"There are numerous other applications for semiconductors, but these represent the general trend. One cannot blame semiconductor companies for switching capacity to growing applications while automakers cut production (and presumably semiconductor orders) by 40% over two quarters. It will take time to resolve the shortages. TSMC stated it takes at least six months from semiconductor production to auto production and involves several links in the supply chain. Capacity can be shifted in the short term, but increasing overall capacity often requires construction of new wafer fabs, which takes about two years. Automakers gave up their place in line, so they will have to wait their turn for semiconductors."
Pretty much the only auto supplier that wasn't forced to move to just outside the automaker's own factories and on the tight chain of just in time. It was just acceptable to not highly integrate them, and oops. Maybe the automakers will make their own fabs. Which is what is really needed. But then again, we've been in a gut because of over production for years. So really, this is just automakers shifting the blame for the lack of demand of the last decade to someone that their stockholders are ok with blaming, because why admit your mistakes and fix them, when you can blame someone else?
Having worked in the auto industry I can say this is the sort of thing was never, ever expected from a supply shortage. The frailty of the global supply chain network has been brutally exposed these last 14 months.
> The frailty of the global supply chain network has been brutally exposed these last 14 months.
I think it’s the exact opposite, supply chains have held up remarkably well. If I had believed some people here we would have been eating each other by now but apart from a shortfall in toilet paper things have been fine.
When you expect your materials to arrive daily for that days production and keep almost zero inventory and relying on "Just in Time Delivery", then cancel all your orders overnight and then expect them to start again on whim, on the day you decide without any heads up to your suppliers...what could possibly go wrong? Can you imagine if Apple behaved this way? If iPhone sales drop one quarter, cancelling all their chip production until sales picked up again?
Auto manufactures are spoiled, they get anything they want whenever they want from the Government every time they start crying. Whether it's multi billion dollar tax breaks (Ford, Oakville, GM Oshawa, etc), multi billion dollar Gov programs (cash for clunkers) at the tax payers expense or being allowed to screw their suppliers for billions through bankruptcy (GM).
Don't excuse their poor management, forecasting, greed for frailty of the global supply chain. It's not like a asteroid hit Taiwan.
> Having worked in the auto industry I can say this is the sort of thing was never, ever expected from a supply shortage.
Having not worked in the auto industry, but having worked in the logistics industry, I and many many others like me have consistently warned about global catastrophes like pandemics causing unforeseen consequences of the kind we're currently experiencing.
To say that it's "frustrating" that nothing has been done before now, and nothing will likely be done - when I've literally written detailed reports complete with advanced statistical analysis for my upper management - is a massive understatement.
Hopefully the next pandemic will be severe enough that society itself is disrupted to the point where "rich" people suffer, perhaps even die. For many readers, this comment will come off as "morbid" or perhaps even be misinterpreted as a "call to violence", but in reality, this is simply "logical" behavior (survival instinct) that would result in a truly massive supply chain breakdown, and humanity as a whole doesn't learn a lesson unless there's unbearable suffering involved. I imagine a pandemic that kills 10% of the people it infects instead of 1% would cause sufficient pain for "elites" who very wrongly believe themselves to be above such inconveniences to seriously rethink their desire for "profits"... especially when a bunch of poor people who can't hoard food all raid their little compounds and the resulting unpleasantness that will result from such an outcome. It's unfortunate that I have to wish for such a thing to make people reconsider something as simple as warehousing additional supplies for unforeseen circumstances, but clearly we're there.
Glad I already got my 2021 F-150. There are lots in MI full of completed trucks awaiting chips. And looks like they're already planning temporary layoffs[1]:
I'm more inclined to believe TSMC and Intel than Cisco. They're closer to the problem.
"actually we see that demand continued to be high and the shortage will continue throughout this year and may be extended into 2022 also." C. C. Wei, TSMC CEO
"We expect it will take a couple of years for the ecosystem to make the significant investments to address these shortages." Pat Gelsinger, Intel CEO
Also, this is a deeply technical topic where BBC should cite engineers and industry veterans, not Dan Ives from Wedbush Securities.
Fire at a factory is not a force of nature, and it might be that the weather issue is also not a force of nature like we saw in TX. Sometimes saving money instead of investing in risk mitigation systems cause things to fail. I don't believe force of nature is behind the chip shortage unless we are counting on "to err is human" then sure.
Well lets be honest, while we are subject to the forces of nature, this particular time we mostly became a victim of the forces of the Texas devil may care mentality.
Cisco are also getting stung at the latest node. For their new line of Silicon One switch/router chips they decided to ditch their usual fabless partner (Broadcom?) and go direct to the fab (I think it's Samsung but not sure - doesn't really matter anyway). They did this to save money and also with the intention of producing their own merchant silicon to directly compete with Broadcom's. This would have been a great plan if there hadn't been a major 7nm capacity problem which resulted in the smaller players, such as themselves, not getting the wafers they need. I don't think there are any public reports of anyone using Silicon One yet (except Cisco themselves) but this won't help them win any orders.
The car industry might have something to do with it also but it's by no means the only cause of Cisco's concerns.
I’ve gotten burned by Cisco in a very similar situation. At this point they basically lean on their largest telecom customers to build their solutions for themz They moved to this model because the Comcasts / AT&Ts / Verizons around the world started looking at contracting with factories to build their own white-label network gear (when you spend $10 billion+ a year on network gear, this starts making sense). Cisco’s pitch is basically “give us all your requirements and we’ll build whatever you want as long as we have the option to sell it in the market”.
Never mind that Cisco is an absolutely terrible partner and the telecoms realized they were getting almost nothing out of the deal, so after a few years the big telecoms all dumped them and went with white label factories in China while working with American companies like Intel and Qualcomm on large component orders to supply the factories. Which left all the small and mid-size telecoms in the lurch for a generational upgrade they were expecting (which is a lot of why Huawei has so much market share in 5G).
It depends, if you are upgrading machines to produce smaller (5nm instead of 7nm) then you lose some productivity as you get lower yields. But many of the companies are adding totally new semiconductor equipment and not removing the older once. That being said, the massive chip shortage is across the entire spectrum, including the bigger older chips.
I still don’t really grasp what factor causes this general shortage across all chip producers and nodes. Why is a spike in demand for pc cpus and gpus causing a shortage in other chips that might be using older nodes? Are there some underlying other constraints under chip production that is causing a ripple effect up the supply chain?
Yes. The CPU and GPU demand has nothing to do with it. The reason is the car industry.
For some reason in early 2020 all the car industry execs were convinced that people would buy dramatically fewer cars in 2020, due to pandemic crashing demand. Because they have a religious aversion to holding any stock they decided to shift the risk over to their suppliers, fucking said suppliers over, as the car industry normally does when they expect demand shifts. The thing that made this particular time special as opposed to business as usual is that the car execs all got it wrong, because people bought way more cars due to pandemic rather than less, due to moving out of cities and avoiding public transit. So they fucked over their suppliers a second time by demanding all those orders back.
Now, suppose you're a supplier of some sort of motor driver or power conversion chip (PMIC) in early 2020. You run 200 wafers per month through a fab running some early 2000s process. Half your yearly revenue is a customized part for a particular auto vendor. That vendor calls you up and tells you that they will not be paying you for any parts this year, and you can figure out what to do with them. You can't afford to run your production at half the revenue, so you're screwed. You call up your fab and ask if you can get out of that contract and pay a penalty for doing so, and you reduce your fab order to 100 wafers per month, so you can at least serve your other customers. The fab is annoyed but they put out an announcement that a slot is free, and another vendor making a PMIC for computer motherboards buys it, because they can use the extra capacity and expect increased demand for computers. So far so normal. One vendor screwed, but they'll manage, one fab slightly annoyed that they had to reduce throughput a tiny bit while they find a new buyer.
Then a few months later the car manufacturer calls you again and asks for their orders back, and more on top. You tell them to fuck off, because you can no longer manufacture it this year. They tell you they will pay literally anything because their production lines can't run without it because (for religious reasons) they have zero inventory buffers. So what do you do? You call up your fab and they say they can't help you, that slot is already gone. So you ask them to change which mask they use for the wafers you already have reserved, and instead of making your usual non-automotive products, you only make the customized chip for the automotive market. And then, because they screwed you over so badly, and you already lost lots of money and had to lay off staff due to the carmaker, you charge them 6x to 8x the price. All your other customers are now screwed, but you still come out barely ahead. Now, of course the customer not only asked for their old orders back, but more. So you call up all the other customers of the fab you use and ask them if they're willing to trade their fab slots for money. Some do, causing a shortage of whatever they make as well. Repeat this same story for literally every chipmaker that makes anything used by a car. This was the situation in January 2021. Then, several major fabs were destroyed (several in Texas, when the big freeze killed the air pumps keeping the cleanrooms sterile, and the water pipes in the walls of the buildings burst and contaminated other facilities, and one in Japan due to a fire) making the already bad problem worse. So there are several mechanisms that make part availability poor here:
1. The part you want is used in cars. Car manufacturers have locked in the following year or so of production, and "any amount extra you can make in that time" for a multiple of the normal price. Either you can't get the parts at all or you'll be paying a massive premium.
2. The part you want is not used in cars, but is made by someone who makes other parts on the same process that are used in cars. Your part has been deprioritized and will not be manufactured for months. Meanwhile stock runs out and those who hold any stock massively raise prices.
3. The part you want is not used in cars, and the manufacturer doesn't supply the car industry, but uses a process used by someone who does. Car IC suppliers have bought out their fab slots, so the part will not be manufactured for months.
4. The part you want is not used in cars, and doesn't share a process with parts that are. However, it's on the BOM of a popular product that uses such parts, and the manufacturer has seen what the market looks like and is stocking up for months ahead. Distributor inventory is therefore zero and new stock gets snapped up as soon as it shows up because a single missing part means you can't produce your product.
So here we are. Shameless plug - email me if you are screwed by this and need help getting your product re-engineered to the new reality. There's a handful of manufacturers, usually obscure companies in mainland China that only really sell to the internal market, that are much less affected. Some have drop-in replacement parts for things that are out of stock, others have functionally similar parts that can be used with minor design adaptation. I've been doing that kind of redesign work for customers this whole year. Don't email me if you work in/for the car industry. You guys poisoned the well for all of us so deal with it yourselves.
Interesting. Other estimates had put it in the “upwards of a year” territory [1,2] so to me this 6-month estimate seems optimistic.
Samsung only recently (end of March) got their fab up and running close to production levels. NXP was a bit faster on the draw, but even still there are likely to still be more issues than normal.
At the end of the day, not much to do except hope for the best and expect the worst.
We often talk about the auto industry as a whole screwing up but I wonder if there's an automaker out there that didn't follow this trend and is doing fine.
They seemingly learned from a few other supplier disasters over the last decade, and were better-prepared to deal with shortages of critical parts from their vendors.
One of the large problems is a shortage of some common part that is widely used.
I recall when 74LS245 were selling for over $100 each to people with $500,000 machines that needed that part. During that shortage we actually built small boards with 3-4 lesser chips that fulfilled the need for the part. When a genuine 245 was obtained, it could be easily swapped in, but many machines lived out their full life with this kluge in it. That one series of chips built Future into the colossuss it is today because they had the smarts to get their engineers to spec in that family (and many others) and Future booked huge orders with Japanese suppliers and enjoyed huge margins. ClassIC did the same thing later. Now Asia dominates.
Dumb question: automakers do relatively simple things with their chips. Is there room on wafers with more advanced chips to squeeze in automotive chips?
Nope. Since most manufacturing steps are performed on an entire silicon wafer at once, the cost per chip is cheaper if there are more chips on each wafer. As a result, wafers (for both basic and advanced chips) are filled with rectangular chips packed as tightly as possible (and when designing chips, prices are often talked about in units of "price per area of silicon"). Images from a web search for "semiconductor wafer dicing" illustrate this [1].
I don't think it's simple things, vehicle has around 60 to 100 sensors on board, some might have even more, they also have infotainment which is tablet-like level of hardware, imaging all different things they have to handle, and how reliable it have to be.
The biggest problem is everything is JIT so all supply chains using JIT (like all of them) get disrupted with as little as 10% variance from the media flow rates. The only real answer is to relax the reasons why we have JIT: taxes on inventory which prevent accumulating safety stock inventory. Having larger safety stock would very quickly end this supply chain disruption and solve the chip shortage in few months rather than 6-24 months.
So kind of... operationally with JIT you're encouraging yourself and suppliers into figuring out how to lower batch sizes and lead times so that the supply chain can be more nibble and financially the biggest benefits to JIT are working capital reductions because you don't have to buy in giant increments.
Even if we fixed it today, it's unlikely to end this supply chain disruption - it will likely make it worse, as now that companies can't avoid facing this problem they have to get more stock in order to build a buffer. Making it easier/cheaper for them to build a BIGGER buffer just means more hoarding/supply chain shocks until everyone has enough of a buffer they stop trying to hoard/buy extra.
The issue is that when you become brittle supply chain wise, the only real answer is to stock more/buy more individually - which crushes the supply chain even more. Either that, or co-ordinated (gov't level often) rationing, which has it's own problems.
Authoritatively stating that inventory taxes are the reason for JIT won't make it the truth. Read a bit more for why Toyota actually came up with the concept. Inventory management is about efficiency. Even if entirely and completely untaxed, you want JIT to make sure your production is not over capacity and you aren't wasting money.
Since when are companies taxed on inventory? I thought JIT was about freeing up capital and avoiding waste (spoilage, out of date inventory etc)? It's hard to change that...
[+] [-] MangoCoffee|4 years ago|reply
https://semiwiki.com/semiconductor-services/298336-automaker...
[+] [-] downrightmike|4 years ago|reply
[+] [-] thedeepdive|4 years ago|reply
[+] [-] tonyedgecombe|4 years ago|reply
I think it’s the exact opposite, supply chains have held up remarkably well. If I had believed some people here we would have been eating each other by now but apart from a shortfall in toilet paper things have been fine.
[+] [-] hourislate|4 years ago|reply
Auto manufactures are spoiled, they get anything they want whenever they want from the Government every time they start crying. Whether it's multi billion dollar tax breaks (Ford, Oakville, GM Oshawa, etc), multi billion dollar Gov programs (cash for clunkers) at the tax payers expense or being allowed to screw their suppliers for billions through bankruptcy (GM).
Don't excuse their poor management, forecasting, greed for frailty of the global supply chain. It's not like a asteroid hit Taiwan.
[+] [-] hctaw|4 years ago|reply
[+] [-] baix777|4 years ago|reply
https://www.reuters.com/article/us-japan-fukushima-anniversa...
[+] [-] cbozeman|4 years ago|reply
Having not worked in the auto industry, but having worked in the logistics industry, I and many many others like me have consistently warned about global catastrophes like pandemics causing unforeseen consequences of the kind we're currently experiencing.
To say that it's "frustrating" that nothing has been done before now, and nothing will likely be done - when I've literally written detailed reports complete with advanced statistical analysis for my upper management - is a massive understatement.
Hopefully the next pandemic will be severe enough that society itself is disrupted to the point where "rich" people suffer, perhaps even die. For many readers, this comment will come off as "morbid" or perhaps even be misinterpreted as a "call to violence", but in reality, this is simply "logical" behavior (survival instinct) that would result in a truly massive supply chain breakdown, and humanity as a whole doesn't learn a lesson unless there's unbearable suffering involved. I imagine a pandemic that kills 10% of the people it infects instead of 1% would cause sufficient pain for "elites" who very wrongly believe themselves to be above such inconveniences to seriously rethink their desire for "profits"... especially when a bunch of poor people who can't hoard food all raid their little compounds and the resulting unpleasantness that will result from such an outcome. It's unfortunate that I have to wish for such a thing to make people reconsider something as simple as warehousing additional supplies for unforeseen circumstances, but clearly we're there.
[+] [-] jcadam|4 years ago|reply
1. https://www.yahoo.com/news/ford-extends-shutdown-stellantis-...
[+] [-] totalZero|4 years ago|reply
"actually we see that demand continued to be high and the shortage will continue throughout this year and may be extended into 2022 also." C. C. Wei, TSMC CEO
"We expect it will take a couple of years for the ecosystem to make the significant investments to address these shortages." Pat Gelsinger, Intel CEO
Also, this is a deeply technical topic where BBC should cite engineers and industry veterans, not Dan Ives from Wedbush Securities.
[+] [-] tims33|4 years ago|reply
It is sometimes humbling to remember that despite our technical advances we’re still subject to the forces of nature.
[+] [-] segmondy|4 years ago|reply
[+] [-] hristov|4 years ago|reply
[+] [-] kingosticks|4 years ago|reply
The car industry might have something to do with it also but it's by no means the only cause of Cisco's concerns.
[+] [-] wayoutthere|4 years ago|reply
Never mind that Cisco is an absolutely terrible partner and the telecoms realized they were getting almost nothing out of the deal, so after a few years the big telecoms all dumped them and went with white label factories in China while working with American companies like Intel and Qualcomm on large component orders to supply the factories. Which left all the small and mid-size telecoms in the lurch for a generational upgrade they were expecting (which is a lot of why Huawei has so much market share in 5G).
[+] [-] throwaway4good|4 years ago|reply
https://www.scmp.com/tech/tech-trends/article/3129611/us-chi...
In particular in China and South Korea.
I wonder when all this extra capacity translates into more supply?
[+] [-] scotty79|4 years ago|reply
[+] [-] whazor|4 years ago|reply
[+] [-] emodendroket|4 years ago|reply
[+] [-] christkv|4 years ago|reply
[+] [-] nnx|4 years ago|reply
1) once in a century severe droughts in Taiwan force water rationing, chip production needs A LOT of water
2) stockpiling from China manufacturers (eg. Huawei) who want to mitigate real or potential US sanctions
3) generally higher demand in some sectors due to covid situation (incl. WFH and stimulus)
(1) is probably the major factor, with others exacerbating it, see https://www.bbc.com/news/world-asia-56798308
[+] [-] Kliment|4 years ago|reply
For some reason in early 2020 all the car industry execs were convinced that people would buy dramatically fewer cars in 2020, due to pandemic crashing demand. Because they have a religious aversion to holding any stock they decided to shift the risk over to their suppliers, fucking said suppliers over, as the car industry normally does when they expect demand shifts. The thing that made this particular time special as opposed to business as usual is that the car execs all got it wrong, because people bought way more cars due to pandemic rather than less, due to moving out of cities and avoiding public transit. So they fucked over their suppliers a second time by demanding all those orders back.
Now, suppose you're a supplier of some sort of motor driver or power conversion chip (PMIC) in early 2020. You run 200 wafers per month through a fab running some early 2000s process. Half your yearly revenue is a customized part for a particular auto vendor. That vendor calls you up and tells you that they will not be paying you for any parts this year, and you can figure out what to do with them. You can't afford to run your production at half the revenue, so you're screwed. You call up your fab and ask if you can get out of that contract and pay a penalty for doing so, and you reduce your fab order to 100 wafers per month, so you can at least serve your other customers. The fab is annoyed but they put out an announcement that a slot is free, and another vendor making a PMIC for computer motherboards buys it, because they can use the extra capacity and expect increased demand for computers. So far so normal. One vendor screwed, but they'll manage, one fab slightly annoyed that they had to reduce throughput a tiny bit while they find a new buyer.
Then a few months later the car manufacturer calls you again and asks for their orders back, and more on top. You tell them to fuck off, because you can no longer manufacture it this year. They tell you they will pay literally anything because their production lines can't run without it because (for religious reasons) they have zero inventory buffers. So what do you do? You call up your fab and they say they can't help you, that slot is already gone. So you ask them to change which mask they use for the wafers you already have reserved, and instead of making your usual non-automotive products, you only make the customized chip for the automotive market. And then, because they screwed you over so badly, and you already lost lots of money and had to lay off staff due to the carmaker, you charge them 6x to 8x the price. All your other customers are now screwed, but you still come out barely ahead. Now, of course the customer not only asked for their old orders back, but more. So you call up all the other customers of the fab you use and ask them if they're willing to trade their fab slots for money. Some do, causing a shortage of whatever they make as well. Repeat this same story for literally every chipmaker that makes anything used by a car. This was the situation in January 2021. Then, several major fabs were destroyed (several in Texas, when the big freeze killed the air pumps keeping the cleanrooms sterile, and the water pipes in the walls of the buildings burst and contaminated other facilities, and one in Japan due to a fire) making the already bad problem worse. So there are several mechanisms that make part availability poor here:
1. The part you want is used in cars. Car manufacturers have locked in the following year or so of production, and "any amount extra you can make in that time" for a multiple of the normal price. Either you can't get the parts at all or you'll be paying a massive premium.
2. The part you want is not used in cars, but is made by someone who makes other parts on the same process that are used in cars. Your part has been deprioritized and will not be manufactured for months. Meanwhile stock runs out and those who hold any stock massively raise prices.
3. The part you want is not used in cars, and the manufacturer doesn't supply the car industry, but uses a process used by someone who does. Car IC suppliers have bought out their fab slots, so the part will not be manufactured for months.
4. The part you want is not used in cars, and doesn't share a process with parts that are. However, it's on the BOM of a popular product that uses such parts, and the manufacturer has seen what the market looks like and is stocking up for months ahead. Distributor inventory is therefore zero and new stock gets snapped up as soon as it shows up because a single missing part means you can't produce your product.
So here we are. Shameless plug - email me if you are screwed by this and need help getting your product re-engineered to the new reality. There's a handful of manufacturers, usually obscure companies in mainland China that only really sell to the internal market, that are much less affected. Some have drop-in replacement parts for things that are out of stock, others have functionally similar parts that can be used with minor design adaptation. I've been doing that kind of redesign work for customers this whole year. Don't email me if you work in/for the car industry. You guys poisoned the well for all of us so deal with it yourselves.
[+] [-] totetsu|4 years ago|reply
[+] [-] InitEnabler|4 years ago|reply
[+] [-] HowardStark|4 years ago|reply
Samsung only recently (end of March) got their fab up and running close to production levels. NXP was a bit faster on the draw, but even still there are likely to still be more issues than normal.
At the end of the day, not much to do except hope for the best and expect the worst.
[1] https://arstechnica.com/tech-policy/2021/04/global-chip-shor... [2] https://www.washingtonpost.com/technology/2021/04/13/intel-c...
[+] [-] gtirloni|4 years ago|reply
[+] [-] sethhochberg|4 years ago|reply
They seemingly learned from a few other supplier disasters over the last decade, and were better-prepared to deal with shortages of critical parts from their vendors.
[+] [-] gingericha|4 years ago|reply
https://www.bloomberg.com/news/articles/2021-04-07/how-toyot...
[+] [-] aurizon|4 years ago|reply
[+] [-] dehrmann|4 years ago|reply
[+] [-] alted|4 years ago|reply
[1] https://duckduckgo.com/?t=ffab&q=semiconductor+wafer+dicing&...
[+] [-] vdfs|4 years ago|reply
[+] [-] kevmo|4 years ago|reply
[+] [-] GNU_James|4 years ago|reply
[+] [-] genericlogic|4 years ago|reply
[+] [-] xyzzy21|4 years ago|reply
[+] [-] sct202|4 years ago|reply
[+] [-] eloff|4 years ago|reply
I thought it was just expensive to tie up a lot of capital on inventory.
[+] [-] lazide|4 years ago|reply
The issue is that when you become brittle supply chain wise, the only real answer is to stock more/buy more individually - which crushes the supply chain even more. Either that, or co-ordinated (gov't level often) rationing, which has it's own problems.
[+] [-] jeltz|4 years ago|reply
[+] [-] hnews_account_1|4 years ago|reply
Usual hackernews bullshit.
[+] [-] LatteLazy|4 years ago|reply