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    Home»Sections»Consumer electronics»The global chip shortage is like the winter that won’t go away

    The global chip shortage is like the winter that won’t go away

    Consumer electronics By Agency Staff18 March 2021
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    When Samsung Electronics says there is a “serious imbalance in supply and demand” for chips, there can be little doubt that we are dealing with a severe semiconductor shortage. The warning from the world’s largest smartphone maker — and a major producer of chips — was the loudest in the recent litany of complaints from car makers, auto parts and electronics manufacturers as well as other microprocessor companies.

    The underlying data from some of the biggest chip makers continue to show lead times at factories getting longer for products across the board. On average, it’s gone from 10 weeks to about 17 weeks for certain types of microprocessors over the last year, according to data from Bain & Company and LevaData, a procurement and sourcing platform. In addition, around 75% of all semiconductor parts had an overall jump in lead times, with most of the increases coming over the earlier part of this year, according to IHS Markit. Capacity utilisation numbers remain elevated, meaning factories are running at full steam. And there are a variety of chips that have lead times of as long as 52 weeks. If you need a different type of chip in your car or phone or flat-screen panel, then the problems just multiply.

    Demand is likely to stay strong as global consumption, a push toward advanced 5G technology and hi-tech car production continue to grow

    Demand is likely to stay strong as global consumption, a push toward advanced 5G technology and hi-tech car production continue to grow. But the chip supply isn’t showing up yet. Makers of semiconductor components like multi-layer ceramic capacitors, substrates, microcontroller units and silicon wafers are all facing orders they aren’t able to satisfy, based on the firms outlooks for demand.

    The one-off factors hitting multiple levels of the global supply chain, from geopolitics to weather, have exacerbated the underlying imbalance. Take Qualcomm. It doesn’t run any microchip making factories itself. In fact, some of its chips are made by Samsung, some of whose phones happen to rely on application processors designed by Qualcomm. But Qualcomm was already under stress because demand for a variety of its chips, which change models and features every two years or so, had surged from Android phone makers. They used to depend on products from Huawei Technologies until that company was banned by the US government. Everything has now been set back because of the power outage during February’s intense cold snap that took out Samsung’s Texas plant. It produced around 28% of the company’s total output. Samsung said on Wednesday it was still trying to get the factory back online.

    Disruption

    A spell of bad weather and port blockages also are crimping supplies in North America. That has led Toyota and Honda to warn of disruption to their supply chains in the region. The former said a “shortage of petrochemicals” at some plants would affect production, while the latter said several factors including bursting pipes at facilities would cause temporary shutdowns. And surprise: a shortage of chips was also a factor.

    Still, supply chains in all sorts of industries have dealt with shortages resulting from catastrophes before. For example, in Thailand, where floods affected the hard disk drive industry; or Japan, when automakers and their parts suppliers ceased operating in the aftermath of the Fukushima earthquake, tsunami and nuclear plant meltdowns, according to Peter Hanbury of Bain. This time, however, there’s some level of a shortfall for most types of semiconductor and sub-components. And with factories everywhere churning away, there’s no clear path to satisfying demand.

    It’s not like cleaning up after a storm. These shortages are here for a while.  — By Anjani Trivedi, (c) 2021 Bloomberg LP

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