Chip Fab Supply Chain Delays
[Photo: AFP / Jiji]
Ever since supply chain shortages hit many industries, particularly in relation to the availability of integrated circuits or chips, there has been a massive scramble to increase capacity and to build new chip fabricating facilities (fabs) or factories. There has been a series of announcements from huge companies like Intel, Taiwan Semiconductor Manufacturing Co. (TSMC), Samsung, and others launching massive multi-billion projects to add more chip production facilities.
There's just one problem... the equipment they need to build these facilities are themselves delayed.
More On The Supply Chain Shortages
Chip Fabs Take Three Years To Construct
With chip demand still at all-time highs, nothing could be more important than building additional production capability so that more chips can be manufactured. Massive industries like electronics and automobiles have seen their revenues crushed and operations thrown into disarray as products were delayed – or even canceled – as a result of the chip shortage.
Hall Of Mirrors
The reason, says this latest report, is that "Leading chip tool makers... are warning clients [the Intels, TSMCs, & Samsungs of the world] they will have to wait up to 18-months for some crucial machines" that are necessary for their projects. Makers of the machinery that fabricates chips are reporting supply chain-related shortages "in everything from lenses, valves and pumps to microcontrollers, engineering plastics and electronic modules."
Demand For Chips Up,
So how are key semiconductor manufacturers reacting to the news of parts shortages? They are panicking. According to the report, TSMC, United Microelectronics Corp. (UMC), Intel, and Samsung each have plants scheduled to come online soon, perhaps as early as late next year (2023). So many of them are deploying their top executives to visit the headquarters of various top machinery and parts makers like Applied Materials, KLA, Lam Research and ASML in order to explain (i.e. pressure, or perhaps, beg) them to deliver the goods in time.
Begging a supplier to deliver goods ordered in the face of supply chain shortages is probably a familiar predicament for many Strata-gee readers.
What about now? Chip manufacturers say the delays are the worst they've seen in decades. For example, testing gear from KLA (a U.S. company) has a current wait time of "more than 20 months." Equipment used in making substrates – material that carries chips prior to being mounted in PC boards – is experiencing wait times "up to 30 months."
Does Misery Truly Love Company?
I'm feeling numb hearing this prolonged [component] lead time. I'm squeezed between our chipmaking clients and my component suppliers, and it's really painful."
U.S. chip manufacturing equipment maker TSMC told the Nikkei that they are already falling behind in their originally planned and announced fab project schedules. They have several projects planned for new chip fabs in the U.S., Taiwan, and Japan. First up was supposed to be the U.S. facility, but it is behind schedule due to supply chain issues AND labor shortages.
Component Shortage Situation 'Is Still Deteriorating'
Perhaps most concerning is that ASML says that "there is a consensus in the industry that the chip shortage could last [another] two years. The entire industry is ramping up to address this."
There are so many bottlenecks, from different components to
logistics, and they just cropped up one after another. It's like deja vu. The
unprecedented supply chain crunch that happened to automakers, PC makers and
smartphone makers is now hitting global chipmakers.
The Biden Administration is working to boost the U.S. share of global semiconductor manufacturing.
Is It a Bubble?
This is not as crazy as you might think it sounds. Some in the investment community see the possibility of a bubble burst as a real risk that manufacturers have to consider. Gokul Hariharan, a JP Morgan analyst covering the technology, media and telecom segments told the Nikkei that these suppliers must take slowing demand into consideration.
From an overall semiconductor industry perspective, my biggest
concern is still whether demand growth is sustainable. We already see signs of
slowing [demand] for consumer electronics, and that could eventually have some
implications for the semiconductor supply chain. I would say the variables are
still going to be more about demand. The magnitude of the cycle will depend upon
how much [chipmaking] supply comes online.
A Heightened Risk Of Recession
And with a recession, you normally see a collapse in demand for goods. For many people, planning their business for one year is tough. Imagine you are a semiconductor manufacturer deciding whether to build a new fab that will take three years before it comes online, and even longer before it reaches full capacity.
Can you confidently predict what the world will look like three years from now? Yeah, me neither...
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