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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
by 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 agoAdditionally 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 agoWhy 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.
- DavidSJ 5y agoAt best this is an accounting trick. It wouldn't solve the global supply/demand imbalance.