4 ms·

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 yea

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
      - ilyt 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 And now you have not one but 2-3 chips that are in demand and price rises for those too. Also in case of cars and similar equipment there would be a bunch of re-testing required so that drives cost of reengineering hard. Especially if said part was used as "jellybean" across a lot of modules just because it's cheaper to buy same part in bulk

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
    - ilyt 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 And now you have not one but 2-3 chips that are in demand and price rises for those too. Also in case of cars and similar equipment there would be a bunch of re-testing required so that drives cost of reengineering hard. Especially if said part was used as "jellybean" across a lot of modules just because it's cheaper to buy same part in bulk