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Why the chip shortage goes on and on … and on

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The rise in demand for high-tech products caused by working from home, blocking minds and changes in e-commerce has only continued, taking many by surprise, he says. David Yoffie, A professor at Harvard Business School, who previously served on Intel’s board.

Chipmakers says Yoffie says it wasn’t until a year ago that they valued the measure of permanent demand, but they couldn’t turn a penny. New chipmaking plants cost billions of dollars and take years to build and equip. “It takes about two years to build a new factory,” Yoffie said. “And the factories have grown a lot, a lot more expensive and a lot more complicated.”

This week, Sony and Taiwan Semiconductor Manufacturing Company, the world’s largest chip contract manufacturer, he said It would invest $ 7 billion to build a factory capable of producing older components, but it won’t start making chips until the end of 2024. Intel it is also investing in several new flagship factories, but these too will not be put into the network until 2024.

Yoffie noted that it is the only company that does this, ASML in the Netherlands extreme ultraviolet lithography machines they are needed to make cutting-edge chips, and ASML cannot produce machines fast enough to meet demand.

Another problem is that not all chips are created equal.

Simple components — integrated power control circuits, microcontrollers, and sensors — have become key points. These devices are much simpler than the CPUs and GPUs used in smartphones and gaming machines, and are made using older manufacturing methods that require less complexity. But they are present in almost every electronic product, from microwave ovens to medical devices and toys.

The integrated power control circuit used in many products that used to cost $ 1 can now be sold for $ 150, says Vice President Josh Pucci. Sourceability, which equates buyers of electronic components with sellers. IC Insights says the terms for these components have been extended from 4-8 weeks to 24-52 weeks. The shortage of these devices is increasing the demand of the elderly chip making equipment.

Gartner estimates that semiconductor foundries operated at 95.6 percent of their capacity in the second quarter of 2021, compared to 76.5 percent in the second quarter of 2019. Gaurav Gupta, a Gartner analyst, says this effectively means that factories are limited because some stops are needed. for maintenance.

Tom Caulfield, CEO of chipmaker GlobalFoundries, he said in October that his business was sold out by 2023. The CEO of Analog Devices, which makes some of the most in-demand components, tell investors in August his company’s order book was extended to the next fiscal year beginning this month.

Part of the challenge for chip manufacturers is to make some customers “double order” or buy more components than they need if the supply dries out, distorting the image of future demand. “It’s a one-time shortage driven by double demand that things are getting worse,” he says Willy Shih, a Harvard professor who studies global manufacturing and supply chains.

Analysts say the companies that make these chips may be reluctant to invest in new factories because the chips have thin profit margins and are known to be in the cyclical industry because of the significant rise and fall in demand. They are afraid of future chip abuse that would lower prices.

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