Wednesday, January 12, 2022 by Matthew Davis
The shortage of semiconductors is worsening and the affected companies are compounding the situation by stockpiling their inventory – further depleting the already thinning supply. The dire situation is happening due to the prevailing global supply chain disruptions, which the Biden administration fails to solve.
Trading and technology firm Susquehanna Financial Group noted that the shortage will continue this year after its research proved that delivery times for chips jumped to an average of 25.78 weeks in December from just six days in November.
This is the longest wait time since Susquehanna started monitoring the data in 2017.
Susquehanna analyst Chris Rolland said the rate of lead time expansion for nearly every product category, with power management and microcontrollers on top of the list, reached all-time highs. (Related: Biden is not doing anything to resolve the supply chain crisis.)
“The rate of lead time has been choppy, but picked up again on December,” said Rolland. Lead time is the gap between when a semiconductor is ordered and delivered. An increase would suggest chip shortages are persisting while a decrease would indicate easing.
The present situation poses a big problem for automakers as a longer wait for microcontrollers being used in cars will hamper production. Also affected are industries related to electronics, heavy equipment, appliances and other consumer durables that rely on automated applications.
With shortages happening because of the global supply chain crisis, people are finding it hard to find microchips, gas, steel, metals, chicken, lumber and even chlorine and ketchup packets.
Those buying a new car, smartphone or washing machine, for example, face long wait plus high prices due to the shortage of computer chips.
It’s an entirely different situation for chips manufacturers as the Philadelphia Stock Exchange Semiconductor Index is up more than 200 percent since early 2020. (Related: Top selling vehicles are being held back, made without computers as semiconductor shortage sweeps the globe.)
Production and delivery problems initially happen only in the car industry, but upending supply chains and changing consumer shopping patterns plus the global economy recession due to the Wuhan coronavirus (COVID-19) pandemic resulted to shortages in other products as well.
Car manufacturers cut back orders for chips, while tech companies, whose product sales were boosted by the lockdown needed to snap up as many as they could.
Analysts believe that the shortage will spread from cars to consumer electronics and the crunch will continue since a handful of suppliers control chip production.
It’s a good thing, electronic giant Samsung intends to build a $17 billion semiconductor factory outside of Austin, Texas, amid a global shortage of chips used in phones, cars and other electronic devices.
Texas Gov. Greg Abbott stressed that Samsung’s project is the largest foreign direct investment in the state of Texas.
The construction will start this year and operations are expected to begin in the second half of 2024. The new facility will boost Samsung production of high-tech chips used for 5G mobile communications, advanced computing and artificial intelligence, and also improve supply chain resilience.
According to Samsung Vice Chairman Kinam Kim, the electronics giant chose the site based on government incentives and local infrastructure.
Due to the shortage of chips, the U.S. faces national security concerns and problems in doing businesses. The inadequate supply of semiconductors is affecting the production of new vehicles and electronic devises.
Many American companies depend on chips produced in Taiwan and China, which are locked in dispute as China regards Taiwan as a runaway province.
Research analyst Nina Turner said it’s a concentration and geopolitical risk for the U.S. to rely much on Taiwan.
“It’s a concentration risk, a geopolitical risk to be so reliant on Taiwan for the chips,” said Turner, adding the current shortages will likely subside but there will be a long-term demand for chips as more and more daily products rely on them.
Many chipmakers are spreading out their manufacturing operations in response to the shortages, which have taken a toll on sectors from automakers to the video gaming industry. The U.S., being the world’s richest economy, is feeling the brunt of the impact.
Watch the video below about the ongoing shortage of microchips.
This video is from Truth and Freedom channel on Brighteon.com.
Follow SupplyChainWarning.com to find out more about the semiconductor shortage.
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