Talk of the chip shortage, its length and the damage it is doing to the industry has been ongoing for well over a year now. The most optimistic of experts predict that it should start to ease during the course of this year, and we may even see an oversupply by this time next year. However, despite these upbeat predictions, there is still a long way to go before the demands of customers are being met by the semiconductor industry. Many of the same people who predict that supply will catch up with demand are the same people who said that we’d be back to normal last year. That’s not to say that they could have foreseen some of the black swan events that have beset the industry over the last year – the latest of which being an earthquake that affected the production of Toshiba’s Oita plant.
One of the ways that the semiconductor industry is expected to catch up with the demands of its customers is by bringing online new fabs. Even then those openings may be slowed due to the reliance of the semiconductor industry in a small number of equipment providers. One of those is ASML - the biggest global supplier of photolithography systems and the only supplier of extreme ultraviolet lithography machines. At the start of the year, ASML had a fire at its Berlin factory which makes key components for the company’s lithography systems, including wafer tables and clamps, reticle chucks and mirror blocks. To try keep up with demand, ASML has increased its workforce, but there have been reports that the company itself has been caught up in the chip shortage and is struggling to get some of the ICs it needs to manufacture its own equipment.
As for the current situation, last September the Department of Commerce launched a Request for Information (RFI) on the semiconductor supply chain to provide some insight into the global semiconductor supply chain. The results of the RFI were recently released. It found that the
median demand for chips was up to 17% higher in 2021 than 2019, and the buyers didn’t see a corresponding increase in the supply they receive, a major supply and demand mismatch. The median inventory of semiconductor products highlighted by buyers had fallen from 40 days in 2019 to less than 5 days in 2021. These inventories are even smaller in key industries.
The US government will use the results of the RFI to pinpoint specific areas where the supply and demand mismatch is most acute, and to collaborate with industry to resolve the bottlenecks in these areas. The primary bottleneck was found to be wafer production capacity, which requires a longer-term solution. The results of the survey will also be used by the US president to push through an investment of $52 billion for domestic semiconductor research and production. At the time of writing, the US Senate has approved the bill, and the House of Representatives is expected to act in the next week or so.
