Salutary Semiconductor Supply Symposium
Now that supply chain issues have become front page news, the press has begun to focus on some of the issues that have caused these disruptions, with videos of freighters waiting offshore for a call to unload and trucking companies lamenting a lack of drivers. As we have been focused on these issues since COVID-19 appeared, we look was askance at these very simplistic ‘examinations’ of supply chain problems and wonder where lawmakers were when trade issues with China and other trading partners were a key part of generating political capital.
We won’t rant but rather focus on the idea that the US government is asking manufacturers all over the world to fill out a “Notice of Request for Public Comments on Risks in the Semiconductor Supply Chain” as supplied by the Department of Commerce, the Office of Technology Evaluation, and the Bureau of Industry & Security as part of the 100 day Supply Chain Review mandated by Executive Order 14017 on February 24. As part of the review, the questionnaire was sent to semiconductor related companies on a voluntary basis, with a due date of November 8, but comments by the DOC have indicated that if they do not get the quality of information they need, they will take steps to ‘compel’ semiconductor companies to provide same, including those outside of the US.
Most recently Taiwan Semiconductor (TSM) indicated that they would comply with such a request, although still ‘assessing the contents of the questionnaire’, with the Taiwanese government saying they will respect US commercial law and rules but will help Taiwanese companies if they receive and ‘unreasonable’ requests. TSM counsel said, “Don't worry. We definitely will not leak our company's sensitive information, especially that related to customers, Customer trust is one of the key elements to our company's success, If this is to resolve supply chain issues, we will see how best we can do to help them.” This made us take a look at what the US was actually asking for, which seems to have been confusing enough that the government is preparing a FAQ page to detail some of the requests.
Here’s what the questionnaire asks of semiconductor product designers, front and back-end manufacturers, microelectronics assemblers and their suppliers and distributors. There is another set of questions for ‘intermediate users and end users of semiconductor products or integrated circuits’:
While the global semiconductor supply chain is an important topic, amassing data about the reasons behind the current issues will serve to educate those that might legislate solutions, but more likely will be used to further political agendas as needed. Rather than ask companies for information that they will spend millions of dollars to obfuscate, we might be better served trying to understand how to better interface with a global semiconductor supply chain rather than trying to control it through trade restrictions. The US is best at developing semiconductor technology yet has rarely developed the production capacity and tools that are essential for maintaining a leading position in the global market.
Yes, the US has a higher manufacturing cost structure than other countries, but how did a Netherlands based company (ASM (ASML)) become the sole supplier of EUV equipment to the semiconductor industry when Intel (INTC) was behind the development of the technology as far back as 2003, especially as a number of US based companies were instrumental in solving some of the issues surrounding the commercialization of the technology? They cooperated with a number of other European companies and created the necessary supply chain. They didn’t stop others from trying to develop a competitive solution, they just did it better than anyone else and now dominate the industry.
It’s not simple and it takes a lot of support from the government and intelligent legislators, which seems to be something that stands in the way of the semiconductor industry in the US, but the knowhow is not the problem with the US semiconductor supply chain, just the coordination of the government and the industry working toward the same goal. “ If a man has good corn or wood, or boards, or pigs to sell, or can make better chairs or knives, crucibles or church organs, than anybody else, you will find a broad hard-beaten road to his house, though it be in the woods “ aka “If you build a better mousetrap the world will beat a path to your door.” – Ralph Waldo Emerson
We won’t rant but rather focus on the idea that the US government is asking manufacturers all over the world to fill out a “Notice of Request for Public Comments on Risks in the Semiconductor Supply Chain” as supplied by the Department of Commerce, the Office of Technology Evaluation, and the Bureau of Industry & Security as part of the 100 day Supply Chain Review mandated by Executive Order 14017 on February 24. As part of the review, the questionnaire was sent to semiconductor related companies on a voluntary basis, with a due date of November 8, but comments by the DOC have indicated that if they do not get the quality of information they need, they will take steps to ‘compel’ semiconductor companies to provide same, including those outside of the US.
Most recently Taiwan Semiconductor (TSM) indicated that they would comply with such a request, although still ‘assessing the contents of the questionnaire’, with the Taiwanese government saying they will respect US commercial law and rules but will help Taiwanese companies if they receive and ‘unreasonable’ requests. TSM counsel said, “Don't worry. We definitely will not leak our company's sensitive information, especially that related to customers, Customer trust is one of the key elements to our company's success, If this is to resolve supply chain issues, we will see how best we can do to help them.” This made us take a look at what the US was actually asking for, which seems to have been confusing enough that the government is preparing a FAQ page to detail some of the requests.
Here’s what the questionnaire asks of semiconductor product designers, front and back-end manufacturers, microelectronics assemblers and their suppliers and distributors. There is another set of questions for ‘intermediate users and end users of semiconductor products or integrated circuits’:
- Identify your company's role in the semiconductor product supply chain
- Indicate the technology nodes (in nanometers), semiconductor material types, and device types that this organization is capable of providing (design and/or manufacture).
- For any integrated circuits you produce—whether fabricated at your own facilities or elsewhere—identify the primary integrated circuit type, product type, relevant technology nodes (in nanometers), and actuals or estimates of annual sales for the years 2019, 2020, and 2021 based on anticipated end use
- For the semiconductor products that your organization sells, identify those with the largest order backlog. Then for the total and for each product, identify the product attributes, sales in the past month, and location of fabrication and package/assembly.
- List each product's top three current customers and the estimated percentage of that product's sales accounted for by each customer.
- For each phase of the production process, identify whether your organization carries out the step internally or externally. For your organization's top semiconductor products, estimate each product's (a) 2019 lead time and (b) current lead time (in days), both overall and for each phase of the production process. Provide an explanation of any current delays or bottlenecks.
- For your organization's top semiconductor products, list each product's typical and current inventory (in days), for finished product, in-progress product, and inbound product. Provide an explanation for any changes in inventory practices.
- What are the primary disruptions or bottlenecks that have affected your ability to provide products to customers in the last year?
- What is your organization's book-to-bill ratio for the past three years? Explain any changes.
- If the demand for your products exceeds your capacity, what is the primary method by which your organization allocates the available supply?
- Does your organization have available capacity? If yes, what is preventing the filling of that capacity?
- Is your organization considering increasing its capacity? If yes, in what ways, over what timeframe, and what impediments exist to such an increase? What factors does your organization consider when evaluating whether to increase capacity?
- Has your organization changed its material and/or equipment purchasing levels or practices in the past three years?
- What single change (and to which portion of the supply chain) would most significantly increase your ability to supply semiconductor products in the next six months?
While the global semiconductor supply chain is an important topic, amassing data about the reasons behind the current issues will serve to educate those that might legislate solutions, but more likely will be used to further political agendas as needed. Rather than ask companies for information that they will spend millions of dollars to obfuscate, we might be better served trying to understand how to better interface with a global semiconductor supply chain rather than trying to control it through trade restrictions. The US is best at developing semiconductor technology yet has rarely developed the production capacity and tools that are essential for maintaining a leading position in the global market.
Yes, the US has a higher manufacturing cost structure than other countries, but how did a Netherlands based company (ASM (ASML)) become the sole supplier of EUV equipment to the semiconductor industry when Intel (INTC) was behind the development of the technology as far back as 2003, especially as a number of US based companies were instrumental in solving some of the issues surrounding the commercialization of the technology? They cooperated with a number of other European companies and created the necessary supply chain. They didn’t stop others from trying to develop a competitive solution, they just did it better than anyone else and now dominate the industry.
It’s not simple and it takes a lot of support from the government and intelligent legislators, which seems to be something that stands in the way of the semiconductor industry in the US, but the knowhow is not the problem with the US semiconductor supply chain, just the coordination of the government and the industry working toward the same goal. “ If a man has good corn or wood, or boards, or pigs to sell, or can make better chairs or knives, crucibles or church organs, than anybody else, you will find a broad hard-beaten road to his house, though it be in the woods “ aka “If you build a better mousetrap the world will beat a path to your door.” – Ralph Waldo Emerson
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