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This is an interesting article, but it doesn't answer why we have this shortage. Presumably without COVID, companies projected what demand would be for years ou

This is an interesting article, but it doesn't answer why we have this shortage. Presumably without COVID, companies projected what demand would be for years out and could plan manufacturing capacities. What about COVID caused the shortage? Is it shipping speeds? Change in demand? Less efficiency down the supply chain due to health requirements? Trade changes?

Bud 5y ago
You expected an actual useful explanation of a complex tech issue from Bloomberg? The next time Bloomberg manages that will be the first time. Completely, utterly useless for tech reporting of any kind.
- deleted 5y ago
  [deleted]
YZF 5y ago
Nobody knows for sure. It's a complex phenomena. - Blame Toyota with their Just In Time inventory management ideas. - Factory closures, lockdowns, etc. - Increased demand for certain items. Everyone's at home surfing the web, playing games on their computers, mining bitcoin? - Monetary policies are creating excess (see bitcoin mining) demand. - Shipping delays. Ports running at reduced capacity. Ships sitting at sea waiting to get access. Suez Canal blocked. Shipping companies have no spare capacity. Blame Toyota. - Building new factories takes time, getting/building new machinery takes time, everything was set up to not have any over capacity (since that's loss) ... blame Toyota again. - Big companies swallowed everyone so we don't have as much diversity of products as we used to. Probably related to easy money as well. tl;dr Toyota, Greenspan, Covid ... Somewhat in that order. EDIT: Should probably add the trade war between the US and China to that list.
- Multicomp 5y ago
  > - Blame Toyota with their Just In Time inventory management ideas. Toyota had a stockpile [1] of semiconductors and are only now-ish running into the same supply problems everyone has been since March 2020. [1] https://www.bloomberg.com/news/articles/2021-04-07/how-toyota-s-supply-chain-helped-it-weather-the-chip-shortage https://www.bloomberg.com/news/articles/2021-04-07/how-toyot... > But the Tohoku earthquake’s aftermath pushed Toyota to increase flexibility, and the value of inventory Toyota carries has almost doubled since 2011. Speaking at a briefing in February, Toyota Chief Financial Officer Kenta Kon said as part of the company’s business continuity plans, it keeps as many as four months of stock for some crucial components such as chips. Toyota didn’t expect the semiconductor shortage to disrupt production in the near term, he said.
  - YZF 5y ago
    Yes. I know that. They were one of the early ones to discover the limitations of their original ideas but that did not make its way to the rest of the industry.
- deleted 5y ago
  [deleted]
- georgyo 5y ago
  Toyota may have been the people who pioneered Just in Time, but there are also one of the few car manufacturers that actually had a stock pile of components. They realized that supply chain disruptions are too damaging not to have a cache. Saying blame Toyota is funny, but really all the execs who say a cost savings and took without consideration of supply chain problems are actually to blame.
  - YZF 5y ago
    Exactly. I was trying to be funny. Not literally blaming Toyota. Though it is their fault in some sense, the popularization of "lean" "just in time" manufacturing as a magic bullet that gives you everything while saving costs.
nekoashide 5y ago
From my understanding companies projected chip needs months and years in advance but a few things happened. 1. Companies cut their orders expecting less demand and lost their place in line for orders. 2. Because of the rush to work remote so suddenly people needed everything from new computers for kids, monitors and accessories for a home office and in general a lot of stuff that used chips. 3. Because of Covid there were shutdowns at semiconductor manufacturers and even disruptions due to fire and weather. Suddenly the entire supply chain went into shock, something that had been perfectly balanced between supply and demand was full of uncertainty. Now we have a situation where everyone is begging for chips and they cannot be built fast enough. Essentially the companies are behind on production and the demand is so high they cannot meet it. Everyone keeps predicting an end but it seems that manufacturers are still falling even further behind than they were before.
- jpgvm 5y ago
  Additionally when companies cut their orders other companies some fabs and other pipeline facilities were shutdown for retooling. Most of the companies that cut their orders were auto and industrials that projected a prolonged downturn and didn't want to carry the inventory on their books. They predominantly use the components manufactured on less advanced process nodes. Thus when demand for new process nodes was increasing and old ones were decreasing at the peak of the pandemic it made sense for pipelines to retool to meet that demand instead. On top of that US-China tensions means SMIC and Hua Hong Semi are now banned for many US producers which is further constraining supply. Also creating asymmetry where China is experiencing lesser a supply crunch. However there is also trouble brewing there due to Trump forcing the Dutch to block export of ASMLs new EUV lithography tech to China. This means they aren't able to start building fabs w/EUV to fill the coming supply gap there either but instead are now having to pour billions into their own lithography progam. Long term this will be good for the market (but very bad for ASML most likely) but short term its not great.
- asdff 5y ago
  Why don't semiconductor manufacturers just cut old orders and refund their customers, who would go on and refund their customers? It seems like the financial hit from cancelling old orders and resetting production like this would be what insurance is for, and you'd no longer be fighting a backlog but just taking in orders as they come like you've always done.
mjevans 5y ago
First, all the predictions went sideways. Consumers needed, not just wanted, more cars and equipment to function as PPE. As their mobile personal protective transit bubbles. As their remote-work conversation devices. As new types of hardware that weren't being used for those economic functions before. Even as webcams and the like. Second, the quarantines combine with unemployment that frees an abused workforce from abusive conditions. Instead of being wage slaves forced to take any job what-so-ever workers are able to demand jobs that value safety protocols, pay well enough to live in an area (which is also extra insane right now), and have reasonable hours (enough, the right times etc). Third, (rent) given a combination of working from home, closed 'entertainment' venues, and general quality of life concerns many have decided to flee the high rents of cities for suburban and even rural areas where their money goes farther. This causes more desire to purchase and more wasteful food packaging and production at home as well. Everywhere around me prices have gone up on eating out something like 25% since the start of the pandemic; my wages have not. So instead of eating small portions of bulk shipped and prepared ingredients I'm now eating at home more, mostly frozen stuff. The price of rent didn't quite increase that much but housing is also insane right now, just like even used cars, due to the supply crunch. Supply correction is how we as a culture, country, and world escape this problem. Increasing supply in all of the problem areas is the only way out. Supply means buying power goes up, irrespective of wages. Those misguided attempts to raise everyone's minimum wage (tax the middle class, since the elite who own the rentable units will just raise their rates) would work far better by decreasing the cost of a better life. It could also be targeted towards desired resources, growing out of undesired patterns and standards which is also opportunity for better energy efficiency.
- tehjoker 5y ago
  > since the elite who own the rentable units will just raise their rates We could also just make the elite pay for it. Just saying.
  - b9a2cab5 5y ago
    That doesn't solve the issue, because the high rental rates are caused by limited supply due to NIMBYism. If you raise taxes on rental income rental rates will just go up and pass on costs to tenants. Rentals are highly inelastic. The real solution is to densify and build way, way more. Why doesn't SF look like China with skyscrapers on every block?
callmeal 5y ago
>What about COVID caused the shortage? Is it shipping speeds? Change in demand? Less efficiency down the supply chain due to health requirements? Trade changes? Take a look at "the beer game". One of the lessons from that game is that a single change in consumer demand causes a wide variety of supply chain disruptions. This lesson was learnt in the 1950s and unfortunately it looks like they stopped teaching this in mba schools, so we have to learn it the hard way all over again. [0] https://www.shmula.com/the-bullwhip-effect/310/ https://www.shmula.com/the-bullwhip-effect/310/
- deleted 5y ago
  [deleted]
- bavell 5y ago
  Insightful link, thanks! I knew this info intuitively but didn't know about the beer game, really interesting! Nice to have a little more theory to back up my understanding.
- ineedasername 5y ago
  Wow, Factorio is an extremely complicated version of the beer game. It's especially obvious visually for my hacked-together systems when I get to the flying drone stage and the drones exhibit the movement patterns like those on the charts in your link. I hate that game.
  - Groxx 5y ago
    yeah, factorio does feel like it models this pretty well doesn't it? especially with drones, because they are more flexible about where they go, so the bullwhip can more easily spread to physically-adjacent supply-chains. if you're not over-supplied, when a new spike in demand starts a whip through your factory, things can go nuts for quite a while. you get power surges. drones that were behaving beautifully before start flying in chaotic patterns due to under/over supply and making a bunch of dumb local decisions about storage boxes. stuff grinds to a halt for no apparent reason, only to discover that some random component has become a bottleneck for practically everything, and then it can quickly shift to something on the opposite side of your factory... in that sense, perhaps the biters help keep your factory more resistant. you have to deal with occasional component-losses and spikes in weapon demands, and if you don't handle them well enough you can get into an awful persistent struggling state.
baybal2 5y ago
There is a very simple explanation. China is a >60% of the world chip market, and probably is even more now since China was the first country to reopen: https://daxueconsulting.com/chinas-semiconductor-industry/ https://daxueconsulting.com/chinas-semiconductor-industry/ Giant stocks of everything started to vaporise overnight, all at the around same time last November. I have a few STM32 reels of different models some of which I can now sell at $10 per MCU. A 100-fold increase in price, that beats any bitcoin. The starvation of seventies, and hungry eighties have taught Chinese a thing, or two about shortages. People in the ex-USSR countries had the same tendency to run hoarding stuff on every economic doom announcement.
- eunos 5y ago
  It's less about USSR and more about Trumps trade and tech war.
hristov 5y ago
There is one important factor that nobody in the popular press is mentioning. Few analysts in the financial industry are starting to point it out. And that is that semiconductor manufacturing has been chronically and almost criminally underinvested. The coronavirus pandemic was just a triggering event that brought the whole house of cards down. The thinking in the financial world for the past 10-20 years has been that software is the hot, growing license to print money industry and actually manufacturing chips is a dirty, competitive, low margin, low return on capital industry best left to the Asians. And of the actual chip manufacturers the ones to be most favored were the ones making digital chips and the ones making analog and power semiconductors were the dirtiest most disliked commodity like companies. Even within the semiconductor world, the financial world heaped money on fabless semiconductor companies like stock market darling Nvidia and did not give much respect to the companies that owned the fabs and made the chips. And even less respect was paid to the ones that made power and analog chips. Guess where the biggest shortage is now. In power and analog. Also, in packaging, another field that was considered unsexy, low margin and too competitive to bother with. Everybody talked about how software is eating the world and heaped massive amounts of capital on software companies but they kind of neglected the important role of semiconductors. And even when they talked about semiconductors they talked about the "important" ones, the "brains" of the computer, the cpus and the graphics chips. So while software companies (especially SAAS ones) would have license to lose large amounts of money and still have receive endless streams of capital, companies that manufacture chips would be judged severely by the market on profitability and free cash flow. This is especially true for analog and power semi manufacturers. Free cash flow is a very dangerous metric for a growing industry. Capital spending gets subtracted from cash flow to arrive at free cash flow, which means that if a CEO is judged by free cash flow, he will try to minimize capital spending. That of course will hurt future growth. I have been investing in analog and power semiconductor companies for many years now, and the CEOs of all these companies knew that a jump in demand was coming. But they all wanted to keep their jobs so they all talked about how they will grow their revenues by minimizing capital outflows etc. If they were cheered by the market for having cash outflows of the type many SAAS darlings have, we would be swimming in semiconductors right now. For example, if some one wants to do some further reading, check out old investor presentations of Texas Instruments. By old I mean a couple of years ago, before coronavirus. Probably the largest power and analog semiconductor manufacturer in the world. Their entire sales pitch to investors was about free cash flow and capital return to shareholders. That is great for many types of shareholders, but this is not something a high growth company should be doing. Needless to say now they are swamped by demand and do not have production capacity anywhere near to what demand is. There is another peculiar quality of semiconductors. They are easy to store and they do not go bad after taking some minimal precautions in storage. This means that any rumor of a shortage and price increases causes everybody that uses semis to go out and buy out everything the suppliers will let them buy. So there is a very unstable situation. A- there is a shortage and B - even the possibility of a shortage causes hoarding behavior that makes the shortage worse. That already unstable situation existed before coronavirus. And then coronavirus came. And it triggered a heightened demand for semiconductors. And that triggered a snowball effect of hoarding and higher prices, more hoarding, etc. The solution is that prices should go up (already happening). Stock prices of semiconductor manufactures should go up. And here I mean actual manufacturers, not fabless chip designers. This should happen especially for analog and power semiconductors where the biggest demand and the biggest underinvestment lies. This has not happened as much as it needs to. Higher stock prices should cause more money to go to the fab business and that should eventually result in the necessary growth in semiconductor manufacturing. All of this will take time. And meanwhile there will be a lot of hoarding. There may also be occasional panics where the hoarders dump a lot of hoarded inventory thinking prices are going down, cause prices to go down and later discover that prices are shooting back up again after their inventory gets used up. But in the end hopefully we should end up in a world where (1) there is much more investment in semiconductors and (2) we eventually get all the benefits of the wealthy, high production, environmentally sustainable, all electric future we have been dreaming of.
varjag 5y ago
It wasn't COVID that caused the shortages, although it did exacerbate them. We've experienced first disruptions during previous administration trade wars with China around 2016-17. They never really went away since.
wonnage 5y ago
The trade war didn't help, China started buying massive stockpiles of chips before the restrictions kicked in: https://www.scmp.com/tech/tech-war/article/3120304/us-china-tech-war-china-stockpiles-chips-and-chip-making-machines https://www.scmp.com/tech/tech-war/article/3120304/us-china-... It's a little dumb that basically all advanced chip manufacturing in the world happens within a thousand mile radius of Beijing and we're over here an ocean over wondering where our supply went. More energy needs to be focused on made-in-USA and less on the thing we have no control over
digikata 5y ago
The article is long on speculation, but really doesn't have even basic data such as inventory or shipped component levels to do the the most basic verification of the theories. Are we shipping more chips than even, only demand is allocating unevenly? Are covid + multiple factory incidents at fault? Even the cost the stay at the cutting edge facts seem a little suspect for at least some chip markets. e.g. embedded chips such as for automotive use are generally are multiple generations behind fab technology - and really don't need to stay on a cutting edge fab to keep profitably producing for many industrial embedded components.

Bud 5y ago

You expected an actual useful explanation of a complex tech issue from Bloomberg? The next time Bloomberg manages that will be the first time. Completely, utterly useless for tech reporting of any kind.

deleted 5y ago
[deleted]

YZF 5y ago

Nobody knows for sure. It's a complex phenomena. - Blame Toyota with their Just In Time inventory management ideas. - Factory closures, lockdowns, etc. - Increased demand for certain items. Everyone's at home surfing the web, playing games on their computers, mining bitcoin? - Monetary policies are creating excess (see bitcoin mining) demand. - Shipping delays. Ports running at reduced capacity. Ships sitting at sea waiting to get access. Suez Canal blocked. Shipping companies have no spare capacity. Blame Toyota. - Building new factories takes time, getting/building new machinery takes time, everything was set up to not have any over capacity (since that's loss) ... blame Toyota again. - Big companies swallowed everyone so we don't have as much diversity of products as we used to. Probably related to easy money as well. tl;dr Toyota, Greenspan, Covid ... Somewhat in that order. EDIT: Should probably add the trade war between the US and China to that list.

Multicomp 5y ago
> - Blame Toyota with their Just In Time inventory management ideas. Toyota had a stockpile [1] of semiconductors and are only now-ish running into the same supply problems everyone has been since March 2020. [1] https://www.bloomberg.com/news/articles/2021-04-07/how-toyota-s-supply-chain-helped-it-weather-the-chip-shortage https://www.bloomberg.com/news/articles/2021-04-07/how-toyot... > But the Tohoku earthquake’s aftermath pushed Toyota to increase flexibility, and the value of inventory Toyota carries has almost doubled since 2011. Speaking at a briefing in February, Toyota Chief Financial Officer Kenta Kon said as part of the company’s business continuity plans, it keeps as many as four months of stock for some crucial components such as chips. Toyota didn’t expect the semiconductor shortage to disrupt production in the near term, he said.
- YZF 5y ago
  Yes. I know that. They were one of the early ones to discover the limitations of their original ideas but that did not make its way to the rest of the industry.
deleted 5y ago
[deleted]
georgyo 5y ago
Toyota may have been the people who pioneered Just in Time, but there are also one of the few car manufacturers that actually had a stock pile of components. They realized that supply chain disruptions are too damaging not to have a cache. Saying blame Toyota is funny, but really all the execs who say a cost savings and took without consideration of supply chain problems are actually to blame.
- YZF 5y ago
  Exactly. I was trying to be funny. Not literally blaming Toyota. Though it is their fault in some sense, the popularization of "lean" "just in time" manufacturing as a magic bullet that gives you everything while saving costs.

nekoashide 5y ago

From my understanding companies projected chip needs months and years in advance but a few things happened. 1. Companies cut their orders expecting less demand and lost their place in line for orders. 2. Because of the rush to work remote so suddenly people needed everything from new computers for kids, monitors and accessories for a home office and in general a lot of stuff that used chips. 3. Because of Covid there were shutdowns at semiconductor manufacturers and even disruptions due to fire and weather. Suddenly the entire supply chain went into shock, something that had been perfectly balanced between supply and demand was full of uncertainty. Now we have a situation where everyone is begging for chips and they cannot be built fast enough. Essentially the companies are behind on production and the demand is so high they cannot meet it. Everyone keeps predicting an end but it seems that manufacturers are still falling even further behind than they were before.

jpgvm 5y ago
Additionally when companies cut their orders other companies some fabs and other pipeline facilities were shutdown for retooling. Most of the companies that cut their orders were auto and industrials that projected a prolonged downturn and didn't want to carry the inventory on their books. They predominantly use the components manufactured on less advanced process nodes. Thus when demand for new process nodes was increasing and old ones were decreasing at the peak of the pandemic it made sense for pipelines to retool to meet that demand instead. On top of that US-China tensions means SMIC and Hua Hong Semi are now banned for many US producers which is further constraining supply. Also creating asymmetry where China is experiencing lesser a supply crunch. However there is also trouble brewing there due to Trump forcing the Dutch to block export of ASMLs new EUV lithography tech to China. This means they aren't able to start building fabs w/EUV to fill the coming supply gap there either but instead are now having to pour billions into their own lithography progam. Long term this will be good for the market (but very bad for ASML most likely) but short term its not great.
asdff 5y ago
Why don't semiconductor manufacturers just cut old orders and refund their customers, who would go on and refund their customers? It seems like the financial hit from cancelling old orders and resetting production like this would be what insurance is for, and you'd no longer be fighting a backlog but just taking in orders as they come like you've always done.

mjevans 5y ago

First, all the predictions went sideways. Consumers needed, not just wanted, more cars and equipment to function as PPE. As their mobile personal protective transit bubbles. As their remote-work conversation devices. As new types of hardware that weren't being used for those economic functions before. Even as webcams and the like. Second, the quarantines combine with unemployment that frees an abused workforce from abusive conditions. Instead of being wage slaves forced to take any job what-so-ever workers are able to demand jobs that value safety protocols, pay well enough to live in an area (which is also extra insane right now), and have reasonable hours (enough, the right times etc). Third, (rent) given a combination of working from home, closed 'entertainment' venues, and general quality of life concerns many have decided to flee the high rents of cities for suburban and even rural areas where their money goes farther. This causes more desire to purchase and more wasteful food packaging and production at home as well. Everywhere around me prices have gone up on eating out something like 25% since the start of the pandemic; my wages have not. So instead of eating small portions of bulk shipped and prepared ingredients I'm now eating at home more, mostly frozen stuff. The price of rent didn't quite increase that much but housing is also insane right now, just like even used cars, due to the supply crunch. Supply correction is how we as a culture, country, and world escape this problem. Increasing supply in all of the problem areas is the only way out. Supply means buying power goes up, irrespective of wages. Those misguided attempts to raise everyone's minimum wage (tax the middle class, since the elite who own the rentable units will just raise their rates) would work far better by decreasing the cost of a better life. It could also be targeted towards desired resources, growing out of undesired patterns and standards which is also opportunity for better energy efficiency.

tehjoker 5y ago
> since the elite who own the rentable units will just raise their rates We could also just make the elite pay for it. Just saying.
- b9a2cab5 5y ago
  That doesn't solve the issue, because the high rental rates are caused by limited supply due to NIMBYism. If you raise taxes on rental income rental rates will just go up and pass on costs to tenants. Rentals are highly inelastic. The real solution is to densify and build way, way more. Why doesn't SF look like China with skyscrapers on every block?

callmeal 5y ago

>What about COVID caused the shortage? Is it shipping speeds? Change in demand? Less efficiency down the supply chain due to health requirements? Trade changes? Take a look at "the beer game". One of the lessons from that game is that a single change in consumer demand causes a wide variety of supply chain disruptions. This lesson was learnt in the 1950s and unfortunately it looks like they stopped teaching this in mba schools, so we have to learn it the hard way all over again. [0] https://www.shmula.com/the-bullwhip-effect/310/ https://www.shmula.com/the-bullwhip-effect/310/

deleted 5y ago
[deleted]
bavell 5y ago
Insightful link, thanks! I knew this info intuitively but didn't know about the beer game, really interesting! Nice to have a little more theory to back up my understanding.
ineedasername 5y ago
Wow, Factorio is an extremely complicated version of the beer game. It's especially obvious visually for my hacked-together systems when I get to the flying drone stage and the drones exhibit the movement patterns like those on the charts in your link. I hate that game.
- Groxx 5y ago
  yeah, factorio does feel like it models this pretty well doesn't it? especially with drones, because they are more flexible about where they go, so the bullwhip can more easily spread to physically-adjacent supply-chains. if you're not over-supplied, when a new spike in demand starts a whip through your factory, things can go nuts for quite a while. you get power surges. drones that were behaving beautifully before start flying in chaotic patterns due to under/over supply and making a bunch of dumb local decisions about storage boxes. stuff grinds to a halt for no apparent reason, only to discover that some random component has become a bottleneck for practically everything, and then it can quickly shift to something on the opposite side of your factory... in that sense, perhaps the biters help keep your factory more resistant. you have to deal with occasional component-losses and spikes in weapon demands, and if you don't handle them well enough you can get into an awful persistent struggling state.

baybal2 5y ago

There is a very simple explanation. China is a >60% of the world chip market, and probably is even more now since China was the first country to reopen: https://daxueconsulting.com/chinas-semiconductor-industry/ https://daxueconsulting.com/chinas-semiconductor-industry/ Giant stocks of everything started to vaporise overnight, all at the around same time last November. I have a few STM32 reels of different models some of which I can now sell at $10 per MCU. A 100-fold increase in price, that beats any bitcoin. The starvation of seventies, and hungry eighties have taught Chinese a thing, or two about shortages. People in the ex-USSR countries had the same tendency to run hoarding stuff on every economic doom announcement.

eunos 5y ago
It's less about USSR and more about Trumps trade and tech war.

hristov 5y ago

There is one important factor that nobody in the popular press is mentioning. Few analysts in the financial industry are starting to point it out. And that is that semiconductor manufacturing has been chronically and almost criminally underinvested. The coronavirus pandemic was just a triggering event that brought the whole house of cards down. The thinking in the financial world for the past 10-20 years has been that software is the hot, growing license to print money industry and actually manufacturing chips is a dirty, competitive, low margin, low return on capital industry best left to the Asians. And of the actual chip manufacturers the ones to be most favored were the ones making digital chips and the ones making analog and power semiconductors were the dirtiest most disliked commodity like companies. Even within the semiconductor world, the financial world heaped money on fabless semiconductor companies like stock market darling Nvidia and did not give much respect to the companies that owned the fabs and made the chips. And even less respect was paid to the ones that made power and analog chips. Guess where the biggest shortage is now. In power and analog. Also, in packaging, another field that was considered unsexy, low margin and too competitive to bother with. Everybody talked about how software is eating the world and heaped massive amounts of capital on software companies but they kind of neglected the important role of semiconductors. And even when they talked about semiconductors they talked about the "important" ones, the "brains" of the computer, the cpus and the graphics chips. So while software companies (especially SAAS ones) would have license to lose large amounts of money and still have receive endless streams of capital, companies that manufacture chips would be judged severely by the market on profitability and free cash flow. This is especially true for analog and power semi manufacturers. Free cash flow is a very dangerous metric for a growing industry. Capital spending gets subtracted from cash flow to arrive at free cash flow, which means that if a CEO is judged by free cash flow, he will try to minimize capital spending. That of course will hurt future growth. I have been investing in analog and power semiconductor companies for many years now, and the CEOs of all these companies knew that a jump in demand was coming. But they all wanted to keep their jobs so they all talked about how they will grow their revenues by minimizing capital outflows etc. If they were cheered by the market for having cash outflows of the type many SAAS darlings have, we would be swimming in semiconductors right now. For example, if some one wants to do some further reading, check out old investor presentations of Texas Instruments. By old I mean a couple of years ago, before coronavirus. Probably the largest power and analog semiconductor manufacturer in the world. Their entire sales pitch to investors was about free cash flow and capital return to shareholders. That is great for many types of shareholders, but this is not something a high growth company should be doing. Needless to say now they are swamped by demand and do not have production capacity anywhere near to what demand is. There is another peculiar quality of semiconductors. They are easy to store and they do not go bad after taking some minimal precautions in storage. This means that any rumor of a shortage and price increases causes everybody that uses semis to go out and buy out everything the suppliers will let them buy. So there is a very unstable situation. A- there is a shortage and B - even the possibility of a shortage causes hoarding behavior that makes the shortage worse. That already unstable situation existed before coronavirus. And then coronavirus came. And it triggered a heightened demand for semiconductors. And that triggered a snowball effect of hoarding and higher prices, more hoarding, etc. The solution is that prices should go up (already happening). Stock prices of semiconductor manufactures should go up. And here I mean actual manufacturers, not fabless chip designers. This should happen especially for analog and power semiconductors where the biggest demand and the biggest underinvestment lies. This has not happened as much as it needs to. Higher stock prices should cause more money to go to the fab business and that should eventually result in the necessary growth in semiconductor manufacturing. All of this will take time. And meanwhile there will be a lot of hoarding. There may also be occasional panics where the hoarders dump a lot of hoarded inventory thinking prices are going down, cause prices to go down and later discover that prices are shooting back up again after their inventory gets used up. But in the end hopefully we should end up in a world where (1) there is much more investment in semiconductors and (2) we eventually get all the benefits of the wealthy, high production, environmentally sustainable, all electric future we have been dreaming of.

varjag 5y ago

It wasn't COVID that caused the shortages, although it did exacerbate them. We've experienced first disruptions during previous administration trade wars with China around 2016-17. They never really went away since.

wonnage 5y ago

The trade war didn't help, China started buying massive stockpiles of chips before the restrictions kicked in: https://www.scmp.com/tech/tech-war/article/3120304/us-china-tech-war-china-stockpiles-chips-and-chip-making-machines https://www.scmp.com/tech/tech-war/article/3120304/us-china-... It's a little dumb that basically all advanced chip manufacturing in the world happens within a thousand mile radius of Beijing and we're over here an ocean over wondering where our supply went. More energy needs to be focused on made-in-USA and less on the thing we have no control over

digikata 5y ago

The article is long on speculation, but really doesn't have even basic data such as inventory or shipped component levels to do the the most basic verification of the theories. Are we shipping more chips than even, only demand is allocating unevenly? Are covid + multiple factory incidents at fault? Even the cost the stay at the cutting edge facts seem a little suspect for at least some chip markets. e.g. embedded chips such as for automotive use are generally are multiple generations behind fab technology - and really don't need to stay on a cutting edge fab to keep profitably producing for many industrial embedded components.