Chip Shortages
Chip shortages are certainly an important topic, as they are the basic building blocks of many CE products, but perspectives on the situation are many and varied, making it a bit hard to discern what is at the root of the problem, especially when certain biases come into play. Recent comments on the shortage by an industry professional leave us in a quandary as to what to believe and what not too, so we pass it on to see if others are equally perplexed.
According to the source there are three main factors for the chip shortage:
So the source is now saying that a focus on self-reliance in the semiconductor space could lead to a lack of profitability, as semiconductor resources are built on a regional or country basis, rather than on global need, a very logical thesis, which unfortunately has been supported by those who fear that globalization leads to a lack of control by incumbents. He added, ‘the chip shortage has nothing to do with the location of the fab. These factors will be present no matter which country it is produced in’, again consistent with a global view of the semiconductor industry.
Given that China’s most recent 5 year plan has a focus to expand the country’s semiconductor industry to reduce dependence on foreign chip manufacturing, and the US government and US companies have begun to focus on building out US semiconductor manufacturing capacity, these comments represent an opinion that is shared by many across the semiconductor industry. The source added that ‘We believe that the current total production capacity is still greater than the actual market demand,” furthering his apprehension toward a nationalistic expansion of the semiconductor industry as opposed to a globalized approach.
All noble thoughts and representing a less political and more industry oriented approach to current shortages, but we are just a bit concerned that there might be some bias here, as the source of the comments was Mark Liu, the just elected Chairman of the Taiwan Semiconductor Industry Association and the Chairman of Taiwan Semiconductor (TSM), the largest semiconductor foundry globally, with capabilities of ~13m 300mm wafers/year, production node capabilities down to the 5nm level, and the largest purchaser of semiconductor capacity and related equipment. This taints his view that semiconductor expansion in China, the US, and Europe, would be ‘unrealistic’ a bit considering such would represent additional competition to TSM and could reduce TSM’s utilization and ‘ability to use their expertise to discern which customers are actually buying for need rather than buying for inventory stocking’, as he also noted in the speech. Its hard to take advice from someone whose motives are a bit self-serving, even if they are correct, albeit likely for the wrong reasons…. JOHO
According to the source there are three main factors for the chip shortage:
- The limitations put on chip production manufacturing by the COVID-19 pandemic, keeping some manufacturers from meeting schedules.
- Repeat (double) orders. The US/China trade war has caused buyers to increase inventory levels at a number of points in the supply chain to make sure they have sufficient inventory to work through potential supply limitations. Those brands looking to build share that was formerly owned by Huawei (pvt) have also increased inventory levels in anticipation of success.
- The COVID-19 pandemic and its limitations have accelerated the global trend toward digitalization. That acceleration is ahead of industry plans for capacity expansion.
So the source is now saying that a focus on self-reliance in the semiconductor space could lead to a lack of profitability, as semiconductor resources are built on a regional or country basis, rather than on global need, a very logical thesis, which unfortunately has been supported by those who fear that globalization leads to a lack of control by incumbents. He added, ‘the chip shortage has nothing to do with the location of the fab. These factors will be present no matter which country it is produced in’, again consistent with a global view of the semiconductor industry.
Given that China’s most recent 5 year plan has a focus to expand the country’s semiconductor industry to reduce dependence on foreign chip manufacturing, and the US government and US companies have begun to focus on building out US semiconductor manufacturing capacity, these comments represent an opinion that is shared by many across the semiconductor industry. The source added that ‘We believe that the current total production capacity is still greater than the actual market demand,” furthering his apprehension toward a nationalistic expansion of the semiconductor industry as opposed to a globalized approach.
All noble thoughts and representing a less political and more industry oriented approach to current shortages, but we are just a bit concerned that there might be some bias here, as the source of the comments was Mark Liu, the just elected Chairman of the Taiwan Semiconductor Industry Association and the Chairman of Taiwan Semiconductor (TSM), the largest semiconductor foundry globally, with capabilities of ~13m 300mm wafers/year, production node capabilities down to the 5nm level, and the largest purchaser of semiconductor capacity and related equipment. This taints his view that semiconductor expansion in China, the US, and Europe, would be ‘unrealistic’ a bit considering such would represent additional competition to TSM and could reduce TSM’s utilization and ‘ability to use their expertise to discern which customers are actually buying for need rather than buying for inventory stocking’, as he also noted in the speech. Its hard to take advice from someone whose motives are a bit self-serving, even if they are correct, albeit likely for the wrong reasons…. JOHO
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