production technologies to optimize their products and operations.

Wafer Capacity to Rise by 8.7 Percent in 2022

For the last few years, the world has grappled with a devastating chip shortage caused by an industrywide supply-demand gulf that followed the outbreak of the coronavirus pandemic. Because of how the contemporary microelectronics sector makes products, individual manufacturers and foundries could not quickly close the gap.

However, IC Insights recently discussed how the situation could meaningfully improve this year.

The market research company forecasts that global wafer capacity will increase by 8.7 percent in 2022. Ten new fabs will go online this year and provide the sector with its largest jump in available wafer production capability in six years. TSMC is leading the way by opening three chip factories in East Asia. Another pure-play foundry, Shanghai’s SMIC, is also bringing a new complex online to support its customers.

Beyond that, memory module providers SK Hynix and Winbond are each adding one manufacturing facility to their existing resources. Hong Kong-based China Resources Microelectronics Limited is set to activate a new power IC plant. Hangzhou Silan Integrated Circuit Co., Ltd. intends to kick off production of its power discrete and sensors fab later this year.

Texas Instruments’ RFAB2, located in Richmond, Texas, will start making analog components in the second half. Plus, STMicroelectronics and Tower Semiconductor have teamed up to launch a power, mixed-signal, and RF parts factory in the same period.

While the semiconductor industry’s global wafer output is growing, demand is not falling. IC Insights predicts worldwide production capacity utilization will only decline by 0.3 percent year-over-year. Further, the organization expects component shipments to jump by 9.2 percent despite macroeconomic instability, mounting geopolitical tensions, and growing inflationary pressure.

Nevertheless, the global chip shortage might reach an inflection point this year.

Chinese Tech Firms Securing TSMC Partnerships

DigiTimes recently reported several China-based technology companies are actively forging partnerships with TSMC, the world’s biggest and most advanced contact chipmaker.

Several mainland mobile device manufacturers have filled up space in the foundry’s state-of-the-art factories.

Oppo ordered 10 million imaging neural processing units using the corporation’s 6nm node. Unisoc requested 6nm and 12nm mobile CPUs, while ZTE wants 5nm and 7nm components to support its 5G base stations. Xiaomi, OmniVision, and Goodix Technology are also interested in using the service provider’s fabrication processes to make their smartphone and wearables parts.

Demand for TSMC’s manufacturing lines among Chinese firms extends past the consumer electronics segment.

Horizon Robotics booked various TSMC manufacturing lines to keep its automotive portfolio available. The Beijing-based company teamed with the foundry to produce its current generation offerings with its 16nm and 28nm technology. It is also collaborating with the contract chipmaker to launch its 7nm Journey 6 embedded artificial intelligence vehicle processors in 2023.

Horizon Robotics counts auto sector heavyweights Audi, SAC Motors, Bosch, BYD, and Continental as partners.

Pingtouge, Alibaba’s semiconductor unit, tapped TSMC to fabricate its designs using its 5nm, 7nm, and 28nm nodes. Cambricon Technologies, a Chinese cloud computing hardware vendor, ordered an unknown quantity of 5nm microelectronics from the Taiwanese foundry.

Moreover, Bitman Technologies, which offers cryptocurrency mining ASICs, secured places on its 5nm and 7nm production schedules.

Currently, China’s tech companies, in aggregate, only represent 11 percent of TSMC’s revenue as of Q1 2022. However, that is a significant increase from Q4 2021, when firms in the East Asian country constituted 5 percent of its income. DigiTimes expects the trend to pick up over the few years, with the regions contributing $8.5 billion to its annual returns in 2023.

So, what does that mean for the rest of the semiconductor industry?

If demand for TSMC’s leading-edge processes remains strong – and most available data suggests that it will - OEMs, CMs, and EMS providers will likely see higher prices for advanced silicon. As component manufacturers orient their output around newer technologies, shortages and obsolescence issues for older parts will become more common.

Consequently, companies navigating forthcoming industrywide pricing and availability shifts should prioritize enhancing their market intelligence resources by signing up with Datalynq.

There is another important implication of so many Chinese tech firms with different specializations partnering with TSMC. By decade’s end, the region’s domestic microelectronics output could be significantly more sophisticated than it is today.

Jump Start Needed – May 3, 2022

China’s recent COVID-19 quarantines have had a significant negative impact on the output of its domestic auto and electronic components industries. And Apple expects to lose up to $8 billion in revenue this quarter due to the same issue.

Chinese COVID Lockdowns Hurting Local Carmakers & Component Suppliers  

China’s recent coronavirus lockdowns in Shanghai and other major cities have severely affected its domestic automotive industry.

The China Passenger Car Association estimated that the government’s mandates reduced local manufacturers’ vehicle output by 20 percent. The organization explained that Beijing’s zero-COVID policies have been especially damaging because of the areas impacted. The Yangtze River Delta region is home to leading vendors SIAC Motor and FAW Group, meaning over one-fifth of the nation’s overall vehicle sector has been hindered.

The disruption of China’s industrial cores and ground transportation infrastructure has also hurt overseas car companies with local capacity.

Tesla suspended work at its Shanghai Gigafactory for over 20 days last month. The EV giant reopened its biggest manufacturing center after enacting COVID mitigation procedures on-site. Market watchers believe the temporary shutdown prevented the American manufacturer from assembling a minimum of 45,000 automobiles.

Insiders expect a shortfall of electronic components to curtail Tesla’s vehicle output until sometime this month.

In addition, German auto parts firm Bosch halted work at two plants in compliance with a mid-April lockdown order. The European supplier initiated “closed-loop” procedures – keeping staffers on campus on shift and off – at two other Shanghai facilities during the same period. 

The Chinese government has moved to support local businesses hurt by its coronavirus containment strategy.

Beijing recently named 666 companies that will receive aid in restarting or continuing their Shanghai-based operations. The initiative primarily aims to support automotive corporations, but it also includes several semiconductor industry providers. SMIC, China’s largest contract chipmaker, secured local leaders’ approval to resume operations, as did Hua Hong Semiconductor, Applied Materials, and ASML Shanghai.

TSMC, the world’s largest component foundry, kept its two mainland fabs running normally during the recent coronavirus outbreaks.

However, China’s most populated city recorded 58 new infections on May 2, and its zero-COVID directive is still in effect. Consequently, local automakers and component suppliers will likely endure more disruptions in the coming weeks and months.

Apple Expects to Lose $8B in Q3 Due to COVID Woes

Apple disclosed that it anticipates a $4 billion to $8 billion revenue hit this quarter during its Q1 earnings report. The Big Tech firm attributed its predicted underperformance to the same COVID-related problems affecting Tesla and Bosch.

Although the corporation sources its electronics components for vendors all over the world, China is its primary supply hub.

As noted last week, almost half of Apple’s top 200 part providers have suffered manufacturing and logistics problems recently. Many of its partners maintain factories in mainland cities that are under quarantine. Moreover, its leading iPhone assemblers operate sprawling complexes in Shanghai and Shenzhen to put together, test, and pack its flagship product. Consequently, the $2.5 trillion OEM anticipates a softer than regular spring sales season.

If China’s current health and safety challenges continue through Q2, Apple’s traditional September device refresh might not go as planned. Even with its vast resources, Apple cannot work around problems generated by China’s COVID lockdowns.

The corporation and its suppliers have tried to diversify their manufacturing resources outside East Asia. But the sheer volume of its consumer electronics output – it sold 60 million smartphones in the January period alone – means its factories in India and Brazil cannot replace its main production center.

Apple is not the only global manufacturer to bear the brunt of the coronavirus pandemic’s effect on the supply chain.

Microsoft and SK Hynix are currently unable to address the demand for their gaming console and memory products because of the disruptions. Similarly, GMC recorded a 24 percent drop in profit from China last quarter caused by weak local demand. MediaTek, a mobile device component vendor, recently revised down its projection of single-digit revenue growth in response to the situation in China.

Last month, Apple reportedly changed its production schedule and design cycle patterns in response to end-market volatility.

Hopefully, May will give the world an overdue opportunity to recover and recalibrate from the first four months of 2022.

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No Christmas in 2022?! – April 26, 2022

Traditionally, the holiday season lifts all ships in the consumer technology sector because computers, PC peripherals, wearables, and smartphones make great gifts. However, supply-side microelectronics challenges and a semiconductor manufacturing equipment shortage are disrupting OEM, CM, and EMS provider supply chains.

While Christmas may not be canceled, many consumers may find disappointment waiting for them under the tree this year.

COVID Takes a Big Bite Out of Apple

Even though Apple is the world’s largest electronics company by revenue, it is not immune to the impact of COVID-19.

Last week, Nikkei Asia reported about 50 percent of the corporation’s top 200 suppliers are grappling with government-mandated manufacturing and logistics lockdowns in the Chinese mainland. Since The start of 2022, Beijing has restricted the activities of industrial operators in Shanghai and other major cities. As a result, the iPhone maker’s leading device assemblers and microelectronics suppliers have struggled to meet their business commitments.

The publication noted thermal parts, PCBs, displays, and acoustic components production and transportation have been significantly undercut by China’s “zero-COVID” strategy.

Local leaders are attempting to address the problem by exempting certain firms from the lockdowns. But shortages of key raw materials and truck drivers, electricity rationing programs, and various logistics chokepoints are taking a major toll on the region’s industrial cores.

Paul Peng, Chairman of AU Optronics, offered a grim assessment of the situation, noting, “the disruption is not to a single company or industry, it's a global supply chain incident that could lead to a supply chain cutoff in the worst-case scenario.” The firm, which supplies Dell, HP, and Tesla, does not expect its operations to return to normal until Q3.

Similarly, Delta Electronics, a power management pasts company, worries its overall production will fall by 20 percent in April. Nevertheless, the company believes it can make up for its lost output in May and June, barring significant new restrictions.

An unnamed parts manufacturer told Nikkei Asia if China’s components producers cannot get back on track by June, they might miss their ocean freight shipments schedules. Consequently, major electronic device brands could come into this year’s holiday sales season with insufficient product inventories.

Apple reportedly responded to the volatility of its supply chain by slashing its production quotas for iPhone SEs and AirPods. However, Bloomberg recently revealed the Big Tech giant probably would not use a new generation of microprocessors in its non-premium 2022 iPhone lineup due to shortage and manufacturing challenges. That means its next flagship product refresh could come to the market without purchase-driving hardware improvements for the first time in several years.

While Apple is the most significant player in the electronics game, it is not the only vendor facing a bleak Christmas this year.

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Lead Times for Chipmaking Equipment Reaches 18 Months

The global chip shortage that cost the automotive sector an estimated $210 billion last year is now hurting the semiconductor industry.

Applied Materials, AMSL Holdings, KLA Corporation, and Lam Research recently began informing their customers manufacturing equipment lead times will be 18 months. Before the outbreak of the coronavirus pandemic, machine deliveries averaged around 3 to 4 months. But by last year, chipmakers had to wait 10 to 12 months to receive their orders.

The microelectronics field’s tool sourcing issues are being driven by unprecedented demand, which is causing a shortage of equipment components.

TSMC, Intel, Samsung, and other foundry service providers have rushed to expand their production capacity in response to the post-pandemic global digitalization wave. Those firms need IC, substrate, PCB manufacturing, and testing machines to build out their existing fabrication lines and outfit new fabs. But their supply partners only have so much factory space and raw materials stockpiles.

So, what does the semiconductor manufacturing space supply chain bottleneck mean for OEMs, CMs, and EMS firms?

The biggest impact will likely be continued tightness for electronic components for the foreseeable future. In addition, the shortage could severely constrain the availability of next-generation microprocessors this year and into 2023.

Earlier this month, TSMC, the world’s most advanced contract chipmaker, disclosed that “unexpected” tool delivery issues had affected its expansion plans for next year. Last year, the foundry declared it would spend $100 billion through 2023 to increase and enhance its global manufacturing resources. But the production equipment shortage might upend its long-term roadmap.

The corporation stated that its 2022 schedule has not been affected but did not go into details.

In addition, TSMC CEO C.C. Wei revealed his company’s supply chain would remain tight through year’s end. The executive also recommended its customers build up their inventories due to ongoing production and logistics unpredictability. The foundry will undoubtedly work to minimize the impact of those problems on its customers, but its mitigation measures may not be enough.

TSMC dedicates the bulk of its advanced nodes to making iPhone and Mac processors because it is its biggest client. However, noted above, Apple has seemingly shifted its product rollout strategy due to supplier limitations.

That means fabless chipmakers intending to utilize the foundry’s cutting-edge processes, such as AMD, Qualcomm, Nvidia, and MediaTek, might be unable to ship adequate quantities of their products to electronics manufacturers ahead of the holiday season.

A technician makes repairs to a automobile's electrical system.

Slam on the Brakes – April 20, 2022

Japan’s leading automakers are struggling to keep their car factories open amid unprecedented supply challenges. And Tesla has found unconventional solutions to fortify its procurement and production operations.

Japanese Automakers Grappling with Supply Chain Woes

Due to multiple overlapping events, Japan’s leading auto manufacturers are facing materials procurement problems and cost volatility challenges.

Tokai Tokyo Research Institute estimates the country’s seven passenger vehicle companies are paying $11.5 billion more for metals, microchips, and electronic components. Russia’s war in Ukraine is the primary driver of the surging raw materials costs for East Asia’s automotive firms. Eastern Europe is a leading exporter of essential car production metals like palladium, nickel, and aluminum. Because of the conflict and many international trade sanctions, the area is effectively cut off from the global supply chain.

Similarly, DigiTimes reports that vehicle manufacturers are experiencing a shortage of wire harnesses and tires due to ongoing geopolitical tensions.

Toyota, Honda, and Nissan are also struggling to source enough microelectronics for their factories amid the global chip shortage. Widespread demand for vehicle ICs is still significantly greater than the available chipmaker and contract foundry production capacity. However, market analysts and business leaders expect the bottleneck will ease up in the second half of 2022.

Finally, Japan’s auto industry is having trouble keeping its plants active because they adhere to the just-in-time (JIT) model.

The popular business methodology requires manufacturers to keep small material stockpiles on hand to keep overhead costs down. Unfortunately, for all economic benefits, that model left her automakers especially vulnerable to disruptions caused by the global semiconductor shortage.

Additionally, automobile vendors have been unable to replenish their inventories recently due to clustered COVID-19 outbreaks in China. Suppliers have been unable to get their badly needed orders because of frequent government mandates restricting production and transportation in the country’s industrial hubs. Last week, Bosch, Pegatron, and other firms closed their plants in Shanghai, Changchun, and Jiangsu amid a new coronavirus flareup.

Related: Global Electronic Component Shortage – April 2022 Update

Ultimately, the passenger vehicle sector’s sourcing problems do not have a “magic bullet” solution. Until more capacity comes online, companies will not have access to large quantities of the custom parts their fleets need. But they can be proactive about revamping their supply chains and replacing their outdated methodologies with more dynamic digital solutions.

Tesla Gets Creative to Overcome Sourcing Challenges

Tesla is dealing with the same problems as its Japanese counterparts and is employing fittingly untraditional solutions to overcome them.

The electric vehicle pioneer shuttered its car factory in Shanghai late last month following a government lockdown. As the corporation’s East Asian plant is its largest manufacturing center, the shutdown significantly affected its output. However, it secured permission to reopen the facility on April 18 after establishing a “closed-loop” system. Under the new structure, workers will sleep and eat on-site, comply with a strict hygiene regimen, and submit to daily nucleic acid COVID tests.

If all goes well, Tesla Giga Shanghai will resume rolling out 2,100 vehicles every day soon. Plus, the corporation recently opened two large manufacturing complexes in Brandenburg, Germany, and Austin, Texas. With those resources added, the carmaker should be able to correct its pandemic-related production shortfalls.

Tesla’s innovative supply chain management extends beyond expanding manufacturing capacity to avoid disruptions.

CEO Elon Musk identified availability and pricing uncertainty for nickel as a major business risk. Since the company uses the metal to make its EV batteries, delivery problems directly undercut its production rates. It made agreements with several mining companies to stabilize its nickel supply to address the issue. Simultaneously, many Tesla rivals are negotiating ways to acquire large quantities of Class 1 nickel.

In the past, manufacturers depended on providers operating in Russia to fill their inventories because the country produces 17 percent of the world’s battery-grade nickel. With that option off the table, some automobile vendors are scrambling. For OEMs, CMs, and EMS providers, the takeaway is that supplier diversification has never been more important.

Data Centers Never Sleep – April 14, 2022

AMD just paid $1.9 billion to snap up an innovative data center processor company. And an Oracle-backed server chipmaker took steps to go public quietly. Within the decade, those two events could have a big impact on the global electronic components industry.

AMD Bets $1.9B on Data Center Chip Market  

AMD announced plans to buy networking technology startup Pensando System for $1.9 billion earlier this month. The Silicon Valley giant stated it made a move to bolster its position within the booming data center space and anticipates the transaction will close in Q2 2022.Its big bet could pay off in a major way as analysts predict the segment will reach $15.64 billion in annual revenue by 2025, up from $7.72 billion in 2017.

The fabless corporation's nine-figure entry into the data center chip segment makes sense given its long-term portfolio diversification strategy.

For decades, Intel dominated the enterprise server market due to its strength as an integrated design manufacturer. By meticulously crafting its firmware, instruction sets, and silicon in-house, it produced hardware solutions that blew away the competition.

But TSMC, the world’s largest contract foundry, has outpaced it in terms of chip miniaturization and transistor density in recent years. That created an opportunity for ambitious IC design houses to claim a much bigger piece of the semiconductor market, AMD chief among them.

If the corporation can bring Pensando’s innovative tech to the global market, it could claim a very healthy slice of the pie.

The startup secured $313 million since 2017 thanks to its core compelling offering, a fully programmable microprocessor and software platform. Its technology boasts the capability to run it cloud scale, with minimal jitter and latency while only consuming 30W of power at 100GbE. And reacquisition, it counted Goldman Sachs and Microsoft’s Azure unit as customers.

However, AMD is not the only big player with eyes on the explosive datacenter chip market.

Oracle-Backed Server Processor Startup Files IPO

Ampere Computing recently filed a confidential initial public offering that could have big implications for the semiconductor industry.

Founded in 2018 by former Intel President Renee James, the fabless firm uses Arm architecture to make specialized high-performance ICs. It strived to distinguish itself in a crowded market by launching flagship general-purpose processors fabricated with TSMC’s 7nm node. The Portland, Oregon company’s strategy paid off as it counted Oracle and Microsoft as customers in 2020.

Moreover, Oracle believed in Ampere enough to have invested $426 million in it to keep its chips in production.

At present, the startup’s future is difficult to gauge because it is facing institutional competition with bottomless pockets. But its tech clearly has potential, and a successful IPO will help it bulk up its manufacturing resources and expand its customer base.

James said she would be open to working with Intel Foundry Services if certain production requirements we readdressed last year. Since Intel has earmarked over $100 billion to build the Silicon Heartland, her terms will likely be met. That means Ampere could gain an advantage in the marketplace by depending on a domestic supply chain instead of navigating the complexities of the global chip sector’s stratified “new normal.”

Regardless, AMD’s acquisition of Pensando and Ampere’s IPO means one thing for midsized OEMs, CMs, and EMS providers: less support from foundries.

The semiconductor leading contract chipmakers want to cash in on the digitalization wave that followed the COVID-19 outbreak by booking up their factories years in advance. They are also mothballing older component manufacturing processes faster than ever to make room for more lucrative next-generation production lines. While those developments are fine for large corporations, less established companies will face tighter material availability and extended lead times.

For that reason, electronics manufacturers have a greater incentive than ever to access long-term industry forecasts and stockpile at-risk parts.

Winter is Here - April 6, 2022

Volvo Cuts Car Production Amid Parts Shortage

Volvo recently announced its annual automobile output would fall below its earlier projections due to a shortage of a critical electronic component. It reportedly cut five shifts at its Torslanda, Sweden, factory that it uses to make its XC60 and XC90 SUVs.

Europe’s largest carmaker made the declaration in response to the fallout of Russia’s war in Ukraine.

Right now, Ukraine produces 20 percent of the European markets’ wire harnesses. No other region or individual manufacturer can step in to fill Volvo’s needs, so its factories are ramping down production. The firm convened a 150-person working group to develop solutions to resolve its bottleneck.

BMW is also grappling with similar headwinds related to Russia’s war in Ukraine.

Ultimately, Volvo has been caught up in a tangle that many other OEMs all over the world are facing right now. How do individual companies move forward with the global supply chain in disarray?

On the one hand, firms can try to wait it out and work to reorganize their vendor networks once the current market volatility stops. The problem is that under our current unprecedented market conditions, no one is sure when the thaw will begin.

Accordingly, OEMs might be better served by taking action as soon as possible to future-proof their supply chains. In Volvo’s case, it might form partnerships with providers like Sumitomo Electric Industries, Ltd. and Furukawa Electric Co. Ltd. Both Japanese companies make wire harnesses and other electronic components. The two firms are vertically integrated manufacturers, so their customers will have options if an unprecedented crisis impacts their businesses.

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TSMC to Break Ground on First Japanese fab in April

TSMC intends to break ground on its first fab in Kumamoto, Japan, next week. The foundry, a joint venture between the contract chipmaker and Sony Semiconductor Solutions, will commence production in late 2024. Once operational, the facility will employ 1,700 workers and fabricate 55,000 12-inch silicon wafers every month.

The facility will utilize a 12/16nm FinFET process and a 22/28n node. University Wafer points out that 12-inch wafers can be used to make wireless communication chips, microcontroller units, and power components for smartphones and desktop computers. But Denso, the global automotive technology giant, declared it invested $350 million in the new fab in February. It received a 10 percent ownership stake and operational control of the facility in exchange.

In recent months, many popular online publications have expressed doubts regarding the long-term profitability of the semiconductor industry. The prevailing belief is that the 19 fabs that went into production between 2019 and 2020 will soon oversaturate the market. But Denso’s investment and the Japanese government’s $8.6 billion support of the plant indicate a high-level belief in the chip sector’s long-term recovery.

March 31, 2022 -Update

TSMC Gives Major Warning Regarding Electronics Industry

Dr. Mark Liu, Chairman of TSMC, recently noted that demand for consumer electronics is slowing down due to various macroeconomic concerns.

The executive explained that buyers’ interest in televisions, personal computers, and smartphones is weakening, especially in China, the world’s largest consumer market. He also noted that electronic component and raw material costs had surged recently, making device and chip production more expensive. Dr. Liu also mused that volatility might impact shoppers, “such pressure could eventually be passed on to consumers.” TSMC's biggest customers include Apple, AMD, Intel, Qualcomm, Broadcom, Nvidia, Sony, Marvell, STMicroelectronics, and Analog Devices, Inc.

Leading market analysts and the International Monetary Fund (IMF) have recently echoed the TSMC chair’s sentiments.

Last week, IHS Markit’s found semiconductor costs skyrocketed in February. The S&P Global PMI Commodity Price & Supply Indicators report revealed that upward pricing pressure for semiconductors outpaced every other item monitored last month, with its “index reaching a fresh record high of 28.3.” Simultaneously, it recorded significant leaps in the price of crucial microelectronics raw materials like aluminum and copper.

The consultancy also stated manufacturers’ uncertainties about microelectronics supply constraints hit a four-month high of 7.4. It supported its finding by explaining that recent COVID-19 outbreaks have effectively reversed the electronic components industry’s gradual recovery from the global chip shortage.

Along similar lines, the IMF reportedly intends to lower its global economic forecast for 2022 because of Russia’s war in Ukraine and other uncertainties. The organization reduced its estimate by .5 percent to 4.4 percent in January due to rising inflation and new coronavirus pandemic-related regional lockdowns. It also projected that growth for 2023 would be 3.8 percent, down 2.1 percent from 2021.


Apple, the world’s most valuable electronics OEM, has curbed its planned 2022 product output in response to predicted soft demand. Nikkei Asia reported the technology giant would make about 20 percent, or 2 million to 3 million, fewer iPhone SEs in Q2 2022 than initially intended. It also slashed its annual AirPod quota by 10 million units this year.

Foxconn in Talks to Build Dual-Line Foundry in Saudi Arabia  

Foxconn, Apple’s primary iPhone assembler, has approached the Saudi Arabian government about building a $9 billion dual-line foundry in-country. The Taiwanese corporation wants to establish the facility in Neom, a smart city development in the Northern Red Sea. If the project is greenlit, the complex will produce silicon wafers, surface mount parts, EV microelectronics, and other components like displays.

According to the Wall Street Journal, Riyadh is considering Foxconn’s offer and performing due diligence. Moreover, Foxconn has also started talks with the United Arab Emirates about building its dual-line factory within its borders.

It also noted that the Saudi government wants certain guarantees before okaying the proposal. Specifically, the kingdom wants assurances that two-thirds of the foundry’s output would be directed toward the company’s global supply chain. That way, it would have a consistent revenue stream to ensure its long-term success.

As of this writing, neither Riyadh nor Foxconn has commented on the $9 billion multipurpose fab.

However, the project offers significant benefits for both the company and the country. For Foxconn, the project would diversify its supply chain and bypass potential flare-ups in China-U.S. trade relations. For Saudi Arabia, owning a stake in a major semiconductor production hub would further its long-term ambitions to break into sectors outside the oil industry.

And for OEMs, Foxconn’s new fab would provide greater stability across the global electronic components supply chain.

March 22, 2022 - Update

China’s Tech Champions Push for Digital Sovereignty

Despite being a major national priority for years, China has not yet achieved digital sovereignty. The mainland’s chipmakers cannot design, fabricate, or package cutting-edge microelectronics, so its semiconductor independence is currently impossible. As a result, the country spent $432 billion on importing electronic components in 2021, up 23.6 percent year-over-year.

But the region’s technology champions are making big moves to change that reality.

Luxshare and Goertek, two Apple device assemblers, recently took steps to move into the microchip packaging field. Luxshare is developing systems-in-package components to power its partner’s AirPod wireless earbuds. The Dongguan-based company has already taken on former Universal Scientific Industries (USI) engineers with relevant experience to execute its roadmap.

The two providers hope to win more business from Apple by adding SIP development to their knowledge bases. Though their technology is less advanced than some Taiwanese packagers, being in the mainland makes them a more cost-effective option. Luxshare and Goertek’s move into SIP development also strengthens the Chinese microelectronics supply chain.

In addition, Semiconductor Manufacturing International Corporation (SMIC), China’s largest contract chipmaker, recently revealed that it is in a major revenue growth phase. The pure-play foundry generated $5.4 billion last year, up 53.8 percent from 2020, and brought in $1.22 billion in the first two months of this year. And it is aggressively working to bolster its income through capacity expansion.

Related: Global Electronic Component Shortage – March 2022 Update

The firm is building a $2.3 billion 300mm factory in Shanghai and an $8.87 billion 300mm complex in Shenzhen. Once those facilities are online, its wafer output will rise by 120,000 units per month. While its nodes are not as technologically sophisticated as its overseas rivals, its accessibility is a major market advantage. Also, it has a business relationship with the maker of the world’s most advanced semiconductor manufacturing equipment.

China’s semiconductor ecosystem is also making significant progress on the chip design front.

Earlier this month, Dr. Rui Wang, SVP and Chair of Intel China, offered intriguing commentary on the sector’s future. “So far there has not been any local companies that can deal a substantial threat to Intel,” Dr. Wang said. “But in 3-5 years, it will become clear that local companies will emerge as strong rivals.”

DigiTimes pointed out several Chinese firms have had success creating powerful microchips using x86, ARM, and indigenous IC architectures. For example, Huawei’s HiSilicon subsidiary developed mobile device processors that equaled Apple’s iPhone CPUs in performance and capability. But that company lost access to state-of-the-art component fabrication services because of U.S. government-issued technology restrictions.

However, by the end of this decade, China’s tech champions could be laying the groundwork for an independent microelectronics supply chain.  

As it happens, China is not the only region to make a significant push for digital sovereignty recently.

Intel to Invest $36 Billion on EU Production Capacity

Intel announced plans to spend $36 billion to establish and expand production capacity across the European Union last week.

The chipmaker is dedicating $18.6 billion to two large-scale fabs in Madgeburg, Germany, that will utilize advanced manufacturing technology. The company intends to commence construction in the first half of next year and begin production by 2027. The four-year project will create an estimated 3,000 permanent jobs. Pending EU approval, the German government will contribute $5.5 billion to creating the fab.

If everything goes according to plan, Intel’s “Silicon Junction” will produce next-generation 2nm ICs before the decade’s end. That means it will be the most technically sophisticated chip plant on the continent.

The corporation’s European roadmap also includes pouring $13.1 billion into its Irish fab to double its production capacity. Moreover, it will launch an R&D center in France and build fabs in Spain and Poland. And the company is in discussions to develop a $4.9 billion packaging and assembly site in Italy.

Intel’s new financial commitments are part of its €80 billion ($93.9 billion) plan to develop a cutting-edge European semiconductor ecosystem. CEO Pat Gelsinger explained the initiative would enable the IDM to reclaim its technological leadership within the electronic components sector. He also noted it would help the industry diversify its supply ecosystem.

At present, Taiwan’s contract foundries make 60 percent of the world’s microchips. While that resource concentration has its benefits, it also leaves the global supply chain vulnerable to systemic disruption. However, thanks to Intel’s actions, tomorrow’s supply chain will be much less centralized and significantly more robust.

March 15, 2022 – Update

Chinese Government to Create Committee to Boost Chipmaking Capabilities

The Chinese government plans to launch a committee made of domestic and oversee chipmakers and local universities to bolster its chipmaking capabilities. The country’s Ministries of Commerce and Industry and Information will spearhead the program. Tsinghua University, Peking University, the Chinese Academy of Sciences will likely participate alongside national technology champions SMIC, its biggest contract chipmaker, and Xiaomi, its top smartphone vendor.

Chinese President Xi Jinping wants the public-private organization to cultivate China’s digital sovereignty, meaning domestic electronic components supply chain.

Nikkei Asia reported the “cross-border semiconductor work committee” will seek the cooperation of Intel, AMD, Infineon Technologies. The group also wants ASML, the world’s foremost advanced microelectronics manufacturing equipment vendor, to join the initiative. Beijing intends to launch the organization sometime in the first half of 2022.

However, ongoing geopolitical tensions between China and the United States could thwart the committee’s goals. The U.S. Department of Commerce placed SMIC on its Entity List, which means it cannot buy advanced semiconductor fabrication technology. Similarly, the Dutch government prevented ASML from selling its cutting-edge tools in China due to concerns about its use for military applications.

On the other hand, Intel reportedly generated 26 percent of its 2020 revenue from China. Likewise, ASML derived 16 percent of its 2021 income from the East Asian country. Potentially, those two firms could broker a deal to share their mature node technologies with their overseas counterparts. Regardless, given Beijing’s support, the semiconductor work committee will be worth keeping an eye on.

Bosch Expands Production Capacity

Bosch recently announced it would expand the production capacity of its Reutlingen, Germany fab in response to the global chip shortage. The company will spend €205 million ($283 million) to create 3,600 square feet of clean room space at the facility. It is also constructing a new building on the campus to support its new and existing media supply systems.

The manufacturer expects its fab expansion to come online in 2025.

Bosch’s new capacity will utilize 150mm and 200mm wafer technologies to make products with automotive and consumer electronics applications. The firm indicated it would also address the growing demand for silicon carbide (SiC) microelectronics related to the vehicle electrification trend.

While market experts believe the chip shortage will be over by 2023, this new capacity will be invaluable to tomorrow’s supply ecosystem.

Intel Expresses Interest in Arm Ownership Consortium

Intel CEO Pat Gelsinger recently touched on the corporation’s long-term plans during its investor’s day event. The executive explained that the company intends to boost its gross margin from 52 percent this year to 58 percent by 2026. He also forecasted that the firm’s revenue would rise by 10 to 12 in that same time frame. If the IDM becomes part of China’s semiconductor working committee, its income projections would be more than reasonable.

Most intriguingly, Gelsinger also said Intel is interested in joining a consortium that would own Arm.

Until last month, Nvidia looked to become the renowned design house’s new corporate parent. In 2020, it announced plans to buy the firm from Japanese investment firm Softbank Group for $40 billion. It viewed Arm as a worthwhile investment because Apple, Amazon, Google, and Tesla use its chip architecture. However, the deal ultimately fell apart due to mounting regulatory scrutiny in America and the United Kingdom.

Government watchdogs questioned if Nvidia’s ownership of Arm would undercut its partnerships with other tech firms.

However, if the consortium owned the chip design company, that could alleviate competition regulators’ concerns. It would also help Intel’s foundry services division to have access to industry-leading component architecture. Given Intel’s interest in spending big to expand its market share, investing in an association to buy Arm makes a lot of sense.

March 8, 2022 – Update

TSMC to Spend $20.94 Billion on Capacity Expansions and Upgrades

TSMC, the world’s largest contract manufacturer, authorized spending $20.94 billion on expanding and upgrading its production capacity. The firm also approved the issuance of $3.26 billion in unsecured corporate bonds to support its plans further. In January, the company announced it would spend $40 billion to $44 billion this year bolstering its fabrication capabilities.

On the bright side, TSMC’s new capital allocation will enable it to fill orders from partners like AMD, Intel, and Nvidia.

Traditionally, the process of building and equipping new fabs can take several years due to construction and shipping times. But the Taiwanese chipmaker has established new component factories in as little as 12 months in the past.

Related: Sourcengine’s Semiconductor Industry Lead Time Report

The corporation’s newly sanctioned expenditure could help it make up for lost time with its Phoenix, Arizona chip factory. Last month, Nikkei Asia reported the complex fell three to six months behind schedule because of COVID-19 flareups and labor shortages. That means the facility will not commence operations in March 2023 instead of September 2022 as intended.

In addition, TSMC’s new production lines are unlikely to address the supply constraints fueling the global component shortage. The firm revealed that 80 percent of its 2022 capex would go to expanding its advanced nodes, meaning 7nm and below. Consequently, it will not significantly increase its capacity for the mature manufacturing processes used to make badly needed MCUs and analog chips.  

Still, the company will protect itself and its customers from future disruptions by enhancing its production resources.

Toyota Supplier Cyberattack Prompts 14 Factory Temporary Shutdown  

Toyota closed 14 factories for one day after one of its suppliers, Kojima Industries Corp., suffered a cyberattack earlier this month. The Tokyo-based carmaker revealed that the disruption of 28 production lines slashed its daily output by 13,000 automobiles. Malwarebytes reported that Hino Motors and Daihatsu, Toyota affiliates headquartered in Japan, shuttered their plants because of the cyberattack.

Kojima, a plastic components and electronic parts vendor, has not disclosed the extent of the hack or the type of malware used. However, the company did reveal it found a threatening message written in English on a server.

So why did the world’s largest automaker briefly close over a dozen factories because of a supplier problem? After all, its vendor ecosystem includes more than 60,000 companies. The issue is Toyota runs its plants under an inventory management system called just-in-time (JIT), which it adopted in the 1950s.

That means its facilities cannot keep its production lines running if shipments are interrupted.

The corporation found great success with the methodology, which requires plans to hold minimal or no stock to maximize efficiency. As the car company became a major player in the worldwide automotive sector, its rivals replicated its approach. However, Toyota’s once-revolutionary practices left it particularly vulnerable to the impact of the global chip shortage.

Last summer, the corporation began shuttering its assembly centers due to widespread component availability challenges. The firm estimated the bottleneck prevented it from making 20,000 vehicles at its domestic factories in 2021.

Over a decade ago, Toyota changed tact in response to the 2011 Fukushima disaster by providing its factories with 2 to 6 months’ worth of components. Theoretically, the chip shortage and cyberattack will prompt the company to reevaluate its supply practices.  

March 1, 2022 – Update

Why Intel is Buying Tower Semiconductor for $5.4 Billion  

Intel announced it would buy Tower Semiconductor for $5.4 billion earlier this month, a significant premium on the Israeli chipmaker’s previously estimated $3.6 billion value. The American corporation anticipates the transaction will close within 12 months, barring regulatory complications. Intel CEO Pat Gelsinger commented that the purchase would expand its portfolio and bolster its foundry services business in a press release.

Although the semiconductor company’s reasoning makes sense, its newly declared acquisition breaks with its recent strategic moves.

Last year, Intel unveiled its IDM 2.0 initiative, a program designed to bring the firm back to the forefront of the electronic components industry. The project entails spending billions of dollars to expand its manufacturing capacity significantly worldwide. It also involves the company using its new resources to accept orders from other chipmakers. So far, it unveiled plans to establish new largescale chip factories in Arizona, Ohio, and Europe to support its foundry service roadmap.

But in snapping up Tower, Intel will expand its specialty semiconductor assets instead of its state-of-the-art capabilities.

Tower maintains five fabs across Israel, Italy, and the U.S. that produce PMICs, CMOS sensors, analog RF parts, and display chips. It also has a controlling stake in three Japanese facilities that manufacture analog, CIS, SOI, and power discrete microelectronics. That capacity enabled it to rank as the world’s ninth-largest pure-play foundry by revenue in Q4 2021.

While Intel will not outpace TSMC and Samsung because of its tie-up with Tower, it will own a bigger slice of a lucrative market. TrendForce pointed out the corporation will gain 6.2 percent of the world’s 8-inch wafer capacity in the deal. The market research group expects the transaction will help it improve its position in the automotive, industrial, mobile device markets.

Plus, in the post-global chip shortage landscape, any transaction that involves the acquisition of component factories is worth pursuing.

Intel’s deal will also further its ambition to cultivate production resources outside Asia.

Intel reportedly tried to buy GlobalFoundries for $30 billion for similar reasons last summer, but a deal failed to materialize. Its purchase of Tower provides many of the same benefits with a lower cost and fewer regulatory hurdles. It will also help the semiconductor firm address a predicted paradigm shift occurring in the vehicle sector.

Gartner: 50 Percent of Auto OEMs to Develop Chips In-House By 2025

Gartner recently published a piece identifying five automotive technology trends that will shape that industry in 2022. The consulting firm forecasts that half of the world’s top 10 automotive OEMs will be designing chips in-house by 2025. It lists the global push toward vehicle electrification and autonomous operation as key contributors to the change.

However, Gartner noted chip shortages are the primary driver of auto part companies taking a page out of Big Tech’s playbook.

Gaurav Gupta, research VP at Gartner, explained that automobile component vendors are moving to reduce supply chain complexity. “In most cases, chip makers are traditionally Tier 3 or Tier 4 suppliers to automakers, which means it usually takes a while until they adapt to the changes affecting automotive market demand.” He explained that vehicle sector OEMs would gain much greater visibility by taking microelectronics development in-house.

Related: Automakers moving away from JIT inventory model post-global chip shortage

Moreover, outsourcing custom chip production has never been easier.

Last November, Samsung, the world’s second-largest foundry service provider, committed to tripling its global production capacity by 2026. Later that month, it announced it would establish a $17 billion fab in Texas to support its American clients better. Similarly, TSMC, the world’s top contract chipmaker, declared it would spend $100 billion over the next three years to ramp up its manufacturing capabilities. It also set its 2022 capex at $40 billion to $44 billion, up from $30 billion in 2021.

Automotive OEMs will have their pick of service providers in a few years’ time due to all the foundry sector competition. However, Intel may have the edge over its rivals thanks to its acquisition of Tower. The Israeli chipmaker’s 8-inch wafer fabrication resources are ideal for tackling manufacturers’ mature component orders.

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February 22, 2022 – Update

Nintendo Switch Sales Significantly Undercut by Chip Shortage

Earlier this month, Nintendo revealed it would miss its annual sales goal for its Switch console by 1 million units. The corporation anticipated moving 24 million gaming systems in the fiscal year ending March 2022, but it revised its forecast due to the global chip shortage. It also revealed that purchases of its flagship product fell 21.4 percent annually in the nine months ending December 2021.

Nintendo also stated it had no visibility regarding the end of its component sourcing difficulties.

The Japanese company is one of many video game industry players that could not meet demand last holiday season. Sony recently lowered its PlayStation 5 fiscal year sales projection from 14.8 million units to 11.5 million. Microsoft has encountered similar procurement issues with its Xbox Series S|X consoles since launching them in November 2020.

Kantan Games, a consultancy, expects Nintendo, Sony, and Microsoft’s supply issues to remain a consistent problem until 2023.

At present, chip sector leaders expect that the microelectronics bottleneck will start easing up in the second half of this year. But contemporary gaming systems require a unique mix of customer premium processors and highly in-demand PMICs. Plus, the comparatively small production orders for popular hardware mean console components are less of a priority for contact foundries.

For instance, Nintendo recently announced that its Switch lineup had moved 103.54 million units since its launch in 2017. But Apple moved an estimated 40 million iPhone 13s since it went on sale in September 2021. Consequently, popular gaming hardware might not be widely available until sometime next year.

Consequently, dedicated gamers may need to face the unconscionable and touch some grass in 2022.

GlobalWafers to Invest $3.6 Billion in Expanding Capacity

GlobalWafers, one of the world’s largest silicon wafer manufacturers, recently revealed it would spend $3.6 billion to expand its production capacity through 2024.

DigiTimes reported the corporation would spend $2 billion to establish a new fab and $1.6 billion enhancing its existing sites. It intends to develop new 200m and 300m production lines and diversify its output to include silicon carbide (SiC), gallium nitride on silicon (GaN on Si), and silicon on insulator (SOI) wafers.

The company expects to start bringing its new fabrication resources online in 2H2023.

GlobalWafers’s declaration follows its failed $4.89 billion acquisition of Siltronic, a German wafer supplier. The two corporations announced their merger in 2021 and aimed to close it before that year’s end. But the deal collapsed because European regulators did not approve it before its January 31 deadline.

Nevertheless, both providers are moving on from their unsuccessful tie-up with a positive perspective.

Siltronic CEO Christoph von Plotho recently commented that the transaction no longer made financial sense for his company following the post-COVID digitalization boom. Similarly, GlobalWafers CEO Doris Hsu expressed excitement about pursuing the manufacturer’s new roadmap. Also, continued competition in the wafer fabrication space should benefit chipmakers in terms of materials pricing and availability.

February 15, 2022 - Update

EU Gives Domestic Chip Sector $49 Billion Boost

The European Union recently adopted the European Chips Act to bolster the region’s digital sovereignty and microelectronics production resources. Most notably, the legislation set aside €43 billion ($49 billion) in private-public capital to boost its local chip sector. It aims to make the trade bloc responsible for producing 20 percent of the world’s electronic components by 2030.

Related: What the Global Semiconductor Supply Chain Could Look Like in 2030

However, the specifics of the EU’s plans could blunt its impact.

The European Chips Act includes €15 billion ($17 billion) in government and business funding for semiconductor research and development. It also features €30 billion ($34.2 billion) in previously announced chip sector support initiatives. European Commission President Ursula von der Leyen explained the body designed the initiative to establish advanced IC manufacturing capacity within the continent.

Von der Leyen also noted COVID-19 and the global chip shortage emphasized the need for greater microelectronics infrastructure in Europe.

While the EU’s ambitions are laudable, its current framework is more of a first time than a comprehensive strategy.

The plan only provides €5 billion ($5.7 billion), or 15 percent of the overall proposal, in direct government funding. The legislation calls on the EU’s member states to approve the Act and put up the bulk of its financing. The bloc’s member countries might have different priorities, so the program might encounter significant roadblocks.

Nevertheless, the region is still evolving into a major semiconductor production hub in the coming years.

Last summer, TSMC, the world’s leading contract foundry, said it was reviewing the possibility of building a new fab in Germany. Bosch, a leading automotive component manufacturer, opened a €1 billion ($1.21 billion) component factory in June and is investing €400 million ($451.8 million) in expanding its capacity. Plus, Intel declared its intention to create a $100 billion microchip ecosystem in Europe, including potentially constructing two factories in Belgium, France, Germany, or the Netherlands.

Hopefully, the European Chips Act will entice other corporations to support the region’s future digitalization.

Semiconductor Industry Labor Shortage

The EU is not the only region that has recently made a significant commitment to bolstering its electronic component capabilities. Earlier this month, the U.S. House of Representatives passed the America COMPETES Act to provide $52 billion in semiconductor sector subsidies. Similarly, the Indian government approved a $10 billion proposal to kickstart its domestic microelectronics production.  

Ironically, these initiatives, created to address the vulnerabilities highlighted by the global chip bottleneck, are driving another kind of shortage.

Related: Sourcengine’s Semiconductor Industry Lead Time Report

Eightfold, a talent intelligence provider, estimates the United States needs to increase its IC sector workforce by 70,000 to 90,000 people to meet its critical application semiconductor needs. Moreover, it believes the country needs 300,000 new component production experts to achieve self-sufficiency. America is not the only region that must significantly increase its chip industry labor force to address post-pandemic demand.

The Wall Street Journal reported Taiwan, a global leader in microelectronics production, is facing a similar challenge. 104 Job Bank, a human resources company, found the area’s components segment had a 27,700-worker shortfall, up 44 percent year-over-year. Notably, its labor shortage has surged even though wages have reached a decade high.

Some of the world’s leading chipmakers have also highlighted the shallowness of the skilled labor pool recently.

Related: The Sourcengine Engineer’s Scholarship

Intel EVP Ann Kelleher told Congress that the U.S. needs to expand its semiconductor workforce to staff its new fabs appropriately. ASML, a Dutch manufacturer of cutting-edge microelectronics production equipment, anticipated staffing needs will grow by 10 percent annually amid rising demand. GlobalFoundries, a leading contract manufacturer, expects the already competitive American labor market will remain tight for several years.

Thankfully, the industry is taking action to rectify its labor issues.

Last spring, Taiwanese leaders passed legislation to support the area’s technology sector, which led to multiple universities launching IC-focused colleges. In Mainland China, several higher education institutions, including Peking University, created chip-centric colleges as part of a national push toward digital sovereignty. And the America COMPETES Act sanctions billions of dollars in federal spending on training and STEM education.

Currently, demand for skilled semiconductor industry workers dramatically outstrips supply. Hopefully, the last two years have convinced the world’s governments and chipmakers that supporting the sector long-term is a global priority.

February 8, 2022 - Update

AlixPartners, a consulting firm, estimated that the global chip shortage cost the automotive industry $210 billion in lost revenue last year. The component crush forced the sector’s most prominent providers to shutter their factories because they could not complete their vehicle assemblies.

Recently, several leading automakers have detailed how the ongoing bottleneck will impact their operations in 2022. Across the board, the segment’s top companies believe the shortfall will affect their business in the short term. But they also share a belief that a major turnaround is coming.

Toyota Wants to Stage a Major Comeback in 2022

Toyota announced plans to roll out 11 million automobiles in the 2022 fiscal year, a 20 percent annual increase.

The Japanese corporation intends to ramp up production as time goes by, aiming to produce a record 1 million units in April. It expects to make more personal transports by working with its suppliers to create more extensive IC stockpiles. Though an innovator of the just-in-time model in the vehicle space, it changed tactics following the 2011 Fukushima disaster.

Unfortunately, Toyota’s reach may exceed its grasp.

Nikkei Asia revealed its output would decline by 20 percent this month because adequate IC quantities are not available. The publication also noted one of its midsize suppliers is grappling with a worker shortage. The manufacturer’s labor force has diminished due to rising COVID infection rates, and national entry restrictions are preventing its overseas recruitment efforts.

Although Toyota admitted reaching its production goal would be “extremely difficult,” its plans are not unfeasible.

The corporation sold more cars in the U.S. than any other company, a feat no foreign provider had ever achieved. If any vehicle manufacturer can set a sales record amid a historical materials shortage, it would be Toyota.

Volkswagen Cuts Shifts at Main Auto Plant

Volkswagen decided to slash almost all night shifts at its main plant in Wolfsburg, Germany, due to the component shortage.

The motor company will initiate the cutback in the second quarter on three of the facility’s four assembly lines. It made the change because the bottleneck previously forced it to lay off staffers or abruptly curtail production work. Last January, it furloughed 10,000 workers due to a lack of in-stock microelectronics.

In addition, a recent COVID-19 flare-up in China exacerbated VW’s sourcing difficulties.

The firm operates two factories in Tianjin with FAW Group, one for cars and another for chips. It closed the facilities on January 10 after both recorded new cases of the respiratory illness. Two weeks later, the complexes reopened as their respective workers had completed coronavirus testing.

VW said it anticipates that the chip shortage will last through 2022 but will ease by mid-year. It anticipates creating better forecasts in 2023 as additional production capacity will have come online.

The corporation’s projections dovetail with its plans to capitalize on the demand for electric vehicles in the world’s largest auto market.

Last year, VW sold 70,625 battery-powered vehicles in China, a big miss of its 80,000 to 100,000 sales goal. Its growth in the region suffered due to COVID-19 and chip crunch-related assembly problems. But by 2023, the company and its partners will operate three plants with a total annual throughput of 1 million units in the country.

Ford Cutting Vehicle Production At Eight Factories

Ford declared it would cut production at eight of its North American factories in response to insufficient IC supplies. However, despite its current situation, it expects to do strong business in 2022.

The automaker suspended vehicle assemblies at its Chicago, Michigan, and Cuautitlan, Mexico facilities on February 7. It paused the production of its iconic F-150 pickup trucks at its Kansas City complex and is ramping down work at its Dearborn and Oakville, Canada plants, as well as both of its Louisville sites.

Related: Global Electronic Component Shortage - February 2022 Update

On the plus side, Ford anticipates increasing its vehicle rollouts in 2H22 to address healthy consumer interest in its EV fleet.

The firm has taken 275,000 orders for its F-150 Lightning pickup trucks, Mustang Mach-E crossover SUVs, and Transit vans. Consequently, its long-term strategy involves betting big on the electrification trend. It wants to make 600,000 EVs annually by 2023, doubling its current capacity.

The manufacturer also recently tapped contract chipmaker GlobalFoundries to produce its parts alongside TSMC, its existing service provider.  

Hyundai Aiming for 12 Percent Growth in 2022

Hyundai took a significant financial hit from a global chip shortage last year, but it sees a recovery on the horizon in 2022.

The company aims to grow its business by 12.1 percent this year, even with the lingering effects of the component crunch. In tandem with its subsidiary Kia, it intends to move 7.47 million automobiles in 2022. Its roadmap to that destination includes stabilizing its supply chain, boosting its yields, and enhancing its EV fleet.

That outlook represents a significant change from 2021; it sold 6.67 million units last year, 3.7 percent less than planned. Its procurement issues contributed to its Q4 2021 profits dipping by 50 percent from the year prior.

Related: Sourcengine Q1 2022 lead time report highlights

The South Korean giant stated Omicron variant-related disruptions would continue disrupting its operations in the first quarter. But it anticipates the chip crunch becoming less intense in Q2 and a return to supply-chain normalcy in Q3. Its leaders believe those developments will enable it to boost its annual sales by 20 percent in its primary market, North America.

Further out, Hyundai reportedly intends to bolster its component ecosystem through a new partnership with Samsung.

The corporation sourced memory modules for its vehicles from the conglomerate in the past. But in the future, it might contract the chipmaker to fabricate other automotive-grade ICs using its advanced nodes. As of this writing, neither firm has publicly confirmed plans to form a new alliance.

Even so, OEMs, CMs, and EMS providers should be aware that change is coming to the semiconductor industry.

EVs require around 2,000 microelectronic devices to function, roughly double the amount of gas-powered cars. As more top automakers push to electrify their fleets, they will increase their component purchases. That means their suppliers will consume more production line space to fill their orders, making procurement more challenging for companies in other sectors. Professional buyers should prioritize supply chain diversification as soon as possible to stay ahead of the curve.

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January 31, 2022 - Update

The global chip shortage happened because demand for electronic components vastly exceeds available production capacity. Thankfully, the industry’s leading chipmakers are working to address that problem by building new factories as quickly as possible.

Even better, many national governments are pushing to bring fabs to their countries, making the microelectronics supply chain more diverse. That development is important because recent COVID-19 flareups highlighted the risks of concentrating too many manufacturing clusters in one region. Even before the shortage began, rising international trade tensions showed the importance of launching new facilities in new areas.

Along those lines, leaders and companies in mainland China and India are taking steps to make their regions prominent IC production hubs.

China’s Rapidly Expanding Chip Ecosystem

According to the South China Morning Post, microchip production by Chinese companies surged by 33 percent year-over-year in 2021. The East Asian country chipmakers fabricated 359.4 million electronic parts at their domestic and overseas plants. As a result, the superpower ranked as the world’s third-largest seller of components behind America and South Korea.

China’s massive 2021 component output spike is a huge milestone for its public-private drive to establish semiconductor independence. That said, it still is a long way to go to reach that goal.

For one thing, none of the region’s microelectronics manufacturers can produce cutting-edge ICs. Because its component technologies are lagging edge, it is still highly dependent on foreign providers to meet its needs. Last year, the nation imported $432 billion in chips, up 23.6 percent from 2020. Its semiconductor spending will remain significant until it establishes a greater, more advanced chip manufacturing ecosystem.

However, Beijing’s efforts to develop robust domestic chip resources are paying off better than the Cincinnati Bengals drafting Joe Burrow.

Related: What the Global Semiconductor Supply Chain Could Look Like in 2030

The national government’s cash grants, tax abatements, and land discounts have seeded fertile ground for local and international entrepreneurs. Over the last 12 months, 105,000 semiconductor sector businesses opened up shop in the country. Alibaba and Tencent, two of its national technology champions, recently unveiled their first self-designed hardware. Plus, it launched 28 fab construction projects last year, supported by $26 billion in funding.  

Industry experts estimated China produced 9 percent of the world’s IC in 2020 and that its market share would reach 17.4 percent by 2024. Just a few years ago, that projection felt almost overly enthusiastic, but today it seems too cautious.

India Invests $10 Billion in Its Future

India is another region that recently moved to better its position in the global semiconductor ecosystem.

In mid-December, New Delhi approved a ₹760 billion ($10.1 billion) package to incentivize chipmakers to create local production nodes. The fund will cover half the cost of establishing front-end capacity in-country, like new wafer fabs. It also offers financial support to cultivate new local talent and firms looking to set up back-end manufacturing facilities.

Moreover, India’s microelectronics program includes creating domestic industrial parks that feature ample water, energy, and transportation resources. That is especially crucial as Nikkei Asia reported a lack of production infrastructure stood as a significant obstacle to attracting leading component manufacturers.

But the South Asian republic is pushing to overcome that hurdle with the power and grace of Cincinnati Bengals wide receiver Ja’Marr Chase.

That said, the Indian government correctly views building the national semiconductor ecosystem as a complex, multi-year process.

Luckily, New Delhi’s efforts are resonating with local businesses. Vedanta, a natural resources conglomerate, recently declared its intention to break into the microelectronics field. The corporation aims to begin fabricating 28mm and 65mm wafers at a volume of 40,000 units per month in its home market by 2026.

Vedanta is investing in older manufacturing processes because that is where it sees the market potential in India. AvanStrate, a glass substrate manufacturer and a Vedanta subsidiary, is spearheading its parent company’s semiconductor initiative. It intends to fabricate ICs with applications in the consumer electronics and automotive segments.

At present, India is 100 percent dependent on outside vendors for its microelectronic. But China’s success in developing a vibrant domestic electronic components ecosystem proves that what India wants is achievable. Like the Cincinnati Bengals heading to the Super Bowl, India is ready to show the world the impossible can become doable.

January 24, 2022 - Update

Earlier this month, ASML Holdings disclosed that a fire broke out at its Berlin, Germany factory that could affect its equipment deliveries. But like John Wick in the third act of the movie, the corporation is driven to make a comeback.

The equipment manufacturer revealed it would greatly expand its headcount to better address the impact of the global chip shortage on January 19.

In more expensive news, ASML announced plans to supply Intel with a next-generation lithography machine that costs over $380 million.

ASML to Add 3,500 Employees by Year’s End

During a recent interview, ASML CEO Peter Winick discussed the firm’s outlook on the components sector.

He explained that the manufacturer aims to hire 3,500 new workers to meet chip shortage prompted demand. Last year, it added 6,000 people to its headcount for the same reason. It also started delaying its testing procedures to expedite its deliveries. The corporation anticipates its army of workers will correct that imbalance in two to three years.

ASML’s chief executive also offered new details on the blaze that hit its Berlin factory. Though the fire affected 200 square meters of the plant, it will not “significantly impact” its 2022 production schedule. OEMs should not see significant delays in their sourcing of next-generation microelectronics, thanks to its efforts.

However, Winnick warned that the semiconductor industry’s push to expand capacity could create an oversupply glut by the middle of the decade.

Relatedly, DigiTimes recently estimated global fab equipment revenue would hit a record $98 billion in 2022, up 10 percent year-over-year. While a lot of money is being poured into expanding production capacity, demand remains incredibly strong. Market intelligence firm Gartner recently reported electronic components sales hit $583.2 billion last year.

The semiconductor market’s robust continued growth suggests the post-COVID digitalization wave will not crest until the third Robert Pattinson Batman movie hits theaters.

ASML and Intel Team Up to Advance Chipmaking Technology to Infinity and Beyond

In addition, ASML announced that Intel had arranged to purchase its next-generation extreme ultraviolet lithography (EUV) machines. The manufacturer pledged to deliver a High NA TWINSCAN EXE:5200 system to the chipmaker in 2025. The new tool features a more precise aperture, decreased complexity, and reduced energy usage and cycle time than current generation EUV machines. It is also a productivity beast capable of fabricating more than 200 silicon wafers per hour.

In practical terms, the TWINSCAN EXE:5200 offers enhanced chip performance, faster throughput, and better production yields.

Intel intends to begin mass production using the system in 2025.

The Dutch corporation has had a consistent partner in the American chipmaker in its quest to advance EUV tech. In 2018, it sold the firm a TWINSCAN EXE:5000 system, its next-gen lithography system prototype. The manufacturer stated it would deliver the high-end equipment to its customers in 2023.

Reuters revealed ASML, the sole vendor of EUV tools, is charging a premium rate for its new products. The firm’s current generation machines retail for around $169.5 million, and the EXE:5000 sells for about $339.1 million. ASML CTO Roger Dassen said the EXE:5200 units cost “significantly” more than $384.3 million.

Although the cost of innovation is high, Intel has a significant incentive to pay the manufacturer’s eye-watering fees. Though it is still the world’s leading IDM, its East Asian rivals have developed far more advanced production tech. Its inability to make advanced hardware led it to book space in TSMC’s 3nm production lines.

However, if Intel can utilize ASL’s innovative High NA equipment to its full potential, it could regain its standing as the semiconductor industry’s top provider. Plus, since the corporation is pursuing a dominant position in a half a trillion-dollar market, a $384 million investment makes sense.

How ASML’s Factory Fire Could Undermine the Global Chip Shortage Recovery

ASML is the sole manufacturer of state-of-the-art lithography machines chipmakers use to create sub-7nm components. The corporation’s technology enables the world’s tech giants to make components for their bestselling smartphones and computers. Last year, it posted record revenues as chipmakers and foundries spent an estimated $87.8 billion to buy new semiconductor production equipment, expenditures driven by the global chip shortage.

Unfortunately, a recent fire at ASML’s Berlin, Germany plant could undermine the industry’s recovery efforts.

The Dutch company revealed the blaze disrupted the fabrication of its deep (DUV) and extreme ultraviolet (EUV) lithography machines. It anticipates the production of its DUV tools will not be impacted but is unsure of its EUV equipment output. Potentially,  the firm’s deliveries could be delayed and curtail its customers’ capacity expansion plans.

Consequently, OEMs, CMs, and EMS providers might struggle to source certain premium processors and memory chips later this year.

That said, ASML maintains an extensive manufacturing network, so it could use another facility to fill the affected orders. Plus, TrendForce reports that it takes 12 to 18 months to make its EUV machines, meaning the fire might only minimally affect its supply chain. Hopefully, this incident will only be a bump in the road chip’s sector recovery. At this point, the entire industry is overdue for a win.

TSMC to Give Major Chipmakers a Manufacturing Boost in 2022

With the bad news out of the way; TSMC, the world’s biggest contract foundry, will make next-generation products for AMD and Intel later this year.

AMD CEO Dr. Lisa Su revealed the chipmaker would begin selling Zen 4 chipsets made using TSMC’s 5nm node in 2022. She also noted its products would be made with bleeding-edge manufacturing and packaging processes to enable high-performance computing. DigiTimes reported the firm would utilize the foundry’s 3D SoC tech for its recently announced Ryzen 7 5800X3D desktop processors at its Chunan, Taiwan-based factory in 2H22.

Ideally, AMD will be able to keep its new hardware consistently in stock with TSMC’s robust support.

In addition, TSMC plans to commence mass production with its N3 node in Q4 2022. The corporation’s 3nm process can make components with 70 percent greater logic density, 30 percent lower power consumption, and 15 percent more processing speed than its 5nm chips. This year, it will deploy its technology to serve Apple, its biggest client, followed by AMD, Broadcom, MediaTek, and Nvidia in 2024.

TMSC also plans to use its 3nm node to make products for Intel before year’s end, likely because the firm is its second-largest customer. The contract manufacturer is also converting production space at a Hsinchu plant to fabricate chipmaker’s offerings. The former research and development facility site can put out 20,000 silicon wafers per month.

Together, AMD, Intel, and TSMC are opening up the bottleneck that has gripped the semiconductor industry since late 2019.

But wait, there’s more!

Intel’s Plans to Establish a European Chip Ecosystem

Although Intel is outsourcing its next-gen hardware, it is also working on expanding its manufacturing resources.

Last month, Reuters reported the chipmaker and the Italian government are “intensifying talks” about building a chip plant within the country. Once operational, the $9 billion plant will use advanced packaging technology to produce high-performance components.

Bloomberg noted Intel is looking at Sicily as a potential building site. The corporation intends to establish a large-scale fab in Germany, with Saxony-Anhalt and Bavaria as possible locations. It also wants to create a new research and development facility in the French cities of Paris or Grenoble.

Intel CEO Pat Gelsinger declared that his corporation would create a $94 billion European semiconductor ecosystem over the next decade. Gelsinger previously said public funding would expedite its capacity expansion. But the firm’s high-level government negotiations and $28 billion planned capital expenditure suggest it is eager to break ground sooner rather than later.

The world’s foremost IDM would benefit in multiple ways from creating a leading-edge chip supply chain in Europe.

The chipmaker would become more competitive with Samsung and TSMC by establishing new advanced labs and factories. It would also appeal to component companies and OEMs that want geographically diffuse supply options. The U.S.-China trade war, the global chip crunch, and disruptive COVID-19 outbreaks have highlighted why it is a monumentally bad idea to concentrate most of the world’s chip factories in one region.

Plus, the coffee over there is infinitely better than the brews produced in the United States.

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