4 ms·

Surely this would explain the initial supply chain shock. But it has been two years, why isn't the backlog from the initial shock diminishing. I understand tha

Surely this would explain the initial supply chain shock. But it has been two years, why isn't the backlog from the initial shock diminishing. I understand that supply is not elastic but two years should have been enough for the producers to ramp up the production. Do they think that this is a temporary spike and building capacity would be unprofitable?

Kliment 5y ago
See my other comment in this thread - it makes no sense to ramp up production because the current demand increase is almost entirely due to lack of market confidence and there's no guarantee it will last long enough for new capacity to go online. That's why ~nobody is building new capacity for the affected nodes.
_rend 5y ago
> two years should have been enough for the producers to ramp up the production Along with what Kliment said about not investing in building capacity, I don't think this specific statement is necessarily true. Many of the original factors that caused these setbacks in the first place are still ongoing: everyone is still trying to catch up, and demand is still outstripping supply almost everywhere, for many, many products; worker mobility is still extremely limited (across countries and regions) because of the ongoing pandemic, so it's not trivial to ramp up. Short of investing in that capacity and expanding into new regions, I'm sure it hasn't been easy to actually ramp up production again, and changes in customer demand and patterns are still shaking out. (And even for those companies which have been investing into ramping production, two years can be the low end to start seeing returns on investments: plants take time to build, resources need to be allocated and transported, new employees may need to be trained, etc.)
bsder 5y ago
> Do they think that this is a temporary spike and building capacity would be unprofitable? Ayup. A lot of the previous decades of chip manufacturing is all about how superior it is to be a "fabless" company. You don't have those nasty capital expenditures and your upside is basically unlimited--while owning a fab means you have to employ a ton of people and your profit margin is effectively capped. The fab folks know that as soon as this shock is over, owning a fab goes back to being crap. So, you make hay while the sun shines, and you don't even think about doing capital outlays. Even if they could find the equipment and people (not at all an easy thing), there is ZERO incentive for the fabs to expand. To first order, it's actually more profitable for them to maintain this shortage. Nobody is going to pass up a sale just to keep a shortage going, however. Eventually, things will equilibrate. However, I suspect that there's going to be a lot less choice in semiconductors for quite a while afterward. The only short-term thing that I'm interested in tracking is how many companies were hoarding and are going to panic now that inventory tax is coming due. That's going to move some commodity microcontrollers back into the system from the hoarders. It will be interesting to see how much comes back into the system in the next quarter or two.

Kliment 5y ago

See my other comment in this thread - it makes no sense to ramp up production because the current demand increase is almost entirely due to lack of market confidence and there's no guarantee it will last long enough for new capacity to go online. That's why ~nobody is building new capacity for the affected nodes.

_rend 5y ago

> two years should have been enough for the producers to ramp up the production Along with what Kliment said about not investing in building capacity, I don't think this specific statement is necessarily true. Many of the original factors that caused these setbacks in the first place are still ongoing: everyone is still trying to catch up, and demand is still outstripping supply almost everywhere, for many, many products; worker mobility is still extremely limited (across countries and regions) because of the ongoing pandemic, so it's not trivial to ramp up. Short of investing in that capacity and expanding into new regions, I'm sure it hasn't been easy to actually ramp up production again, and changes in customer demand and patterns are still shaking out. (And even for those companies which have been investing into ramping production, two years can be the low end to start seeing returns on investments: plants take time to build, resources need to be allocated and transported, new employees may need to be trained, etc.)

bsder 5y ago

> Do they think that this is a temporary spike and building capacity would be unprofitable? Ayup. A lot of the previous decades of chip manufacturing is all about how superior it is to be a "fabless" company. You don't have those nasty capital expenditures and your upside is basically unlimited--while owning a fab means you have to employ a ton of people and your profit margin is effectively capped. The fab folks know that as soon as this shock is over, owning a fab goes back to being crap. So, you make hay while the sun shines, and you don't even think about doing capital outlays. Even if they could find the equipment and people (not at all an easy thing), there is ZERO incentive for the fabs to expand. To first order, it's actually more profitable for them to maintain this shortage. Nobody is going to pass up a sale just to keep a shortage going, however. Eventually, things will equilibrate. However, I suspect that there's going to be a lot less choice in semiconductors for quite a while afterward. The only short-term thing that I'm interested in tracking is how many companies were hoarding and are going to panic now that inventory tax is coming due. That's going to move some commodity microcontrollers back into the system from the hoarders. It will be interesting to see how much comes back into the system in the next quarter or two.