Global Electronic Component Shortage - May Update

Electronic Component Shortage Struggles Continue

Intel recently forecast that the global chip shortage will continue until 2024. And Nintendo and Sony recently cut their video game console sales goals due to worsening global supply chain conditions.

On the bright side, Thor: Love and Thunder looks pretty fun, right?

Intel Believes Chip Shortage Will Last Until 2024

In a recent interview (watch the video to the right), Intel CEO Pat Gelsinger expressed his belief that the global chip shortage will “drift into 2024.” The executive explained that the electronic components manufacturing equipment bottleneck is the foundation of his new outlook. Last month, Applied Materials, ASML Holdings, Lam Research, and other microelectronics fabrication tool providers informed their customers that delivery times would be around 18 months.

Because of that delay, Gelsinger believes chipmakers and foundries will not be able to expand their capacity as planned. Last summer, the semiconductor industry veteran, as well as several analysts, expected the shortfall would end in 2023.

Download: Sourcengine Semiconductor Industry Lead Time Report Q2 2022

As of this writing, Intel’s forecast has not been echoed by other semiconductor sector leaders.

In fact, IC Insights recently predicted global silicon wafer capacity would increase by 8.7 percent annually this year. The organization believes ten new fabs will go online in 2022 and raise the worldwide wafer output to its highest level in six years. Moreover, TSMC recently told Nikkei Asia that chipmaking equipment delivery problems had affected its 2023 capacity expansion plans. However, the world’s largest foundry service company stated that its 2022 roadmap has no issues.

TSMC fabricates components for Apple, AMD, Qualcomm, Nvidia, MediaTek, Broadcom, Marvell, and several other leading global electronics brands. Therefore, Intel's shortage prediction is highly credible if it is struggling to outfit its factories with manufacturing tools. Especially considering that…

Sony and Nintendo Cut Video Game Console Product Targets

Sony and Nintendo have recently cut the production targets for their PlayStation 5 and Switch video game consoles despite robust worldwide demand.

Sony CFO Hiroki Totoki recently revealed his corporation expects to sell 18 million ninth-generation systems in the current fiscal year. Last November, the conglomerate declared its goal to move 22.6 million units during the same period. Totoki also disclosed that it only moved 11.5 million consoles in 12 months ending in March 2022, down 17.87 percent from its target. The executive attributed the negative change to China's ongoing manufacturing and logistics issues related to COVID-19.

Sony launched its PlayStation 5 system in November 2020, but supply chain issues have kept it from meeting demand. The console features a custom CPU and graphics components designed by AMD. That high-performance hardware has made the system widely sought after but elusive in the end market since its launch. The company’s new forecast indicates that the situation will remain unchanged this year.

Nintendo recently made a negative revision to its long-term video game hardware sales forecast.

The corporation expects to move 20 million Switch systems in the current fiscal year, down 10 percent from 2021. Although the firm launched the hybrid console in 2017, it has enjoyed robust popularity throughout its lifecycle. Amid global coronavirus pandemic lockdowns in 2020, gamers pushed it to record annual sales of 28.83 million units. Unfortunately, supply chain interruptions caused worldwide purchases to tumble by 20 percent in 2021, even though demand did not diminish significantly.

Nintendo said China’s COVID flareups and Russia’s invasion of Ukraine had exacerbated its ongoing procurement, production, and shipping challenges.

Since supply chain disruptions are hindering the gaming industry’s most prominent players, conditions are undoubtedly more severe for midsized OEMs, CMs, and EMS providers. Although incremental progress is being made to relieve major component chokepoints, shortages will be in everyday reality throughout 2022.

Accordingly, companies should reinforce their inventories immediately because pricing volatility and availability problems will only worsen as the holiday shopping season gets closer.

COVID Lockdowns Problems – May 4, 20222

Recent citywide COVID-19 quarantines in China have caused serious production and logistics problems for the country's electronic component suppliers. And a recent surge in DDR3 demand might cause new shortage issues for OEMs, CMs, and EMS providers later this year.

China's COVID Lockdowns Disrupting Component Production & Deliveries

Since the beginning of the year, the Chinese government has locked down several major cities amid a spike in COVID-19 infections.

Download the Semiconductor Q2 2022 Lead Time Report

Consequently, corporations with manufacturing facilities in Shanghai, Shenzhen, and other areas have dealt with production shutdowns and logistics hurdles. Though Beijing is actively working to mitigate the problem, many automobile companies and components suppliers are struggling.

DigiTimes reports that recent quarantine mandates have disrupted the area's printed circuit board output.

The publication notes several ODMs have had difficulty securing their PCB orders because of the factory closures. Unimicron Technology and Career Technology had to shutter their Kunshan plants in response to coronavirus-related directives. Other firms in eastern China have avoided output disruptions by adopting “closed-loop” management procedures at their facilities. However, Chinese truckers must submit to lengthy screening when transporting goods from one city to another, which has caused delivery delays.

Along similar lines, AU Optronics anticipated COVID restrictions would curb production at its Kunshan factory by 30 to 40 percent. The affected facility made premium LTPS laptop panels and was getting certified to fabricate automotive parts. But the regional health and safety orders interrupted the site's equipment installations and raw materials shipments.

AU0 expects panel shipments to fall by 1 to 3 percent this quarter while average selling prices will decline by 5 to 10 percent.

Finally, On Semiconductor suspended operations at its Shanghai global distribution center in late April. The manufacturer, which makes automotive ICs, discrete semiconductors, and logic components, reopened the complex a week later, but its operations suffered. It had to tap alternate warehouses in Manila and Singapore to fulfill some shipments and expedite others to maintain its schedule.

Onsemi also encountered operational problems because of lockdowns in Shenzhen, Suzhou, and Leshan.

Although COVID-19 infection rates have fallen in Shanghai, China has experienced new clustered outbreaks in areas like Beijing. As such, it is unlikely that the Chinese government will roll back its pandemic containment strategy in the immediate future.

DDR3 Demand to Exceed Supply in Q3

According to DigiTimes, demand for DDR3 memory modules is on the verge of exceeding the available supply.

The site explained that interest in that low-density DRAM has ramped up recently. Taiwan-based supplier Elite Semiconductor Memory Technology (ESMT) recorded a spike in orders last month, along with an increase in requests for advanced deliveries.

Unfortunately, China's COVID lockdowns have impeded its ability to address its customers' needs due to regional transportation snarls. The firm expects its order volume to ramp up in the remainder of this quarter, provided Beijing eases its pandemic restrictions.

ESMT should manage the upswing in DDR3 purchases well as it held a $183.7 million chip inventory at the end of 2021. It also has contracts with local foundries such as Powerchip Semiconductor Manufacturing (PSMC) and Wuhan Xinxin Semiconductor Manufacturing (XMC).

That said, OEMs, CMs, and EMS companies that keep DDR3 modules on hand as part of their regular inventory might want to stock up soon.

Last month, Samsung declared it would stop taking orders for that niche component category at year's end. The conglomerate is eager to dedicate its production capacity to newer and more lucrative memory products.

The manufacturer's portfolio update and the jump in demand could create a significant shortage in that category. The ongoing unpredictability surrounding China's industrial cores and ground logistics makes that outcome even more likely.

As it happens, Micron Technology and Integrated Silicon Solution, Inc. have DDR3 products available with short lead times.

Short-Term Challenges, Long-Term Sufficiency – April 27, 2022

Despite historic efforts to bolster global semiconductor production capacity, some segments like analog chips and microcontrollers still face severe shortages. However, significant capital expenditures and rising market competitiveness are cultivating long-term supply stability in those sectors.

Analog IC Shortage Pushing Lead Times and Pricing

According to industry insiders, the ongoing analog IC shortage is not getting better anytime soon.

On the plus side, IDMs specializing in that component type believe the bottleneck affecting the segment has eased since last year. Moreover, the biggest driver of the parts scarcity – constrained 8-inch (200mm) fab space – is being addressed. Chipmakers are seeking partnerships with foundry service providers with 12-inch (300mm) wafer output capability to make their automotive and industrial parts.

That change, and ambiguity about consumer electronics demand, should bring some stability to the analog IC sector.

In addition, SEMI recently reported that the global 200mm production capacity will rise by 21 percent from 2020 to 2024.

The organization determined that 25 new 8-inch wafer production lines would come online during that timeframe. That means manufacturers can ramp up their output of analog, MOSFETs, display drivers, MCUs, PMICs, and sensors with 5G, IoT, and automotive applications.

Unfortunately, building or expanding chip factories and equipping them with proper machinery and personnel is a slow process. It is also incredibly expensive; DigiTimes estimates foundries and manufacturers will spend $4.9 billion on 200mm equipment this year.

Until the industry catches up with demand, OEMs, CMs, and EMS companies should stockpile mission-critical chips at every opportunity.

MCU Supply Remains Tight Worldwide

Industry watchers recently determined average industrial and automotive MCU lead times now range from 32 weeks to over one year.

Infineon Technologies and STMicroelectronics informed buyers that their microcontroller units would require 52 to 58 weeks for production and delivery. Those providers noted that supplies of their 8-bit, 16-bit, and 32-bit devices are constrained.

Along similar lines, Microchip Technology’s 16-bit devices will arrive at their customers’ receiving bays for 40 to 70 weeks, while its 32-bit components will not be available for 57 to 70 weeks. Moreover, the Chandler, Arizona-based provider does not expect its output schedule to return to normal this year.

NXP Semiconductors told its customers it needs 30 to 50 weeks of turnaround time for its MCUs.

On a brighter note, Renesas Electronics has gotten its automotive MCU lead times down to 30 to 34 weeks. The manufacturer cut its delivery delays by securing additional foundry support from TSMC and outsourcing some backend production work.

In addition, DigiTimes reports that Nuvoton Technology, Holtek Semiconductor, Weltrend Semiconductor, and other Taiwanese suppliers are stepping up their MCU fabrication. The region’s chipmakers aim to meet the demand for 8-bit industrial parts and 32-bit consumer electronics ICs. The publication also notes several companies in mainland China want to break into the automotive MCU segment.

Earlier this month, Nanjing-based SemiDrive Technology launched a new series of vehicle microcontroller units to support next-generation in-cabin safety features. The firm intends to make its high-performance into volume production in Q3 using TSMC’s 22nm node.

GigaDevice Semiconductor, Sine Microelectronics, Chipsea Technology Shenzhen, Hangshun Chip, and Nations Technologies also have plans to into the sector.

All that is to say, the bottleneck affecting the global MCU industry will not be a long-term challenge because so many companies want a slice of the $21.6 billion markets. After years of unprecedented volatility, the semiconductor space is moving towards a new stable paradigm. But “the new normal” will not snap into place overnight.

Pricing Volatility Continues – April 20, 2021

Memory Module Prices to Fall in Q2

Industry insiders report spot and contract DRAM and NAND prices will decrease in the second quarter of this year. The reason for the change is complicated but boils down to recent government-mandated coronavirus lockdowns in China.

The widespread disruption follows whenever Beijing orders a temporary halt to manufacturing activity and transportation within a particular area. On March 28, local leaders implemented the country’s “COVID-zero” measures in several industrial hubs, including Shanghai and Shenzhen.

Though state administrators have worked with large providers to resume normal operations, several ODMs with large facilities in the region are still getting back on their feet.

As a result, suppliers across the DRAM and NAND value chain are experiencing soft orders and weak interest. Market watchers anticipate distributors will offload their memory products in Q2, prompting a slight spot price dip. However, contract DRAM costs could climb by around 5 percent due to the fallout from a plant contamination event in February.

In happier news, DigiTimes expects production and logistics conditions in China’s industrial cores to normalize in early May amid Labor Day celebrations.

Samsung to Cease Taking DDR3 Orders by Year’s End

Samsung recently told its customers it would stop taking orders for DDR3 SRAM modules by the end of 2022. The corporation intends to continue shipping 1GB, 2GB, and 4GB memory chips through 2023, but its re-tasking its capacity to fabricate more CMOS sensors. Consequently, OEMs, CMs, and EMS firms using that brand and component type should make large purchases as soon as possible.

It is worth noting that major chipmakers accelerating obsolescence in their catalogs is a widespread trend.

Since the global chip shortage began, semiconductor corporations across the industry have started removing older portions of their portfolios. Leaders believe that dedicating their production capacity to newer and more lucrative parts is the best way forward. With the marketplace being as unstable as it is, that strategy makes a lot of sense from a financial perspective.

Unfortunately, midsize firms can be caught off guard by these shifts if they happen to miss a single crucial product change notice (PCN). For that reason, professional buyers should expand their supply chains to include vendors that make chips essential to their product lineups.

In this instance, the company should look to purchase DDR3 from providers that are committed to the market segment long-term, such as Nanya Technology Corporation and Winbond Electronics.

STMicroelectronics to Raise Prices Across the Board

STMicroelectronics informed its distribution partners that it would raise prices across the board in the current quarter.

The chipmaker explained that skyrocketing raw materials costs and geopolitical disruptions had pushed its overhead expenses to new heights. On top of that, the supplier is dealing with sharp increases in logistics and energy fees. Because those developments occurred in the last few months, it cannot absorb the surge in costs alone.

The Singapore-based company noted the pricing would affect new orders and its current backlog. The firm made its portfolio more expensive in Q4 2021 amid strong demand for its microcontroller units and power management circuits. DigiTimes anticipates other European and East Asian IDMs in automotive and industrial segments to follow in STMicro’s footsteps in short order.

No End in Sight – April 13, 2022

Based on recent reports, the global chip shortage will not end anytime soon. Well-sourced industry publications have reported that a variety of electronic components with data center applications will be in short supply for the rest of the year. In addition, supplies of certain NAND flash parts are becoming tighter. But even with those less than energizing developments, CMs, OEMs, and EMS providers still have solid procurement options.

Server Components Supply Limited Through 2022

Though we all deserve a break, shortages of server components like microprocessors will probably continue until the end of the year.

Market-leading ODMs Inventec, Quanta Computer, and Wistron anticipate strong sales of their networking products in the near future. Those firms believe that Intel and AMD’s recent data center CPU launches will drive purchases worldwide as companies refresh their hardware. In fact, they are already feeling the impact of that market trend on other data center components.

Inventec determined it is facing an 8 to 10 percent supply-demand gap for the data center's motherboards. DigiTimes founds supplies of PMICs, discrete crystals, MCUs, cabinets, switches, and chassis backplanes are also very tight.

Because it is still 2022, the server component bottleneck does not have a single direct cause. Chenbro Micom, a Taiwanese chassis maker, is struggling to ship orders due to labor, materials, and shipping container shortages. Rising geopolitical tensions in Eastern Europe have increased the price of stainless steel, which is constraining availability across the server supply chain.

Moreover, new clusters of COVID-19 infections in the Chinese mainland have disrupted the production and transportation of data center microelectronics.

NAND Flash Device Controllers Getting More Elusive

Micron Technology and Samsung have tapped Silicon Motion Technology and Phison Electronics to help ramp up their NAND flash controller output. The top providers are responding to spiking demand from the data center providers and other high-end segments. However, supply and foundry support constraints are obstacles for first-class third-party providers.

Phison believes its 55nm flash controllers will be in short supply through next year. Market watchers estimate that the overall product category is currently dealing with a 40 percent shortfall. As a result, suppliers are pushing their older USB and SD 2.0 parts toward end-of-life to make more space for the newer, more lucrative items.

Though that trend makes sense from a business perspective, manufacturers might encounter material sourcing problems sooner than expected.

Along similar lines, Silicon Motion expects its 28nm flash controller availability will not normalize until 2023. The chipmaker is competing with automotive suppliers for foundry space, with automotive suppliers eager to make more OLED DDIs and CMOS image sensors. Despite its current production challenges, it projects 20 to 30 percent year-over-year revenue growth in 2022.

Right now, it seems pricing and availability unpredictability will likely affect this product category for at least a year. Unless something changes, OEMs, CMs, and EMS providers should consider expanding their supply chains to include an electronic components e-commerce marketplace as quickly as possible.

For example, industry-leading chipmakers, even with world-class help, will not be able to stabilize the overall NAND flash controller supply until 2023. But Microchip’s PM8609B1-F3EI32xG3 PCIe NVMe controllers are available factory-direct with extraordinarily low lead time. The DDR4-2400 component features 32TB of flash memory capacity with 32 independent NAND channels. Even better, it can perform up to 1 million random reads IOPS on 4KB.

In other words, online marketplaces can help manufacturers source parts from qualified suppliers when no one else can.

March 28, 2022, Renesas Fabs Return Full Capacity Following Earthquake

Renesas revealed that the four fabs it shuttered in response to a massive earthquake on March 16 had resumed full production.

The Japanese chipmaker closed its factories after a 7.4 magnitude tremblor hit the coast of the Fukushima prefecture. Three of the affected facilities reopened and returned to normal operations within a few days. However, its Naka-based fab lagged due to “work-in-progress” damage, only hitting 50 percent capacity on March 23.

Download: Sourcengine’s Semiconductor Industry Lead Time Report Q2 2022

The firm disclosed that the plant resumed its pre-earthquake cadence last Saturday and that it sustained a supply hit. The disaster ruined two weeks’ worth of 300mm wafers and three weeks’ worth of 200mm units. The manufacturer uses its Naka complex to make nonautomotive microcontroller units (MCUs).

As of this writing, Renesas has not publicly announced any lead time or pricing adjustments related to the tremblor.

SGT MOSFET Foundries Booked Through 2H22

Earlier this month, DigiTimes reported multiple 6-inch wafer foundries based in Taiwan had filled their capacity through the first half of 2022 due to robust demand for split-gate trench (SGT) MOSFETs.

Epsil Technologies, Mosel Vitelic, and Nuvoton Technology, among others, are running their specialty fabs at full utilization at present. The service providers have received a spike in orders from their manufacturing clients in part because of expiring IP rights. Previously, global IDM derived revenue from manufacturers that maintained SGT MOSFETs as part of their portfolios. But those corporations shifted focus to addressing component shortage-related demand for automotive components once their patents ran out.

Consequently, chipmakers pursuing positions in the consumer electronics, server, and vehicle power systems markets had to find new service providers.

Thanks to their deals with Taiwan’s specialty foundries, manufacturers including Advanced Power Electronics, Niko Semiconductor, and Cystech Electronics have stabilized their SGT MOSFET output. But other providers without fabrication contracts may see long lead times for that component type until this summer.

Demand Soft for Large-Size DDIs, But Upward Pricing Pressure Coming Soon

Breaking with current market trends, large-size display driver ICs (DDIs) are facing downward pricing pressure due to weak demand. However, that situation is not going to remain static long-term.

Currently, the semiconductor industry is still experiencing extreme volatility due to the ongoing impact of the chip bottleneck. But certain segments are normalizing as end-market demand has fallen in line with established seasonal buying patterns. In this instance, companies are not stocking up on large-size DDIs because interest in TVs, PCs, and monitors is soft right now.

In fact, outsourced semiconductor assembly and testing (OSAT) and chip-on-film (COF) packaging providers are running their DDI production lines at 70 to 80 percent utilization.

That said, market watchers expect the segment to see some upward pricing pressure in the second half of 2022.

Industry insiders expect two factors to ramp up consumer spending on big televisions later this year. One, several OEMs will introduce new 8K sets powered by robust 7nm SOCs. TVs that can support ultra-high-definition gaming and video content will likely entice buyers. And two, the 2022 FIFA World Cup, starting in late November, is anticipated to drive purchases of 4K and 8K TVs.

Under the circumstances, manufacturers could benefit from reinforcing their DDI inventories soon.

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