Is the chip shortage a “crisis”? Depends who’s talking

 

How bad is the chip shortage?  Opinions vary.

While some analysts have called the shortage a “crisis,” many analysts and even some car companies believe supply will begin to meet demand starting in June.

There’s a shortage of equipment to manufacture 200mm wafers used as the substrate for chips deployed in braking and engine systems.  Recently, analyst Kevin Anderson at Write-Tek told Fierce Electronics the total market demand for 200 mm capacity will be “tight through the end of the year” leading to increased prices.

Chipmakers have been more guarded in their forecasts and descriptions of the shortages, but companies that buy up chips in the auto industry and other sectors have been more direct.

“We have an incredible crisis in the supply chain,” Cristiano Amon, incoming CEO of Qualcomm told Shara Tibken in a recent interview with CNET.  The shortage is “impacting everything and of course [is] impacting phones.”

He also told CNET that the shortages are likely to continue until late 2021. 

Qualcomm designs Snapdragon chips used in a variety of phones, but like many other designers, the chips are built by huge companies with fabs such as TSMC and Samsung.

The large chipmaker trade organization, Semiconductor Industry Association, has notably avoided calling the semi shortage a “crisis” but does refer to it as a “global chip shortage.”

In a blog, SIA’s director of industry statistics and economic policy Falan Yinug said the semi industry is “substantially increasing its fab capacity utilization, a term that refers to the percentage of total available manufacturing capacity that is being used at any given time.” 

Yinug noted, however, “that is not as easy as ‘flipping a switch’ and increasing chip output overnight.”  When market demand runs high, as now, utilization will typically run above 80%, with some fabs as high as 90 to 100%.

Relying on data from VLSI Research, SIA said the industry has steadily increased fab utilization over the past two years “and is estimated to increase utilization even more during most of 2021.” VLSI has projected first quarter 2021 fab utilization will be 94% and increase to 96% in third quarter.

Yinug noted that there can be 1,400 process steps to make a wafer, and up to 26 weeks to make a finished chip.

Some analysts have noted that the chip shortage is a blessing in a disguise in a way. It has caught the attention of carmakers and Qualcomm.  Carmakers and union leaders who have seen workers face temporary plant shutdowns due to the shortage have in turn complained to Washington.

President Biden recently signed an executive order for a longer-term solution to put resilience in the chip supply and said it will take $37 billion to meet short-term chip supply needs.  Congressional leaders from both parties are also on board to promote domestic production of chips.

Whether it deserves the label of a crisis or not, the chip shortage is at least ringing alarm bells in Washington at least.

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