16 ms·

Explaining the global chip shortage

91 points by nabakin 4y ago

jamesvnz 4y ago
It's an interesting article overall - but it seems to be half written now, and half written earlier in 2022. There's no publish date on the blog article that I can see. Google seems to think it was posted 3 days ago - but in the article you have sentences like "However, some of the most in-demand phones are expected to become more available by February 2022." Which adds to the confusion of the currency of some of the statements / observations.
- jpm_sd 4y ago
  I'd go further and argue that this contains no new information and it's basically a sales pitch for outsourcing your electronics manufacturing to Jabil.
- Brybry 4y ago
  You're correct. You can wayback machine it and see they first archived a version in 2021 and it's been updated multiple times since then. https://web.archive.org/web/*/https://www.jabil.com/blog/global-chip-shortages.html https://web.archive.org/web/*/https://www.jabil.com/blog/glo...
11thEarlOfMar 4y ago
In some cases, the shortage has an obvious explanation. Many chips are made in exactly one fab, and may be made for a few days per month or a few months per year when a line produces multiple devices or device variants. Designs are not readily transportable to other fabs. So if there is an interruption from, say, a fire or a pandemic, the global supply of that chip is stopped cold until the interruption is resolved. If a chip has been shipping for a while, the supply chain may be full of enough inventory that end users don't see a problem before production is restored. But imagine a case where the line is stopped for months and at the same time, the demand for that device accelerates. This is what COVID did to a lot of devices. Contagion mitigation strategies sent all the operators at the Infineon Kulim fab home for months, at the same time that auto sales surged. The power switch devices popular at US automakers, and purchased for 45 cents each, started seeing longer and longer lead times until Infineon's distributors started simply reporting 'availability unknown'. This forced buyers into the perilous broker market. I say perilous because prices quickly went out of control for this chip. End customers were paying more than US$50 for many months and in some rare cases, over $100 for this 45 cent chip. These prices were paid by, among other companies, suppliers to semiconductor equipment makers. Without that chip, they'd not be able to sell their $10 million machines, which were also seeing demand skyrocket as chip makers scrambled to add capacity. Equipment makers would pay anything to keep their subsystem supply chain alive. When the gray market got wind of the prices being paid, all kinds of scandalous activity happened. For example, unscrupulous resellers would gather many small lots of that chip, even units with different specification variants, paint over all the markings and re-label them all with the same, current date codes. This greatly increased their salability and value, but left the end customers with an unreliable product. Eventually, the Kulim fab came back online and is back at full production. The supply chain is mostly recovered. And that 45 cent chip is now selling for 80 cents because Infineon saw first hand the high-value applications it was used in, and the price insensitivity of their end customers.
- ArchD 4y ago
  What are some of the intricacies in the 45-cent chip that makes it hard to produce by a large number of different fabs? In the absence of more details, it seems to me that a cheap, 45-cent, chip should not be so complicated that only a small number of companies can produce it on-demand.
  - 11thEarlOfMar 4y ago
    It's not a matter of intricacy. It's a 'low tech' power chip that is made on fully depreciated and outdated equipment. Most likely all Infineon lines were running at capacity at that time and they had no place to put it. Setting up a new line would not make business sense since a new equipment would cost in the realm of $250 Million for a line, and take a year or more to set up. Not to mention, lead times for new equipment was also extending. By that point, the crunch may as well have ended and they'd then have more capacity for that device than they needed, and no ROI on their $250M.
    - mattnewton 4y ago
      I am having trouble wrapping my head around a business that costs 250mm and a year+ to enter not increasing its prices earlier or even more than the current 80 cents. It must be that they are also limited in their ability to increase price by people just paying the cost to redesign to another chip in the medium to long term?
      - jareklupinski 4y ago
        knowing it would cost that much ahead of time would let the purchaser and engineer work together to determine if it would be more cost-effective to swap that part out for a similarly specced but less expensive chip, or rework the circuit to use a slightly different chip, perhaps with two chips instead, or more jellybeans to make up the lost functionality a ten million dollar machine missing a 45 cent part probably costs a few hundred thousand to redesign around that part. a mass market vehicle that needs multiple of those part per SKU would be cheaper to re-engineer
10g1k 4y ago
[flagged]
- rcme 4y ago
  Nvidia and TSMC are probably the two most important semi-conductor companies on Earth. Semi-conductors is probably one of the most important geopolitical issues. Not saying there isn’t corruption, but it’s unsurprising that there’s a lot of overlap.
  - AlexTWithBeard 4y ago
    May be yes. May be no. But it looks suspicious enough to appoint a special prosecutor and investigate the allegations.
    - rcme 4y ago
      Does it? A lot of the events involve China’s influence over Taiwan and the impact on the semi-conductor industry. E.g. China disrupting the chip supply chain in Taiwan and the U.S. responding by supporting the domestic chip industry. What is the conspiracy there exactly? That Pelosi conspired with China to create the pretext for a bill that would support the domestic chip industry to profit off the stock market?
      - NhanH 4y ago
        The conspiracy is that Nancy Pelosi is doing insider trading. Though at this point, I'm not even sure "conspiracy" is the right word anymore. There is nothing "secret" with the situation.
        rcme 4y ago
        Insider trading is not a conspiracy. I think insider trading is bad, and the laws should be amended so that congress is forbidden from insider trading. But if the only “smoking gun” is insider trading then this is a non-issue. It’s legal for members of congress to trade with non-public information, and many members in both parties do it.
lfmunoz4 4y ago
[dead]
comboy 4y ago
This video seems to be doing much better job at explaining the problem [1]. Long story short there's high demand for trailing edge (50nm+) tech, but it is not worth investing in building more of these for number of reasons mentioned in the video (huge investment, long time, and despite high demand it's still only low percentage of profit compared to cutting edge) I suppose prices must increase but likely there are some long term contracts in place. 1. https://www.youtube.com/watch?v=YJrOuBkYCMQ https://www.youtube.com/watch?v=YJrOuBkYCMQ
- kurthr 4y ago
  One other thing that's not mentioned is qualifying the new fabs and porting old designs. Each design (even the old ones) would need to be requalified. That could easily be $Millions for a $0.1 die. Until you've made >>10 million parts (1000s of wafers) you won't be cost competitive even in a converted old depreciated fab... Now add the costs of building a new fab and bringing it on line?! Realistically, I can see building new 28nm 12" fabs and designing new die (for the same purpose) for the smaller geometry, but anything older/larger will just make due with what is available. The ecosystem existed because newer fabs were always taking up the demand slack, while the older lower cost fabs were fully depreciated and didn't take much engineering effort to keep running the same old process.
  - ilyt 4y ago
    > Realistically, I can see building new 28nm 12" fabs and designing new die (for the same purpose) for the smaller geometry, but anything older/larger will just make due with what is available. The ecosystem existed because newer fabs were always taking up the demand slack, while the older lower cost fabs were fully depreciated and didn't take much engineering effort to keep running the same old process. Also, power matters. Smaller process means jack shit if the part needs the same amount of current running thru it. Anything analog is harder to shrink (as you care about the detailed parameters of transistors, not just the on/off state, so most likely full redesign), and anything that needs to pass enough current and enough voltage just can't be shrunk in the first place. See your humble 5A linear regulator die shot https://zeptobars.com/en/read/LM338K-5A-LDO-TO-3-TO-220 https://zeptobars.com/en/read/LM338K-5A-LDO-TO-3-TO-220 only the upper part could be shunk, the bottom one, the power transistor, can't be
lnxg33k1 4y ago
I've dealt with US companies as European for a couple of things, and I think that I've been avoiding companies from there for the past couple of years due to speculation about this chip shortage, I've 2 bikes from US one super 73 and one bird bike, for the bird bike in particular, in order to have the engine replaced I've had to wait for 2 months, due to chip shortage, while the shop I've bought it from has had the whole time new bird bikes delivered to sell, so yeah, I think a good part of the global chip shortage when it comes to post-sales components is speculation, I've got a vanmoof since then and it takes a week get damaged pieces (not needed replacement parts so far, but I've friends with vanmoof who had) But yeah as a rule of thumb stay away from super73 and birds bikes
deleted 4y ago
[deleted]
havblue 4y ago
The global chip shortage reminds me of the "just in time" training that corporate mandated for all engineers at my large cap aerospace company about ten years ago. "Is it always better to avoid having spare parts? Maybe in some cases..." "No," the older engineer a few seats away from me interrupted. "Keeping extra inventory is a waste of money." He actually thought that redundancy is a waste and selecting parts doesn't involve any consideration of uncertainty...
- prometheus76 4y ago
  That's one of the main presuppositions in Lean Manufacturing that is so entrenched and so insidious. What's even more annoying is when managers who have worked in a Lean environment come over into our industry of steel fabrication (high-mix low-volume, where lean is low-mix high-volume), and they assume that 1) we're screwing up because nothing is consistent in our charts and graphs and 2) that if they just make us do Lean stuff, it will magically improve. It leads to disaster every time.
  - ngrilly 4y ago
    Lean manufacturing is a lot about avoiding waste, but it doesn't necessarily mean removing all buffers and stocks, which is a type of waste, if this is causing a much worse type of waste, which is making the entire production line useless because it is missing input material. I really think "lean manufacturing" = 100% JIT is a misconception and an over-simplification.
    - actionfromafar 4y ago
      And wasn't it notably Toyota, inventors of lean which had a decent stock of components? (Not huge perhaps, but better than a lot of competitors.)
    - prometheus76 4y ago
      The argument becomes how much buffer and stock do you need? How long can you fade a falloff in supply? One hour? One day? One week? What is "wasteful" vs. what is wise?

91 points by nabakin 4y ago

It's an interesting article overall - but it seems to be half written now, and half written earlier in 2022. There's no publish date on the blog article that I can see. Google seems to think it was posted 3 days ago - but in the article you have sentences like "However, some of the most in-demand phones are expected to become more available by February 2022." Which adds to the confusion of the currency of some of the statements / observations.

jpm_sd 4y ago
I'd go further and argue that this contains no new information and it's basically a sales pitch for outsourcing your electronics manufacturing to Jabil.
Brybry 4y ago
You're correct. You can wayback machine it and see they first archived a version in 2021 and it's been updated multiple times since then. https://web.archive.org/web/*/https://www.jabil.com/blog/global-chip-shortages.html https://web.archive.org/web/*/https://www.jabil.com/blog/glo...

11thEarlOfMar 4y ago

In some cases, the shortage has an obvious explanation. Many chips are made in exactly one fab, and may be made for a few days per month or a few months per year when a line produces multiple devices or device variants. Designs are not readily transportable to other fabs. So if there is an interruption from, say, a fire or a pandemic, the global supply of that chip is stopped cold until the interruption is resolved. If a chip has been shipping for a while, the supply chain may be full of enough inventory that end users don't see a problem before production is restored. But imagine a case where the line is stopped for months and at the same time, the demand for that device accelerates. This is what COVID did to a lot of devices. Contagion mitigation strategies sent all the operators at the Infineon Kulim fab home for months, at the same time that auto sales surged. The power switch devices popular at US automakers, and purchased for 45 cents each, started seeing longer and longer lead times until Infineon's distributors started simply reporting 'availability unknown'. This forced buyers into the perilous broker market. I say perilous because prices quickly went out of control for this chip. End customers were paying more than US$50 for many months and in some rare cases, over $100 for this 45 cent chip. These prices were paid by, among other companies, suppliers to semiconductor equipment makers. Without that chip, they'd not be able to sell their $10 million machines, which were also seeing demand skyrocket as chip makers scrambled to add capacity. Equipment makers would pay anything to keep their subsystem supply chain alive. When the gray market got wind of the prices being paid, all kinds of scandalous activity happened. For example, unscrupulous resellers would gather many small lots of that chip, even units with different specification variants, paint over all the markings and re-label them all with the same, current date codes. This greatly increased their salability and value, but left the end customers with an unreliable product. Eventually, the Kulim fab came back online and is back at full production. The supply chain is mostly recovered. And that 45 cent chip is now selling for 80 cents because Infineon saw first hand the high-value applications it was used in, and the price insensitivity of their end customers.

ArchD 4y ago
What are some of the intricacies in the 45-cent chip that makes it hard to produce by a large number of different fabs? In the absence of more details, it seems to me that a cheap, 45-cent, chip should not be so complicated that only a small number of companies can produce it on-demand.
- 11thEarlOfMar 4y ago
  It's not a matter of intricacy. It's a 'low tech' power chip that is made on fully depreciated and outdated equipment. Most likely all Infineon lines were running at capacity at that time and they had no place to put it. Setting up a new line would not make business sense since a new equipment would cost in the realm of $250 Million for a line, and take a year or more to set up. Not to mention, lead times for new equipment was also extending. By that point, the crunch may as well have ended and they'd then have more capacity for that device than they needed, and no ROI on their $250M.
  - mattnewton 4y ago
    I am having trouble wrapping my head around a business that costs 250mm and a year+ to enter not increasing its prices earlier or even more than the current 80 cents. It must be that they are also limited in their ability to increase price by people just paying the cost to redesign to another chip in the medium to long term?
    - jareklupinski 4y ago
      knowing it would cost that much ahead of time would let the purchaser and engineer work together to determine if it would be more cost-effective to swap that part out for a similarly specced but less expensive chip, or rework the circuit to use a slightly different chip, perhaps with two chips instead, or more jellybeans to make up the lost functionality a ten million dollar machine missing a 45 cent part probably costs a few hundred thousand to redesign around that part. a mass market vehicle that needs multiple of those part per SKU would be cheaper to re-engineer

10g1k 4y ago

[flagged]

rcme 4y ago
Nvidia and TSMC are probably the two most important semi-conductor companies on Earth. Semi-conductors is probably one of the most important geopolitical issues. Not saying there isn’t corruption, but it’s unsurprising that there’s a lot of overlap.
- AlexTWithBeard 4y ago
  May be yes. May be no. But it looks suspicious enough to appoint a special prosecutor and investigate the allegations.
  - rcme 4y ago
    Does it? A lot of the events involve China’s influence over Taiwan and the impact on the semi-conductor industry. E.g. China disrupting the chip supply chain in Taiwan and the U.S. responding by supporting the domestic chip industry. What is the conspiracy there exactly? That Pelosi conspired with China to create the pretext for a bill that would support the domestic chip industry to profit off the stock market?
    - NhanH 4y ago
      The conspiracy is that Nancy Pelosi is doing insider trading. Though at this point, I'm not even sure "conspiracy" is the right word anymore. There is nothing "secret" with the situation.
      - rcme 4y ago
        Insider trading is not a conspiracy. I think insider trading is bad, and the laws should be amended so that congress is forbidden from insider trading. But if the only “smoking gun” is insider trading then this is a non-issue. It’s legal for members of congress to trade with non-public information, and many members in both parties do it.

lfmunoz4 4y ago

[dead]

comboy 4y ago

This video seems to be doing much better job at explaining the problem [1]. Long story short there's high demand for trailing edge (50nm+) tech, but it is not worth investing in building more of these for number of reasons mentioned in the video (huge investment, long time, and despite high demand it's still only low percentage of profit compared to cutting edge) I suppose prices must increase but likely there are some long term contracts in place. 1. https://www.youtube.com/watch?v=YJrOuBkYCMQ https://www.youtube.com/watch?v=YJrOuBkYCMQ

kurthr 4y ago
One other thing that's not mentioned is qualifying the new fabs and porting old designs. Each design (even the old ones) would need to be requalified. That could easily be $Millions for a $0.1 die. Until you've made >>10 million parts (1000s of wafers) you won't be cost competitive even in a converted old depreciated fab... Now add the costs of building a new fab and bringing it on line?! Realistically, I can see building new 28nm 12" fabs and designing new die (for the same purpose) for the smaller geometry, but anything older/larger will just make due with what is available. The ecosystem existed because newer fabs were always taking up the demand slack, while the older lower cost fabs were fully depreciated and didn't take much engineering effort to keep running the same old process.
- ilyt 4y ago
  > Realistically, I can see building new 28nm 12" fabs and designing new die (for the same purpose) for the smaller geometry, but anything older/larger will just make due with what is available. The ecosystem existed because newer fabs were always taking up the demand slack, while the older lower cost fabs were fully depreciated and didn't take much engineering effort to keep running the same old process. Also, power matters. Smaller process means jack shit if the part needs the same amount of current running thru it. Anything analog is harder to shrink (as you care about the detailed parameters of transistors, not just the on/off state, so most likely full redesign), and anything that needs to pass enough current and enough voltage just can't be shrunk in the first place. See your humble 5A linear regulator die shot https://zeptobars.com/en/read/LM338K-5A-LDO-TO-3-TO-220 https://zeptobars.com/en/read/LM338K-5A-LDO-TO-3-TO-220 only the upper part could be shunk, the bottom one, the power transistor, can't be

lnxg33k1 4y ago

I've dealt with US companies as European for a couple of things, and I think that I've been avoiding companies from there for the past couple of years due to speculation about this chip shortage, I've 2 bikes from US one super 73 and one bird bike, for the bird bike in particular, in order to have the engine replaced I've had to wait for 2 months, due to chip shortage, while the shop I've bought it from has had the whole time new bird bikes delivered to sell, so yeah, I think a good part of the global chip shortage when it comes to post-sales components is speculation, I've got a vanmoof since then and it takes a week get damaged pieces (not needed replacement parts so far, but I've friends with vanmoof who had) But yeah as a rule of thumb stay away from super73 and birds bikes

deleted 4y ago

[deleted]

havblue 4y ago

The global chip shortage reminds me of the "just in time" training that corporate mandated for all engineers at my large cap aerospace company about ten years ago. "Is it always better to avoid having spare parts? Maybe in some cases..." "No," the older engineer a few seats away from me interrupted. "Keeping extra inventory is a waste of money." He actually thought that redundancy is a waste and selecting parts doesn't involve any consideration of uncertainty...

prometheus76 4y ago
That's one of the main presuppositions in Lean Manufacturing that is so entrenched and so insidious. What's even more annoying is when managers who have worked in a Lean environment come over into our industry of steel fabrication (high-mix low-volume, where lean is low-mix high-volume), and they assume that 1) we're screwing up because nothing is consistent in our charts and graphs and 2) that if they just make us do Lean stuff, it will magically improve. It leads to disaster every time.
- ngrilly 4y ago
  Lean manufacturing is a lot about avoiding waste, but it doesn't necessarily mean removing all buffers and stocks, which is a type of waste, if this is causing a much worse type of waste, which is making the entire production line useless because it is missing input material. I really think "lean manufacturing" = 100% JIT is a misconception and an over-simplification.
  - actionfromafar 4y ago
    And wasn't it notably Toyota, inventors of lean which had a decent stock of components? (Not huge perhaps, but better than a lot of competitors.)
  - prometheus76 4y ago
    The argument becomes how much buffer and stock do you need? How long can you fade a falloff in supply? One hour? One day? One week? What is "wasteful" vs. what is wise?