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Hard to listen to someone talk about semiconductor/IC supply without mentioning China's cornering and hording of the semiconductor/IC market. There are bottlen

Hard to listen to someone talk about semiconductor/IC supply without mentioning China's cornering and hording of the semiconductor/IC market. There are bottlenecks in all electronic assemblies. Processors, crystals, specialized chips, etc. Things you just can't substitute. China identified many bottlenecks and strategically bought the entire supply. For thousands of items. Hundreds of billions of dollars worth of electronic components. Then they marked them all up 100x and are now selling them back to us. Supposedly they are just "Chinese brokers", but the scale is far too large not to be government sponsored. Here's an example: MKL27Z128VFT4 NXP Kinetis ARM Cortex M0+ Microcontroller. You haven't been able to buy these for over a year now. And it will be another year before you can buy any. They used to go for $2.50. Brokers have 215,000 pieces in stock[0]. Mostly in China. (The US brokers have tied themselves into the Chinese broker inventory.) Average price now: $100 each. [0] https://www.netcomponents.com/results.htm?flts=1&t=f&sm=&r=1&lgc=begins&pn1=MKL27Z128VFT4 https://www.netcomponents.com/results.htm?flts=1&t=f&sm=&r=1...

sidewndr46 4y ago
I'm not trying to advocate a pro-China stance here, but is there any business that is done in China that isn't in part sponsored by the government? One book I read even told the story of a grey market manufacturing operation that had to go legit not because of a government "bust" but because the local figurehead wanted the output of the factory included in his productivity figures.
- monocasa 4y ago
  Correct, there's not really any businesses legitimate enough to have a domain name that are large enough to get major city or province level attention that aren't implanted with direct CCP oversight.
- Taniwha 4y ago
  Of course there is - I've gone to Shenzhen several times and hired people to build my kickstarter - including supplying of most of the parts, building the PCBs, assembling the boards etc - the only time I ever interacted with the government was the guy behind the immigration desk on the way in and out again (I have an APEC business card so I don't need to apply for visas, just show up at the door and show it)
  - sidewndr46 4y ago
    I wasn't implying the Chinese government actually directly runs the business. Instead the business has a contact in the government who at times may make decisions for the business. In the case of Chinese businessmen visiting the US it literally took the form of a CCP member who shadowed them at all times, participating in all meetings and potentially censoring communications. They never actually stepped in and did anything, presumably because the businessmen aren't dumb enough to say something like "what can you tell me about Tiananmen Square?"
alimov 4y ago
> “…strategically bought…” That’s a key phrase here. Did others do the same? If they didn’t then why not? And if they did, then they are surely profiting from the shortage as well. I wonder how long this can go on for… I mean if you can make less of something, and make 2x or more (in your example) profit from it then I’d guess some businesses might not want this kind of arrangement to end.
- swamp40 4y ago
  I consider this economic warfare. I suspect disruption and chaos are the end goal, and the monetary gain is just the cherry on top. Once the supply chain starts to catch up, they will dump everything at once and possibly ruin the manufacturers if they aren't careful. And careful mfgs means supply disruptions will be extended even longer. I mostly posted because it doesn't seem like anyone is even noticing the coup. There will be laws against this kind of thing some day, in the aftermath.
  - monocasa 4y ago
    I mean, there is economic warfare going on, but this is probably the most civil fronts of this war. There's been enough tit for tat (particularly at the intersection of the semiconductor space and china) that it's hard to get mad at this. I don't really have a problem with cornering the market, but instead the state sponsored economic espionage and sanctions intended to cut the country off from further development are the root causes here that result in heavy handed techniques like this article is talking about.
  - alimov 4y ago
    > “I mostly posted because it doesn't seem like anyone is even noticing…” What do you read / use to stay current on what you are referring to as a coup? Are you noticing these trends / events because you are a frequent buyer of related technologies or is it out of interest or maybe some other reason? Do you think more manufacturing will be moving to the states or out of Asia in general as a result of what’s happening now? You mentioned that you believe there will be laws against this kind of thing in the future, but depending on the state of global affairs/ economic alliances laws like these would be difficult to enforce (imo), so would a more direct solution involve countries producing their own chips / (whatever else is being hoarded now)?
zozbot234 4y ago
The real issue is that these are narrow bottlenecks in very specific components that are used in existing designs. It's not that they can't be substituted with something else, but doing so would require reengineering the product and be just as expensive as the price they're actually paying.
- CamperBob2 4y ago
  Another issue is that there are simply too many parts. Nobody needs 50 different variants of the same LDO in slightly different temperature grades and slightly different packages, all sold under slightly different part numbers, none of which is available in useful quantities under any one of those part numbers. Semiconductor manufacturers have been overdue for a back-catalog contraction for years, and I think that's part of what we're seeing now. Many of the parts that are currently in short supply with ridiculous multiyear lead times are not coming back, IMO. Not in 2024, not in 2025, not ever. When you see lead times exceeding two years, that's the manufacturer politely telling you, "Respin your board to use something else. No, really. Respin your board."
cherioo 4y ago
I’m not in the hardware industry, but is 215000 microcontroller supposed to be a lot? The case you bring up sounds like run of the mill hoarding for profit. Semi conductor supply shortage can be seen from miles away and building up inventory sounds like exactly the thing broker should do if they foresee shortage to last (and risk losing money if shortage doesn’t last). To me it would only be a problem if NXP, which isn’t even a Chinese company, refuses, or forced to refuse to sell to other broker when new chips get off the line. This is not to mention how China’s crown jewel Huawei got cut off from supply for sometime due to sanction, so it actually makes a lot of sense for China to stockpile chips in general if they can afford to.
- strogonoff 4y ago
  Free market is a great idea, but it’s fragile in that it requires good faith in order to be fair and it’s not immune to tragedies of the commons. Hoarding or panic buying is an example of bad-faith behavior. Panic buying hurts buyers without means to hoard. With groceries, it might mean their children going hungry after a rich guy empties out local store (not everywhere a store manager can flat out refuse to sell). With microchips, where bad-faith behavior may also be amplified by information asymmetry (coordinated action by large number of players), it may mean stagnation in the industry and wide-reaching implications for everything that has grown to rely on microchips (which, incidentally, includes the above-mentioned grocery stores, their supplies and so on). With groceries it is a bit easier to understand the impact of your actions, because the aforementioned local rich will see hungry children’s parents day to day. With microchips and global market, the negative impact is far removed (and in many cases can be considered beneficial, if country boss designates some group of humans as “the enemy”), and one is incentivised to keep looking for ways to exploit market mechanics technically legally but in bad faith. Hoarding of microchips makes me worry about the global market. It may seem like a good idea to include bad guys into it, since participating in it may make them more interested in getting along with everybody, but if we have one psychopathic, chronically insecure participant insisting on playing a zero-sum game it’s feasible that they ruin the whole initiative and “outplay” the rest who assume the best in others.
  - barry-cotter 4y ago
MuffinFlavored 4y ago
instead of $2.50 -> $100, why don't they make it like... $2.50 -> $5 and actually sell them all?
- kurthr 4y ago
  Because if 5% of the customers actually need the part that bad, they'll make more money and still have almost all the components left... plus bonus supply chain disruption of the western imperialists.
  - barry-cotter 4y ago
    The Western imperialist but is a lot less important than the money. It’s all about the money.
- snovv_crash 4y ago
  Because the demand isn't flexible enough to change parts, so they will pay it anyways.
antoniuschan99 4y ago
Wow no wonder! I produce an IoT device and was using this TI buck boost voltage converter that was the only component that I couldn’t source. It used to cost 90 cents. And all the mainstream sources went dry a few months ago (digikey, mouser, etc). So had to dig into random Chinese 3rd party suppliers and I was getting quotes from $7-25!
CamperBob2 4y ago
Sad to say (and easy to say, given our relatively high margins relative to other product sectors) but those Chinese scalpers are saving our business right now. It's easy to curse them for price gouging -- and believe me, we have, being forced to pay $300 for $50 FPGAs -- but if they weren't gouging, those parts wouldn't be available to us at all.
- barry-cotter 4y ago
  /me wipes a tear from his eye at the wonder of markets working to get goods to their highest productivity uses.
  - CamperBob2 4y ago
    Exactly, it's just capitalism at the end of the day. But it's cutthroat capitalism to be sure. I don't see how any products with consumer-level pricing and profit margins are getting built at all.
raxxorraxor 4y ago
That could bite them in the back though. The reality is that western nations depend on cheap labor and producing chips domestically isn't feasible. With a unit price of $2.50 or $0.10 for low-powered CPUs you would have to sell billions or trillions of units to make it viable to develop and produce them. But if these prices would rise significantly it could become viable again.
negative_zero 4y ago
I'm a Hardware Engineer who's lived through a few of these cycles now. I personally wouldn't give the CCP that much credit, at all. In my experience, the signs for this crunch in supply were there. The unusual part is maybe the speed at which it took hold and now the amount of time the shortages are lasting. I was arguing for building inventory when the situation was (in my eyes) clearly getting bad, the business chose not to. Now its much much worse. A 5-10USD lithium charge controller goes for about 100USD (one seller had it for 500USD). At least this way, the smaller businesses that get ignored by the big suppliers in times like these, can get supply if they can pay. It's also not all just brokers. The outfit we use in China for PCB fabrication and population saw the signs and stocked up on inventory on their one initiative. They are the only reason we can make anything at all. Fundamentally ICs are NOT a Just-in-time-able part. And if people actually read the book on JiT they'd understand that fact, and they would keep inventory. When you see this time and again like me, it's hard to have sympathy for businesses that get caught out. (I do have sympathy for those that came prepared and are now stuck though). Next crunch time (and there always is a next time in this business), I seriously think I'll just invest in IC inventory. Because honestly if I did this time, I probably could have retired early.

sidewndr46 4y ago

I'm not trying to advocate a pro-China stance here, but is there any business that is done in China that isn't in part sponsored by the government? One book I read even told the story of a grey market manufacturing operation that had to go legit not because of a government "bust" but because the local figurehead wanted the output of the factory included in his productivity figures.

monocasa 4y ago
Correct, there's not really any businesses legitimate enough to have a domain name that are large enough to get major city or province level attention that aren't implanted with direct CCP oversight.
Taniwha 4y ago
Of course there is - I've gone to Shenzhen several times and hired people to build my kickstarter - including supplying of most of the parts, building the PCBs, assembling the boards etc - the only time I ever interacted with the government was the guy behind the immigration desk on the way in and out again (I have an APEC business card so I don't need to apply for visas, just show up at the door and show it)
- sidewndr46 4y ago
  I wasn't implying the Chinese government actually directly runs the business. Instead the business has a contact in the government who at times may make decisions for the business. In the case of Chinese businessmen visiting the US it literally took the form of a CCP member who shadowed them at all times, participating in all meetings and potentially censoring communications. They never actually stepped in and did anything, presumably because the businessmen aren't dumb enough to say something like "what can you tell me about Tiananmen Square?"

alimov 4y ago

> “…strategically bought…” That’s a key phrase here. Did others do the same? If they didn’t then why not? And if they did, then they are surely profiting from the shortage as well. I wonder how long this can go on for… I mean if you can make less of something, and make 2x or more (in your example) profit from it then I’d guess some businesses might not want this kind of arrangement to end.

swamp40 4y ago
I consider this economic warfare. I suspect disruption and chaos are the end goal, and the monetary gain is just the cherry on top. Once the supply chain starts to catch up, they will dump everything at once and possibly ruin the manufacturers if they aren't careful. And careful mfgs means supply disruptions will be extended even longer. I mostly posted because it doesn't seem like anyone is even noticing the coup. There will be laws against this kind of thing some day, in the aftermath.
- monocasa 4y ago
  I mean, there is economic warfare going on, but this is probably the most civil fronts of this war. There's been enough tit for tat (particularly at the intersection of the semiconductor space and china) that it's hard to get mad at this. I don't really have a problem with cornering the market, but instead the state sponsored economic espionage and sanctions intended to cut the country off from further development are the root causes here that result in heavy handed techniques like this article is talking about.
- alimov 4y ago
  > “I mostly posted because it doesn't seem like anyone is even noticing…” What do you read / use to stay current on what you are referring to as a coup? Are you noticing these trends / events because you are a frequent buyer of related technologies or is it out of interest or maybe some other reason? Do you think more manufacturing will be moving to the states or out of Asia in general as a result of what’s happening now? You mentioned that you believe there will be laws against this kind of thing in the future, but depending on the state of global affairs/ economic alliances laws like these would be difficult to enforce (imo), so would a more direct solution involve countries producing their own chips / (whatever else is being hoarded now)?

zozbot234 4y ago

The real issue is that these are narrow bottlenecks in very specific components that are used in existing designs. It's not that they can't be substituted with something else, but doing so would require reengineering the product and be just as expensive as the price they're actually paying.

CamperBob2 4y ago
Another issue is that there are simply too many parts. Nobody needs 50 different variants of the same LDO in slightly different temperature grades and slightly different packages, all sold under slightly different part numbers, none of which is available in useful quantities under any one of those part numbers. Semiconductor manufacturers have been overdue for a back-catalog contraction for years, and I think that's part of what we're seeing now. Many of the parts that are currently in short supply with ridiculous multiyear lead times are not coming back, IMO. Not in 2024, not in 2025, not ever. When you see lead times exceeding two years, that's the manufacturer politely telling you, "Respin your board to use something else. No, really. Respin your board."

cherioo 4y ago

I’m not in the hardware industry, but is 215000 microcontroller supposed to be a lot? The case you bring up sounds like run of the mill hoarding for profit. Semi conductor supply shortage can be seen from miles away and building up inventory sounds like exactly the thing broker should do if they foresee shortage to last (and risk losing money if shortage doesn’t last). To me it would only be a problem if NXP, which isn’t even a Chinese company, refuses, or forced to refuse to sell to other broker when new chips get off the line. This is not to mention how China’s crown jewel Huawei got cut off from supply for sometime due to sanction, so it actually makes a lot of sense for China to stockpile chips in general if they can afford to.

strogonoff 4y ago
Free market is a great idea, but it’s fragile in that it requires good faith in order to be fair and it’s not immune to tragedies of the commons. Hoarding or panic buying is an example of bad-faith behavior. Panic buying hurts buyers without means to hoard. With groceries, it might mean their children going hungry after a rich guy empties out local store (not everywhere a store manager can flat out refuse to sell). With microchips, where bad-faith behavior may also be amplified by information asymmetry (coordinated action by large number of players), it may mean stagnation in the industry and wide-reaching implications for everything that has grown to rely on microchips (which, incidentally, includes the above-mentioned grocery stores, their supplies and so on). With groceries it is a bit easier to understand the impact of your actions, because the aforementioned local rich will see hungry children’s parents day to day. With microchips and global market, the negative impact is far removed (and in many cases can be considered beneficial, if country boss designates some group of humans as “the enemy”), and one is incentivised to keep looking for ways to exploit market mechanics technically legally but in bad faith. Hoarding of microchips makes me worry about the global market. It may seem like a good idea to include bad guys into it, since participating in it may make them more interested in getting along with everybody, but if we have one psychopathic, chronically insecure participant insisting on playing a zero-sum game it’s feasible that they ruin the whole initiative and “outplay” the rest who assume the best in others.
- barry-cotter 4y ago

MuffinFlavored 4y ago

instead of $2.50 -> $100, why don't they make it like... $2.50 -> $5 and actually sell them all?

kurthr 4y ago
Because if 5% of the customers actually need the part that bad, they'll make more money and still have almost all the components left... plus bonus supply chain disruption of the western imperialists.
- barry-cotter 4y ago
  The Western imperialist but is a lot less important than the money. It’s all about the money.
snovv_crash 4y ago
Because the demand isn't flexible enough to change parts, so they will pay it anyways.

antoniuschan99 4y ago

Wow no wonder! I produce an IoT device and was using this TI buck boost voltage converter that was the only component that I couldn’t source. It used to cost 90 cents. And all the mainstream sources went dry a few months ago (digikey, mouser, etc). So had to dig into random Chinese 3rd party suppliers and I was getting quotes from $7-25!

CamperBob2 4y ago

Sad to say (and easy to say, given our relatively high margins relative to other product sectors) but those Chinese scalpers are saving our business right now. It's easy to curse them for price gouging -- and believe me, we have, being forced to pay $300 for $50 FPGAs -- but if they weren't gouging, those parts wouldn't be available to us at all.

barry-cotter 4y ago
/me wipes a tear from his eye at the wonder of markets working to get goods to their highest productivity uses.
- CamperBob2 4y ago
  Exactly, it's just capitalism at the end of the day. But it's cutthroat capitalism to be sure. I don't see how any products with consumer-level pricing and profit margins are getting built at all.

raxxorraxor 4y ago

That could bite them in the back though. The reality is that western nations depend on cheap labor and producing chips domestically isn't feasible. With a unit price of $2.50 or $0.10 for low-powered CPUs you would have to sell billions or trillions of units to make it viable to develop and produce them. But if these prices would rise significantly it could become viable again.

negative_zero 4y ago

I'm a Hardware Engineer who's lived through a few of these cycles now. I personally wouldn't give the CCP that much credit, at all. In my experience, the signs for this crunch in supply were there. The unusual part is maybe the speed at which it took hold and now the amount of time the shortages are lasting. I was arguing for building inventory when the situation was (in my eyes) clearly getting bad, the business chose not to. Now its much much worse. A 5-10USD lithium charge controller goes for about 100USD (one seller had it for 500USD). At least this way, the smaller businesses that get ignored by the big suppliers in times like these, can get supply if they can pay. It's also not all just brokers. The outfit we use in China for PCB fabrication and population saw the signs and stocked up on inventory on their one initiative. They are the only reason we can make anything at all. Fundamentally ICs are NOT a Just-in-time-able part. And if people actually read the book on JiT they'd understand that fact, and they would keep inventory. When you see this time and again like me, it's hard to have sympathy for businesses that get caught out. (I do have sympathy for those that came prepared and are now stuck though). Next crunch time (and there always is a next time in this business), I seriously think I'll just invest in IC inventory. Because honestly if I did this time, I probably could have retired early.