CM – Global Chip Scarcity: Everything You Need To Know

What is the global chip shortage? How can your company cope with this crisis? When is the chip shortage likely to end? These and other questions are answered in this cheat sheet.

Almost every digital electronic device today is powered by semiconductors, which contain silicon and are critical to the manufacture of integrated circuits, also known as microchips. Cars use ICs for things like digital displays, entertainment systems, and more complex functions like assisted parking.

Semiconductor chips are also used in everyday devices; they enable advances in computing, communications, and applications used by almost every industry.

In the past, computers were made up of tubes and dials that were not only fragile but also used a lot of electricity. Tubes were eventually replaced by semiconductor chips, which are faster, cheaper, and more efficient.

Since everything that has to calculate or process information contains a chip, it is extremely important in our lives. And because the demand for ICs is greater than the supply, they are missing worldwide.

The rapid acceleration of the Internet of Things was one of the culprits even before the COVID-19 pandemic and “moves semiconductors forever before oil, the most important in the world Raw material for growth, ”says the business investment firm TS Lombard.

While the US leads the world in developing and selling semiconductors, accounting for 45 to 50% of global billing, manufacturing has shifted to Asia. Taiwan and Korea account for 83% of the global production of processor chips and 70% of the production of memory chips, and the lead of the region is to be expanded further.

Taiwan dominates the foundry market, in particular Taiwan Semiconductor Manufacturing Co., which better than TSMC is known and accounted for 54% of total global foundry sales last year.

There wasn’t always a shortage. Global semiconductor sales declined between 2018 and 2019, but sales rose 6.5% by 2020, according to the Semiconductor Industry Association. The rapid growth continued through 2021, with sales in the third quarter of 2021 27% higher than the same period last year. According to SIA, more semiconductor units were shipped in the third quarter of 2021 than in any other quarter in market history.

A semiconductor supply bottleneck hit the automotive industry for the first time during the COVID-19 pandemic and had a cascading effect that led to global disruptions. The shortage can be traced back to the first half of 2020 when general consumer demand for cars declined during the lockdown. This forced chipmakers to shift their focus to other areas such as computing equipment and mobile devices, the demand for which increased with the increasing number of employees working remotely.

With the growth of 5G and cloud-based services More chips were needed for communication platforms like Zoom and video streaming services. Part of the problem is that ROI is not convincing enough to build new foundries – which cost billions of dollars and take years – to meet automaker demands, IDC said. According to Mario Morales, program vice president of the semiconductor group at IDC, automakers operate in a just-in-time environment with no business continuity planning.

After canceling orders at the start of the pandemic, disgruntled suppliers turned to other markets, still doing well, like consumer electronics, and automakers were lower on the list of priorities.

Some customers hoard supplies and buy more components than they need if supplies run dry, as companies like Huawei hold supplies before the U.S. American technology ban for China earlier this year.

One of the inevitable consequences of the global chip shortage is an increase in counterfeit products. When companies get into a difficult purchasing situation, they become less vigilant and may not immediately notice that they have been sold illegal parts, according to the Center for Advanced Life Cycle Engineering.

Businesses need to be vigilant when dealing with independent distributors because they buy and sell components in open online markets, the CALCE said. Because parts can change hands multiple times, it can be difficult to trace back the origins and credentials of the original seller.

The center recommended checking the records of the company selling the components and performing thorough tests on the parts , admitted, however, that companies often don’t have the time.

How long the chip shortage will last depends on who makes the forecast. Gartner estimates the semiconductor shortage will extend well into 2022 and warns that wafer orders could have a lead time of one year.

The offer will « grow from older chip fabs and foundries that operate processes far from the cutting edge and on comparatively small silicon wafers, » wrote the IEEE. More than 40 companies will increase their capacity by more than 750,000 wafers per month by the end of 2022, the IEEE announced.

Despite the reluctance of some manufacturers to build new facilities, there is a momentum. Intel said it will spend $ 20 billion to build two new fabs in Arizona, and TSMC plans to spend $ 28 billion on new chips and building facilities to increase capacity.

Texas Instruments announced the construction of up to four new semiconductor plants in Texas in November 2021 for an estimated $ 30 billion. Construction of the first two manufacturing lines is slated to begin in 2022, and production of TI’s 300-millimeter wafers is slated to begin by 2025, according to the company. TI has the option to build two more plants on site in the future.

With Samsung’s announcement that it will build a $ 17 billion plant in 2022, other states and cities across the country are trying to incentivize the company courting in the hope of attracting chip production to their areas.

Regarding federal efforts, in June 2021 the Senate passed a $ 250 billion spending bill – one of the largest industrial bills in U.S. history – that was designed to increase production and increase $ 54 billion Semiconductor research included. However, five months later legislation stalled in the House of Representatives because members of the House of Representatives said they wanted to write their own bill.

Earlier this year, Micron said it was working on it
Mitigating the effects of bottlenecks in the electronics industry

through « proactive and disciplined supply chain and inventory management strategies » on its manufacturing performance, as well as a stronger focus on building supply chain resilience with data analytics.

Experts say the US could face a strategic disadvantage in the coming years unless semiconductor production in the country is expanded.

According to Ben Stanton, Principal Analyst at Canalys, global smartphone shipments fell 6% in the third quarter as vendors struggled with the « chipset famine » Meet demand for devices.

Apple has reportedly cut production of the iPad in half and is using older iPhone parts for use in the iPhone 13. Nintendo is reducing production of its Switch OLED consoles by 20%, according to a spokesman Cited chip scarcity as an impact on production.

« The inability to meet consumer demand during the busiest shopping season will add to affect companies’ bottom line, ”wrote Gadjo Sevilla for eMarketer. « And with no end to the chip shortage in sight, it’s impossible to tell how long it will take companies to recoup their losses. »

Retailers should place orders now, if they haven’t already, to make sure they have the right products in stock for the holidays.

SEE: Global Chip Shortage: The traffic jam is more durable than laptops and cars and could ruin the holidays (TechRepublic)

Because so many toys and other holiday items contain chips , research the sellers and compare prices before buying. If something sounds too good to be real, it probably is. Pay by credit card in case you dispute a charge and need to record online orders. If you discover a scam with your Christmas shopping, report it to the Federal Trade Commission.

Longer term, industry observers have said that foundries may be reluctant to invest in new factories because the chips don’t make big profit margins and the industry is known to have high demand spikes followed by declines. They later fear that a flood of chips would drive prices down.

Organizations should identify elements of their infrastructure that would be significantly impacted if one or two components fail and they cannot get a replacement due to a supply shortage, and this is so use as a basis for planning,
wrote TechRepublic contributing writer Patrick Gray.

Also consider what alternatives are available, e.g. B. Whether employees can stay productive with their personal devices. Do a cost-benefit analysis and don’t let the low initial cost be the only driver behind inventory levels.

Forrester recommends buying used or refurbished parts and choosing a different supplier, such as a PC -Manufacturer does not have the laptop you want.

Gartner recommends four steps for manufacturers who depend on semiconductors to mitigate risk and lost revenue during the global chip shortage:

In the severely affected automotive industry, McKinsey found that leading OEMs have set up « dedicated war rooms » that combine their supply and demand data to provide better transparency. These automakers also use analytics to match supply and demand in order to reduce errors and manual processes.

In the short term, McKinsey suggests, among other things, that a joint discussion between an OEM, its tier-one suppliers and semiconductor suppliers should to coordinate the goals of all parties involved. It could also help offer additional payments to expedite the production of wafers when the capacity is less than 5% of the production volume, the consultancy said.

Other options include replacing reordered components with similar but more feature-rich units, such as inserting chips with more memory and using consumer-grade chipsets that undergo additional quality tests.

A longer-term solution for the Automotive sector is rethinking just-in-time delivery strategies and considering more regional sourcing with less dependency on individual suppliers and far-off countries for chips.

This advice should be heeded by automakers. Even before the pandemic, Deloitte predicted that electronics systems would account for half the total cost of a car, including safety sensors, powertrain parts, and instrument panels, by 2030, Mickey Meece wrote for TechRepublic.

Consumers and businesses alike have the option of only using their current devices, automobiles and other equipment and wait with upgrades until the crisis subsides.

Discover the secrets of IT leadership success with these tips on project management, budgets, and dealing with daily challenges.
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Esther Shein is a longtime freelance writer and editor whose work has appeared in several online and print publications. Before that she was Editor-in-Chief of Datamation, Managing Editor at BYTE and Senior Writer at eWeek (formerly PC Week) …

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