Supply chain issues have continued into 2022, with many hoping the current chip backlog may dissipate by the end of 2022. Unfortunately hopes and reality are in conflict for electronics manufacturing.
Major players in chip manufacturing, Taiwan Semiconductor (TSM), NXP Semiconductors (NXPI) and Microchip Technology (MCHP), are expecting chip demand to far exceed the available chip supply, continuing the trend dating back to last year.
Other fabless chip makers such as AMD and Qualcomm have reported supply-constrained, with wafer capacity unlikely to meet demand. Additionally, it has been reported Japanese wafer supplier Sumco has sold out of 300mm silicon wafers through 2026.
With the demand high, manufacturing these chips has become the next battle. Even with a new plant going online, Sumco still expects the wafer market to be tight, with the main problem being not enough equipment to manufacture the chips.
Shin-Estu, the leading wafer producer concurs that the shortages will remain in effect for the foreseeable future. Even with increasing their production capability, those plants won’t be completed for a couple of years.
Because of the specialized nature and machine specific processes of manufacturing chips, simply ramping up production isn’t an easy solution to the problem. With chips being needed to create chip shortages, the cycle will carry on.
What this means for electronics manufacturers is continued elevated lead times. Morris A Cohen of the Wharton School had this to say on pricing and lead times, “We’ve seen shortage allocations. If you want to buy a car today, you’ll probably have to wait to get what you want. This is also true for a lot of other products. Some prices will go up and there will be more delays.”
As we wait for more chip manufacturing to come online, including in America, long lead times and higher pricing will continue to be the norm. Working with more local electronics manufacturing can help with the long lead times and gives the customer more access to the manufacturing.
Jhonsa, Eric. “6 Key Takeaways from Recent Tech Earnings Reports and Calls.” RealMoney, 9 Feb. 2022, realmoney.thestreet.com/investing/technology/6-key-takeaways-from-recent-tech-earnings-reports-and-calls-15905574. Accessed 11 Feb. 2022.
Baker, Brandon. “Why the Semiconductor Shortage Won’t End Soon.” Penn Today, 19 Mar. 2021, penntoday.upenn.edu/news/why-semiconductor-shortage-wont-end-soon.
Kan, Michael. “Top Silicon Wafer Supplier Is Booked up through 2026.” PCMAG, 10 Feb. 2022, www.pcmag.com/news/top-silicon-wafer-supplier-is-booked-up-through-2026. Accessed 11 Feb. 2022