Chips Are in Hot Demand—and That’s a Problem - Reviews
"Toyota predicts the shortage of supplies to continue through the spring."
Semiconductor companies are requesting their customers to be patient as the industry is going through a sharp increase in demand from manufacturers of everything from cars to consumer electronics.
The shortage of chip caused prices for some semiconductors to rise, delays in filling orders, and automakers to stop factories. If problems persist, consumers may see delays in getting a new cars, and possibly in higher prices.
There's no quick fix to the situation either. Adding new chip-making machinery can be expensive and slow, and some of the most serious supply problems occur with older production lines that are less lucrative for manufacturers.
“In the whole semiconductor industry there is very little [spare] capacity right now—everything is doing well,” said Risto Puhakka, president of VLSIresearch, an industry-analysis firm. “We’re coming off a record investment year, and the demand continues to grow.”
Toyota predicts the shortage of supplies to continue through the spring.
With chip plants already running out, carmakers and manufacturers of consumer electronics fight for every bit of limited production capacity.
Among the first markets to feel the pressure was China, where demand recovered early. And among the first to get hit was the automotive industry.
This week, Ford Motor Co. said it was going to pause a plant in Kentucky due to chip shortages that have also prompted some rivals to change production plans. General Motors Co. requested suppliers last month to stockpile a year's worth of chips in the face of shortages.
The increase in demand is expected to raise revenue for contract chip manufacturers that account for a large proportion of the semiconductors in the world. According to Taipei-based consulting firm TrendForce, revenues are projected to rise 6 % this year, hitting a record high. For its most advanced chips, TSMC is running t around 90 % of capacity, TrendForce said last month.
Globalfoundries Inc., a major U.S.-based contract chip manufacturer, is doubling its capital investment to raise capacity this year compared to 2020, said Mike Hogan, senior vice president of the company overseeing the manufacturing of automotive and industrial chips.
Although the chip shortages are broad, the effect on the automotive industry, which was hit early in the pandemic by a supply slump and plants idled by Covid-19, has been clearly reflected.
In November, NXP, a major chip supplier to the automotive industry, told customers it saw a "serious shortage" of chips and said it would increase prices for all its products.
In anticipation of the demand recovery, the automotive industry bears responsibility for failing to position orders early enough, Mr. Puhakka of VLSIresearch said. He said businesses need to better manage their supply chains as the use of chips in cars has increased to fulfill the demand for more efficient entertainment systems and driver-assistance functions.
“They don’t understand that the production cycles are long, the development cycles are even longer and there are reliability requirements that increase the cycle times,” he said.
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Rahul Shrestha
