Tag: Chip Shortage

Categories
Electronic Components Semiconductor

The CHIPS for America act

The CHIPS for America act

The CHIPS for America act

The Biden-Harris administration is trying to bring semiconductor development home to the US.

Once a superpower in the chip-making industry, America’s share of the semiconductor market has plummeted from 37% in the 1990s to only 12% this decade.

The demand for chips is constantly increasing and production cannot keep up, it’s left us all wondering when we’ll manage to get a PS5 and a new car.

The majority of the US’s chips are sourced from Asian countries like China, Japan, and Taiwan, whose Taiwan Semiconductor Manufacturing Company (TSMC) sells the most chips globally.

But then when the pandemic hit, the US chip stocks fell. As outbreaks overseas caused factory closures, it became more and more difficult to get hold of the stock suppliers were looking for. The closures and delays led to raw materials and logistics increasing in price too, making the whole situation pretty dire.

Suddenly, finding affordable stock that would arrive swiftly and safely was much harder than it used to be, and it showed. A report from the US commerce department said the chip shortage was hitting the country hard, all while demand rose by 17% from 2019 to 2021.

The Senate passed an act in June 2021 called the US Innovation and Competition Act (USICA), which detailed several initiatives to increase technological autonomy. This included the ‘Creating Helpful Incentives to Produce Semiconductors’ (CHIPS) Act, which would allocate $52 billion for domestic semiconductor research, design, and manufacturing.

The act’s House of Representatives equivalent was passed by the Senate on February 4th 2022 titled the ‘America Creating Opportunities for Manufacturing Pre-Eminence in Technology and Economic Strength’ (America COMPETES) Act. The package, worth $250 billion, would invest in the improvement of domestic manufacturing and research.

The act will encourage investment for the building of new fabs, create incentives for manufacturers who want to upscale their equipment, and will provide funds to improve research and communications in the semiconductor field.

Aside from these incentives, Intel also pledged $100 million to fund partnerships with universities located near its new factory to “build a pipeline of worker talent and bolster research programs in the region”.  

One of the driving factors to increase the domestic stock of chips is the rise in production of Electric Vehicles (EVs). The current administration wants to raise the number of EVs being produced so they make up half the cars in production by 2030. However, a typical EV will need twice the amount of chips a regular car takes at around 2,000.

The America COMPETES Act will also contribute funds to the improvement of Homeland Security, a move that has been welcomed by industry leaders. President Joe Biden received a letter early last year from professionals in the security sector, showing their support for funding the production and design of semiconductors. A supply of domestic chips would no doubt benefit this sector, as chips are used in security devices and infrastructure.

The two houses are expected to discuss the reconciliation of the act by conference committee later in February.

Despite the current shortages, Lantek are here to help. We have a range of day-to-day and obsolete electronic parts to suit your needs and will go the extra mile to help. Send us your enquiries today at sales@lantekcorp.com.

 

Categories
component shortage

Chip Shortage causing car manufacturers to cut production levels

Chip Shortage

Chip shortage causing car manufacturers to cut production levels

A week doesn’t pass without an announcement from a car manufacturer that they are cutting production levels. Idling shifts and even entire factories has become normal for an industry that thrives on maximising output. 

Volkswagen, Ford, General Motors, Hyundai and Toyota have cut production levels to prioritise their most lucrative models. In some cases, plants have shut down for weeks at a time to allow supply chains to catch up to one another.

To understand how big this is, a 1-2 week plant shutdown will cost a car manufacturer millions of pounds at the very least. No manufacturer would willingly do this, but the global chip shortage is forcing them to.

Chip shortage in numbers

Just 53,438 cars rolled off assembly lines in the UK in July 2021, making it the lowest output in the month of July since 1956.

In June 2021, data from the Society of Motor Manufacturers and Traders (SMMT) showed that car production was down 52.6% on the same month in 2019. Telling us that we’re a long way off reaching pre-pandemic levels.

According to research firm AlixPartners. The chip shortage will collectively cost the auto industry $110 billion in revenue in 2021. A revised figure and an increase of 81.5% over the same firm’s figures in late January.

More telling figures come from Fitch Ratings, who estimate the chip shortage will cost automakers 5% of production. North America and Europe will be the hardest hit, with Asia and China coming in third and fourth respectively.

What’s happening with chips!?

The automotive sector has been hit harder than any other by the chip shortage due to cancelling orders for chips at the start of the pandemic.

Anticipating a slowdown that would last months, most car markers cancelled orders for chips. Semiconductor manufacturers filled order books with orders from companies making smartphones, laptops and other devices.

When the automotive sector bounced back sooner than expected, semiconductor manufacturers had hardly any capacity to meet demand. This has led to the situation today, where car makers can’t secure the inventory they need. 

Now, there are not enough chips, foundries are running at 99% capacity and new foundries take years and billions in investment to set up.

Changing the production line for a chip costs tens of millions and takes months, labour shortages are causing a manpower crisis, and the pandemic is causing short-term factory shutdowns at foundries and fabless plants.

When will the global chip shortage end?

It will take at least five years for the global chip shortage to subside. Assuming investment in new foundries begins in 2021/22. New factories are the only the way out of the shortage because demand for chips is only going to increase.

Opinions on when the shortage will end vary from early 2023 to 2025. The last 18 months has tested supply chains and wreaked havoc on production, but the automotive industry is experienced enough to cope with future problems.

When you need to source hard to find electronic components quickly because of allocation, long lead times, obsolescence or quality issues, contact Lantek Corporation for a fast response to your enquiries and reliable on-time delivery. Our Team are here to help. 

Categories
Electronic Components Semiconductor

Semiconductor production capacity expected to hit records highs in 2021

Semiconductor production capacity expected to hit records highs in 2021

As you probably know, we are in the middle of a global semiconductor shortage. Auto manufacturers are cutting jobs, brands are delaying the release of new products, and people are struggling to buy things like games consoles.

It’s a grim situation predicted to last a few years, but behind the scenes, semiconductor companies are preparing to come out of the chip shortage swinging.

In fact, it’s predicted that semiconductor production capacity will reach a record high in 2021 so long as additional production lines are completed. This is reliant on production lines coming online following investments made at the beginning of 2018.

According to industry forecasts, next year, another 10 production lines for 300mm silicon wafers will be added worldwide. These will contribute millions of semiconductors each year, helping to release some pressure on demand.  

IC Insights also provides the following forecasts for chips: “By 2024, the average annual growth rate of semiconductor production capacity will be 5.9%. Compared with the average annual increase rate (5.1%) of semiconductor production capacity in the past 5 years (2014 ~ 2019), the growth rate slightly increased.”

Record demand for chips

The semiconductor market is experiencing record demand across all sectors. Chip manufacturers are struggling to keep up, but they are investing in new production lines to meet predicted demand several years from now.

The latest report from IC Insights’ McClean Report says that the semiconductor market will shake off the Covid-19 pandemic with 13% growth in 2021.

Semiconductor unit shipments are expected to hit 1,135.3 billion in 2021, fuelled by chips that target connected devices, VR and AR, network and cloud computing systems, contactless payment systems, automotive electronics including autonomous systems and consumer electronics including smartphones.

As technology advances and the world becomes more digital and more connected, chip demand will increase ten-fold over the next few years.

Semiconductor manufacturers are struggling to keep up with demand now but there are signs of life as the IC Insights’ report demonstrates.

The world’s biggest chip companies, including TSMC, UMC, SMIC, Samsung, Micron and SK Hynix are going to play a leading role in how technologies roll out long into the future. There should be no doubt these companies will power our future.

What next for semiconductors?

The prices of semiconductors are expected to increase by 20% in 2021 due to a shortage in production capacity and higher silicon prices.

However, the future may not be silicon at all. Graphene chips are 100 times smaller than silicon chips and thousands of times faster. This technology is in its infancy but it’s showing great promise. We expect big things in the next decade.

We also expect the semiconductor shortage to persist until 2022. Shortages should lift beyond this as production capacity increases from new production lines. Chip makers will need to manage supply and demand better in the future. The current shortage is bad news for everyone. Thankfully, it won’t last forever. Of this we’re certain.

 

 

Categories
Electronic Components

Chip shortage hitting auto jobs

Chip shortage hitting auto jobs

The global semiconductor shortage is hitting automotive manufacturers where it hurts, which will inevitably lead to job cuts across the supply chain.

We are already starting to see this with Stellantis, the car company formed by the merger of Fiat and Peugeot, saying it will cut over 1,600 jobs at its Illinois Jeep plant.

Elsewhere, the first sign of job cuts will be found in production cuts. Ford Motor Co has outlined a series of plant shutdowns due to the chip shortage, with five facilities in the US and one in Turkey affected. They have also cut output in Europe.

Meanwhile, GM has been forced into production cuts and Nissan recorded its worst annual loss in decades because of the global chip shortage.

Volkswagen AG has also sounded the horn, warning that chip shortages will curb output in the coming months of 2021. VW expects worsening production from the chip shortage and for it to affect all their cars groups, including SEAT and Audi.

Billions in losses

Job cuts appear to be inevitable across the automotive industry as manufacturers count the cost of production constraints caused by the chip shortage.

It is estimated the global auto industry will take an £80 billion hit in 2021. Several manufacturers have come forward with their own estimates. Ford says the chip shortage will cost them up to $2 billion in 2021 alone.  

Unfortunately, it is ordinary workers who will be punished. With fewer cars to make, workers involved in the manufacturing of cars will be cut first. We have already seen this with Stellantis. Other manufacturers will likely follow.

Why the chip shortage?

Modern cars have more than 1,000 chips in them and the smartest, most connected models, such as those with ADAS systems, have over 3,000 chips. So, even a small supply constraint can set back production.

However, this is no small supply constraint.

It appears that no auto maker is immune to the chip shortage brought about by cancelled orders at the peak of the coronavirus pandemic.

When the coronavirus pandemic hit, auto makers cancelled chip orders. Electronics manufacturers filled this gap in demand with soaring sales. Now that auto makers need to ramp up chip orders again, they have nowhere to go because most chip makers are running at 98-100% capacity making chips for other booming sectors.

This has caused a global semiconductor shortage that has affected all industries and all players. Even Samsung, who make their own chips, are struggling. The shortage is predicted to last 1-2 years until new foundries become operational.

Looking ahead

The semiconductor shortage will not last forever, and people need cars. Production will accelerate in the years to come. However, jobs may still be at risk.

Sadly, the chip shortage could accelerate digital transformation in manufacturing facilities, with the displacement of human workers for machines.

This is commonplace, but traditional brands may now seek a permanent solution to job cuts through technology. Automated plants are inevitable.

In any case, the future of the automotive industry is bright so long as you extend your horizon. The chip shortage is likely to last for the next 2 years. If you work in the automotive sector, strap yourself in. There is more drama to come.

 

Categories
component shortage Electronic Components

IBM says chip shortages could last two years

IBM

IBM says chip shortages could last two years

As technology has advanced, semiconductors have found their way into everything that requires computing power from coffee machines to cars. But the manufacturing output for semiconductors has not kept up with this change.

The semiconductor industry has also been hit with an industry rotation in demand that it was never prepared to deal with.

This happened at the start of the coronavirus pandemic when automotive manufacturers scaled back semiconductor orders. Lockdowns meant they weren’t making enough cars, so they scaled-down and battened the hatches.

Meanwhile, the demand for data center, computing, and home device semiconductors soared. Rather than finding themselves down on orders, semiconductor makers were all of a sudden making more semiconductors than ever before.

And then the automotive sector came roaring back.

Now, the semiconductor industry is in a state of disarray. Manufacturers are struggling to make enough chips in a situation we’ve called Chipageddon. This is compounded by the fact that silicon prices are soaring, making chips more expensive.

How long will the chip shortage last? The latest opinions don’t deliver good news – IBM says the chip shortage could last 2 years.

IBM isn’t alone

There is a serious imbalance in the semiconductor industry, and this is a problem many companies are having to contend with.

For example, Ford cancelled shifts at two car plants earlier this year and said profits could be hit by up to $2.5bn due to chip shortages. Meanwhile, Apple announced it would take a $3 billion to $4 billion hit due to the global chip shortage.

However, the most telling story of the semiconductor shortage comes from Samsung.  

Samsung is the world’s largest manufacturer of DRAM and the world’s fourth largest semiconductor manufacturer but are also experiencing shortages, to the point of having to delay the launch of the next-gen Galaxy Note until as late as 2022.

The fact that Samsung is experiencing a chip shortage when it manufactures its own chips tells us everything we need to know – the chip shortage is severe. It isn’t a small shortage at all – it’s an enormous shortage affecting everyone across the supply chain.

Unfortunately, it looks like the global semiconductor shortage will be around for a few years yet, and things could get worse before they get better.

Semiconductor woes

The semiconductor shortage is the result of a catalogue of problems going back several years. Here are some of the highlights:

Intel’s woes

Intel is the world’s leading supplier of CPUs for PCs and data centres and in 2018 they caused a chip shortage with the troubled development of 10nm chips. Intel’s mistakes have led to a shortage in CPUs for computers.

Declining DRAM prices

DRAM is a computer’s main memory. In 2019 and 2020, prices for DRAM declined, causing the biggest players – Micron, Samsung and SK Hynix – to curb their output. This led to supply constraints when the coronavirus pandemic hit.

Super cycle

The global demand for chips has hit an all-time high. Data centres, computers, cloud services, augmented reality, 5G, connected devices and connected vehicles are fuelling demand. This is great for chip sales, but the industry can’t keep up.

Tech war

The U.S. created a semiconductor shortage of its own when they levied sanctions against several Chinese companies, including SMIC and Huawei. This exasperated the chip shortage, placing strain on domestic manufacturers.

Coronavirus pandemic and cancelled orders

During the coronavirus pandemic, demand for semiconductors soared in some industries (e.g. electronics) and dropped in others (e.g. automotive). When demand came back for “down” industries, demand didn’t drop for “up” industries, leading to a shortage.

Fierce competition

We now have a situation where carmakers are battling the electronics industry for chips. There aren’t enough chips to go around and increasing manufacturing capacity is impossible without significant investment in new foundries.

Meeting demand

The electronics super cycle is not going to end anytime soon because there are so many tailwinds, including self-driving cars, VR, AR, AI, 5G and space travel. So, we cannot expect demand to drop and the chip industry to catch up with itself.

To meet demand, we need new foundries which take 12-24 months to set up. Many companies are already building new foundries, or are boosting capacity at existing plants, which is good news for the long run.

In the here and now, manufacturers can meet demand for chips by partnering with an electronics component distributor like us. We specialize in the procurement and delivery of electronic components and parts (including semiconductors) for a wide variety of industries from the world’s leading manufacturers.

The semiconductor shortage has affected the entire manufacturing supply chain but our close links in the industry mean we have better access to chips than most. No promises, but we have an excellent track record across all sectors.  

Get in touch with us to discuss your needs. We’re here to help.

Call: 001 973 579 8100

Email: sales@lantekcorp.com