I was on a panel with one of the study's authors recently, she's very thoughtful, thorough, and precise. I like how she emphasized that there is no simple TL;DR to explain the situation, and her paper does a good job of covering a lot of ground without taking short cuts.
However, one factor not mentioned in the study is that China, which had announced a plan for foundry independence, had its capacity expansion program disrupted by the trade war, as the US restricted China's ability to acquire key equipment to build out fabs.
As a result China could not build the plants it needed to meet its own consumption, forcing them to buy chips from the same vendors that everyone else is also trying to buy chips from. This is an additional shock which is hard to estimate in magnitude but it's probably not small as it represents the missing capacity of entire fabs for many months or years as they struggle to be built.
Thus while the US trade policy may have effectively hamstrung China's plans for foundry independence in the short term, it may also have contributed to a global shortage of semiconductors and its own inflation problems as collateral damage. Trade wars are tricky: without careful and long term policy planning there is a high risk of even more collateral damage.
Another factor that could also be contributing specifically to the difficulties of the automotive supply chain is that China internally had made electric vehicles a strategic technology focus, which means that domestically China's demand for automotive-grade semiconductors was set to surge. Even before the pandemic I was getting tips from buyers that power semiconductors, particularly those in SiC and GaN, were going to be in short supply, due to that shift.
Huawei start buying huge amount of chips when there was rumor that US going to imposed sanctions on Huawei, and when the sanction hits, every major chips users in China start buying too, they were afraid that they will be next on sanction lists. They kept buying chips to build up safe inventory level during the early pandemic period when western firms were cutting orders.
Of course, when demands returned, Chinese companies were still on buying spree. The shrewd middleman everywhere, not just in China, saw shortage coming, and they stock piling chips too.
Yeah, most semi-industry people in Taiwan think that US sanctions and the threat to impose more sanctions definitely contribute to the current shortage.
How does your view comport with the fact that the supply shortages did not actually begin with the trade war or the pandemic? The problem worsened, certainly, but global stock of components had been tight for years before any of these supposed causes.
If fault must be found with the US it is in the consolidation and outsourcing of manufacturing to a small number of manufacturers, removing competitors and excess capacity from the supply chain. China's part has simply been to grow; creating consumers and thus demand for products that it had previously not consumed.
However, one factor not mentioned in the study is that China, which had announced a plan for foundry independence, had its capacity expansion program disrupted by the trade war, as the US restricted China's ability to acquire key equipment to build out fabs.
Page 5 alludes to this, but it does seem to be underrepresented in the report. Erratic policymaking on the US's part incentivized China to hoard semiconductors while they could still get them. For all they knew, their whole country was about to end up on the entity list.
> As a result China could not build the plants it needed to meet its own consumption, forcing them to buy chips from the same vendors that everyone else is also trying to buy chips from.
How a fab that didn't exist yet can affect current demand?
Semiconductor nonproliferation feels as pointless as banning math after school. it’s a sign that the people who run the usa really don’t get along with the people that run China on some issue, and they picked semi conductors as the game of chicken that’s going to settle it.
I work in this industry. Nobody is producing significantly more as a result of covid or anything else. Aggregate demand for electronics products has increased a bit, but it's not a significant change. The "skyrocketing demand" mentioned in this paper is not for electronics products, but for their components, and it's happening entirely due to a lack of visibility into future availability and demand, or, to put it more simply, a lack of confidence in the market. Device manufacturers are buying as much as they can because they don't know when they'll be able to buy again. Component manufacturers are not expanding production because they don't know when the rush buying will end and everyone will produce from stockpiled material. This is primarily a confidence problem (caused primarily by automotive manufacturers being absolute shits to their suppliers). The total production volumes of electronic devices have not increased by any significant amount. Many manufacturers are actually producing less now than pre-pandemic, simply because they can't produce more due to shortages.
This is also my suspicion. Further, since ALL the GPUs are being eaten up by crypto miners, people are calling it Unpresented demand. As for when It shall end? My take is when Ethernum switches to Proof of Stake model. By keeping the switch 6 months away forever, they hare in a way hindering the creation of ASIC miners, forcing everyone to use GPUs..... Once all those crypto GUPs reinter the gaming market, half the computer side supply problems would be gone.
I have read, regarding the GPU shortage, that silicon wafers are in short supply. Is that true? If so, how does it square with actual component production not rising? Are people that high in the supply-chain stockpiling silicon?
Or production is on forced holiday because we are lacking µC (ST) for our devices. So it is not only future demand or high tech components, part of it is already here.
The biggest skeleton in the room was barely mentioned once.
Chip shortage, or, better say, capacity shortage for affordable nodes been there for 5-7 years, and nobody really gave it much notice.
Lead times for average 180nm project were 12 months+ for last 5 years.
There is still a stratospheric gap in between "common man fab service," and the realm of multi-million dollar semi companies, who can afford service on relatively new, (and not decades old) equipment.
All significant chips which went into shortage were using that "common man fab process" on eighties, and nineties era equipment.
> All significant chips which went into shortage were using that "common man fab process" on eighties, and nineties era equipment.
I don't think I agree with that. A LOT of small microcontrollers went into allocation and they were on 120nm, 90nm, and 65nm processes.
However, I do agree that there really was a shortage even before Covid and nobody cared. Effectively--nobody builds a line for an older node, ever. And there has been a lot of consolidation and sales of facilities such that very few people have been building fabs below 90nm.
The number of fabs built in the 2010's that aren't TSMC, Intel, or Samsung is pretty minimal.
I can’t download the pdf but PCs are 15% of global semiconductor demand and the second largest electronics end market (after smartphones). After a decade of stagnant growth, PC sales are are now 40% above pre-pandemic levels. The semiconductor industry does not operate with a lot of slack, and this sort of step-change demand in a single large end market sucks up a lot of that slack capacity by itself. Then of course you have elevated demand and improved mix of overall goods, strong corporate investment cycle, low inventories entering the pandemic, and delayed semiconductor capacity investments from the trade war / inventory downcycle in early 2019 through to late 2020…
Isn't the way to bolster the market to avoid the crazy 8nm stuff and just buy into the industry at the large scales. I can't imagine that buying or building machines to build op amps or voltage regulators isn't within the reach of lots of manufacturers.
I assume that this would allow the advanced manufacturers to concentrate on the newest tech unless the shortages are only at the cutting edge?
I once heard a major blockage was also the number of companies who had the skill to build machines that build semiconductors was low and therefore prices and leadtimes are high but again, someone who already makes high precision stuff building the lower size fabs must be doable?
> I can't imagine that buying or building machines to build op amps or voltage regulators isn't within the reach of lots of manufacturers.
The thing is, these things used to be built all over the place. However, consolidation, environmental concerns (the Silicon Valley is one of the US' most polluted areas due to decades of semiconductor manufacture) and market forces have destroyed lots of the capacity that used to exist, and now everyone is stuck and waiting. Not to mention that the people who operated the old fabs are gone for good, either in pension or in completely different careers.
Bringing the old fabs back or constructing new ones will take years. Capitalism is great for driving down costs in peace times, but usually the cost-saving comes at the cost (sic) of losing resilience in crisis times, and forget about "perfect storm" events like the one we're currently seeing with corona, coin miners, the shift towards electric mobility and the Chinese saber-rattling against Taiwan.
Seems like an issue of incentives at varying scales. A private business has an incentive to produce the quantity demanded and nothing more. Surplus is a cost, and capacity should be designed to meet, not exceed demand. Then, a stress appears on the system, and shortages occur.
A government has an incentive to avoid shortages of specific products and resources. In some industries, this leads to, essentially, a promise to purchase the supply the market does not (agriculture).
Does a similar model need to apply hereafter to certain technological inputs?
Actually capacity is designed to meet the highest demand and scale down for slow times. My company has seen lines go from 100% capacity and turning away customers one year to 20% capacity filling all orders. It is murder on our suppliers and so the most important question we ask when sourcing a new part is can the supplier keep their doors open if we make no orders for two years, yet still meet our peek demand? The reality of the business cycle is on everyone, though some see it worse than others.
I am also curious as to the chip demand by major cloud providers. COVID accelerated migration to the cloud, I have heard numbers from "cloud people" as much as 5x.
For a billion dollars, you're not getting anything latest and greatest. And you're definitely not going to get anything in the timeframe of the chip shortage.
I applaud the effort, but feel like it's just going to be people taking advantage of the money for no net benefit.
According to standard economic theory, shortages only happen when pricing mechanisms fail.
If prices rise, then demand would lower and shortage will be resolved (?)..
> According to standard economic theory, shortages only happen when pricing mechanisms fail.
No, not it isn't. That assertion is fundamentally wrong at many levels. It seems you're confusing the intro to economics definition of equilibrium between supply and demand with your own definition of shortage. However, in the process you're making the mistake of believing somehow that pricing out demand from the market and being unable to scale up production to meet demand does not involve any shortages of any kind.
Think about it for a second: I'd suddenly food prices skyrocketed to the point a single 1kg bag of rice sold for over €100, and most of the world was thus unable to buy food for being priced out of the market, would that represent a shortage even if some people could still afford it?
[+] [-] bunnie|4 years ago|reply
However, one factor not mentioned in the study is that China, which had announced a plan for foundry independence, had its capacity expansion program disrupted by the trade war, as the US restricted China's ability to acquire key equipment to build out fabs.
As a result China could not build the plants it needed to meet its own consumption, forcing them to buy chips from the same vendors that everyone else is also trying to buy chips from. This is an additional shock which is hard to estimate in magnitude but it's probably not small as it represents the missing capacity of entire fabs for many months or years as they struggle to be built.
Thus while the US trade policy may have effectively hamstrung China's plans for foundry independence in the short term, it may also have contributed to a global shortage of semiconductors and its own inflation problems as collateral damage. Trade wars are tricky: without careful and long term policy planning there is a high risk of even more collateral damage.
Another factor that could also be contributing specifically to the difficulties of the automotive supply chain is that China internally had made electric vehicles a strategic technology focus, which means that domestically China's demand for automotive-grade semiconductors was set to surge. Even before the pandemic I was getting tips from buyers that power semiconductors, particularly those in SiC and GaN, were going to be in short supply, due to that shift.
edit - emphasized original paper
[+] [-] websg-x|4 years ago|reply
Of course, when demands returned, Chinese companies were still on buying spree. The shrewd middleman everywhere, not just in China, saw shortage coming, and they stock piling chips too.
Yeah, most semi-industry people in Taiwan think that US sanctions and the threat to impose more sanctions definitely contribute to the current shortage.
[+] [-] topspin|4 years ago|reply
If fault must be found with the US it is in the consolidation and outsourcing of manufacturing to a small number of manufacturers, removing competitors and excess capacity from the supply chain. China's part has simply been to grow; creating consumers and thus demand for products that it had previously not consumed.
[+] [-] CamperBob2|4 years ago|reply
Page 5 alludes to this, but it does seem to be underrepresented in the report. Erratic policymaking on the US's part incentivized China to hoard semiconductors while they could still get them. For all they knew, their whole country was about to end up on the entity list.
[+] [-] felipelemos|4 years ago|reply
How a fab that didn't exist yet can affect current demand?
[+] [-] throwaway4good|4 years ago|reply
https://www.semiconductors.org/chinas-share-of-global-chip-s...
China’s Share of Global Chip Sales Now Surpasses Taiwan’s, Closing in on Europe’s and Japan’s
[+] [-] naveen99|4 years ago|reply
[+] [-] deeviant|4 years ago|reply
US companies sold the US out when they moved our manufacturing base to china and handed them the future.
Now we should give up our negotiation leverage so the chip shortage lasts a bit shorter?
[+] [-] Kliment|4 years ago|reply
[+] [-] ramshanker|4 years ago|reply
[+] [-] gilbetron|4 years ago|reply
[+] [-] rocqua|4 years ago|reply
[+] [-] raxxorrax|4 years ago|reply
[+] [-] baybal2|4 years ago|reply
Chip shortage, or, better say, capacity shortage for affordable nodes been there for 5-7 years, and nobody really gave it much notice.
Lead times for average 180nm project were 12 months+ for last 5 years.
There is still a stratospheric gap in between "common man fab service," and the realm of multi-million dollar semi companies, who can afford service on relatively new, (and not decades old) equipment.
All significant chips which went into shortage were using that "common man fab process" on eighties, and nineties era equipment.
[+] [-] bsder|4 years ago|reply
I don't think I agree with that. A LOT of small microcontrollers went into allocation and they were on 120nm, 90nm, and 65nm processes.
However, I do agree that there really was a shortage even before Covid and nobody cared. Effectively--nobody builds a line for an older node, ever. And there has been a lot of consolidation and sales of facilities such that very few people have been building fabs below 90nm.
The number of fabs built in the 2010's that aren't TSMC, Intel, or Samsung is pretty minimal.
[+] [-] xadhominemx|4 years ago|reply
[+] [-] lbriner|4 years ago|reply
I assume that this would allow the advanced manufacturers to concentrate on the newest tech unless the shortages are only at the cutting edge?
I once heard a major blockage was also the number of companies who had the skill to build machines that build semiconductors was low and therefore prices and leadtimes are high but again, someone who already makes high precision stuff building the lower size fabs must be doable?
[+] [-] mschuster91|4 years ago|reply
The thing is, these things used to be built all over the place. However, consolidation, environmental concerns (the Silicon Valley is one of the US' most polluted areas due to decades of semiconductor manufacture) and market forces have destroyed lots of the capacity that used to exist, and now everyone is stuck and waiting. Not to mention that the people who operated the old fabs are gone for good, either in pension or in completely different careers.
Bringing the old fabs back or constructing new ones will take years. Capitalism is great for driving down costs in peace times, but usually the cost-saving comes at the cost (sic) of losing resilience in crisis times, and forget about "perfect storm" events like the one we're currently seeing with corona, coin miners, the shift towards electric mobility and the Chinese saber-rattling against Taiwan.
[+] [-] evancoop|4 years ago|reply
A government has an incentive to avoid shortages of specific products and resources. In some industries, this leads to, essentially, a promise to purchase the supply the market does not (agriculture).
Does a similar model need to apply hereafter to certain technological inputs?
[+] [-] bluGill|4 years ago|reply
[+] [-] dinnozaoor|4 years ago|reply
[+] [-] papito|4 years ago|reply
[+] [-] reactspa|4 years ago|reply
[+] [-] silisili|4 years ago|reply
I applaud the effort, but feel like it's just going to be people taking advantage of the money for no net benefit.
[+] [-] throwaway9870|4 years ago|reply
[+] [-] unmole|4 years ago|reply
[+] [-] leptoniscool|4 years ago|reply
[+] [-] fivea|4 years ago|reply
No, not it isn't. That assertion is fundamentally wrong at many levels. It seems you're confusing the intro to economics definition of equilibrium between supply and demand with your own definition of shortage. However, in the process you're making the mistake of believing somehow that pricing out demand from the market and being unable to scale up production to meet demand does not involve any shortages of any kind.
Think about it for a second: I'd suddenly food prices skyrocketed to the point a single 1kg bag of rice sold for over €100, and most of the world was thus unable to buy food for being priced out of the market, would that represent a shortage even if some people could still afford it?
[+] [-] mtsr|4 years ago|reply