Why is there such a global shortage of chips?
Latest update time：2022-01-30
Reads：
Author 1: Zhou Xiaoyang (Gilbert), semiconductor veteran, Xi'an Jiaotong University microelectronics alumnus
Author 2: Zhou Xiaoyang, Professor of School of Management, Xi’an Jiaotong University
Since the beginning of 2020
, the world has gradually experienced a chip shortage, which has intensified.
How serious is the
"
chip shortage
"
problem?
The CEO
of GlobalFoundries Semiconductor
said that the company's chip production capacity has been fully booked until
the end of
2023.
And according to his prediction,
the
"
chip shortage
"
problem cannot be completely solved in the next
5
to
10
years, and the global semiconductor supply chain may be in a tight supply situation for a long time. The same situation has occurred in other wafer foundries. The foundry fee has increased, and the reserved capacity needs to be prepaid in part or in full. The capacity for the next one or two years has been fully booked.
The problem of "
chip shortage
"
is fully reflected in the automotive industry
.
According to data from
forecasting agency
AFS
(
AutoForecast Solutions
), as of
November
14
,
2021
, the global automotive market has reduced production by
10.097
million vehicles
due to chip supply shortages
. Among them, the cumulative production reduction in Europe this year is
2.859
million vehicles; the cumulative production reduction in Asia this year is
3.677
million vehicles (of which the production reduction in the Chinese market is
1.981
million vehicles); the cumulative production reduction in North America this year is
3.152
million vehicles. In addition, according to
AFS
's forecast, the global automotive market may reduce production by
11.263
million vehicles this year. Some car manufacturers even plan to deliver
"
shortweight
"
products: Ideal Auto allows users to choose whether to deliver
the
3-
radar version
lacking
2
radars
in advance or wait until
December
to deliver the complete
5-
radar version;
Xiaopeng
Motors issued an announcement that if the owner chooses to install the radar after picking up the car, he will receive
the
X
ž
PILOT
software for free, and the radar will be installed in batches starting from
March
31
,
2022
; Tesla has delivered models in the US market that lack the rear
Typc-C
interface (with reserved holes) and the mobile phone wireless charging plate, and plans to
install them in batches starting in December
.
So, why is there a sudden chip shortage that is so fierce and unprecedented? Is it because global demand has suddenly increased, and the increase in global chip production capacity
/
output cannot keep up with the increase in demand? What exactly is the problem?
1.
Overview of the demand side in the past two years
Among all terminals that use chips, mobile phones have the greatest demand for chips (because first, each mobile phone uses a lot of chips; second, mobile phones have the largest production and sales volumes), followed by computers (including tablets), home appliances, automobiles, etc.
1.
Mobile phone demand side
Table 1 shows
the sales changes of mobile phones
,
the largest consumer of chips
.
Table 1: Changes in global mobile phone sales
It can be seen from Table 1 that if we only look at the sales changes in the third quarter of each year over the past three years, the global annual average growth rate in the past two years has been only
2.11%
. Taking into account the accuracy of statistics and the volatility of each quarter, and taking into account the annual chip technology iteration and increase in storage capacity, the increase in the value demand for chips should be less than
10%
.
2.
Computer demand side
Table 2 shows
the shipment volume and year-on-year growth rate of
the world's top five traditional
PC
manufacturers in
2020
.
Table 2: Global PC shipments
2019 VS 2020
Table 3 shows the global shipments (market share and annual growth) of desktop computers, notebook computers, and workstations.
Table 3: Global PC shipments
2021Q2 vs 2020Q2
It can be seen that the annual growth rate of the computer industry
in
2020
compared with
2019
, and
the annual growth
rate
of Q2 2021 compared with Q2 2020 is
about
13
%
.
Considering
that
the sales volume of computers is about one-quarter of
that
of mobile phones, this growth rate has little impact on chip demand.
3.
Automobile demand side
In
2021
, automobile production will be most in need of chips. Table 4 shows
the global automobile group sales ranking in
2020
.
Table 4:
2020
Global Automobile Group Sales Ranking
International credit rating agency Standard & Poor's recently released a report in July 2021 , raising its growth forecast for the global automotive industry. It is expected that global auto sales in 2021 will be about 83 million to 85 million , an increase of 8% to 10% . Standard & Poor's analysis shows that after being severely hit by the epidemic in 2020 , the global automotive industry has gradually accelerated its recovery, especially since the second half of 2020 , some countries have adopted relevant support policies and stimulus measures, which has driven auto sales.
From Table 4 and the above statements, the full-year auto sales in 2021 are basically unchanged compared to 2019. Of course, the demand for computing power and power chips for new cars has increased significantly. Similarly, the growth of other major chip users such as home appliances was also moderate in 2020 and 2021 .
To sum up, from the demand side of chips, the total demand for chips, converted into how many
8
-inch wafers are needed,
is still quite mild
in
2020
and
2021
.
2.
Chip supply situation in the past two years
Among the global semiconductor companies,
17
are expected to have
sales of more than
$
10
billion in
2021
, as
shown in Figure
1.
These include
six
fabless companies
(
Qualcomm, Nvidia, Broadcom, MediaTek,
AMD
, and Apple
)
and one pure foundry
(
TSMC
)
.
Another three semiconductor companies (
AMD
, NXP, and Analog Devices) will
join the list of
"
super suppliers
"
worth watching
in
2021
.
Table 5: Sales of major semiconductor companies
Overall,
super suppliers' sales are expected to increase by
26%
in
2021
compared to 2020.
Assuming
that
70%
of the revenue growth
comes from price increases and
30%
from increased supply, the average supply increase over the past two years is
7.8%
, which fully or almost fully supports the demand for chips in the terminal market growth over the past two years.
So, why is there a global chip shortage? Why is the chip shortage so serious?
3.
The origin of chip shortage
-
Huawei's business has been sanctioned. On September 15 , 2020 , the US ban on Huawei will take effect. At that time, chip companies that use US technology will not be allowed to supply Huawei without permission. Major international suppliers worked at full capacity to prepare for Huawei before the sanctions took effect (a large part of their production capacity was allocated to Huawei), which affected the supply of chips to other customers and caused supply tensions;
-
The high prices of cryptocurrencies such as Bitcoin have led to a surge in demand for mining machines and mining machine chips (including GPUs ). The demand for advanced wafer foundry capacity accounts for more than 10% of TSMC and other companies. Moreover, mining chip foundries are not sensitive to prices and even require 100% prepayment, which once squeezed out the capacity demand of other normal terminals for foundries, further causing supply tensions.
-
Due to the US sanctions on Huawei, the top mobile phone suppliers have accurately predicted that Huawei's mobile phone supply and sales will plummet. Each of them (Samsung, Apple, Xiaomi, OPPO , VIVO ) has formulated an aggressive strategy to seize Huawei's market share and actively stock up on chips and mobile phone terminals, preparing for a big fight. The stocking quantity of the top five companies is far greater than the reduction in Huawei's mobile phone sales, making the chip supply situation even worse;
-
Due to the COVID-19 pandemic and other natural disasters, the world's leading chip suppliers have had to stop or reduce production from time to time. Although the percentage is small, it has a huge psychological impact on the industry.
-
Many companies, especially car companies and computer manufacturers, learned from Toyota's experience and implemented JIT (just-in-time supply, zero inventory). Due to the impact of the above factors, they were forced to adjust their strategies and change the zero inventory target to a half-year inventory target. This is equivalent to increasing the demand of the entire industry by 50%/ year, which is something that the supply chain of any industry cannot bear!
-
Amid the tense situation of supply and demand in the entire industry, middlemen also began to stockpile goods and increase prices, making the entire industry extremely difficult.
To sum up, the overall global chip shortage is not caused by a surge in overall demand. The major factors causing the shortage are gradually disappearing or have disappeared. In addition, the world is also actively increasing production capacity. The cycle of increasing production capacity is about
12
months (with existing factories) to
36
months (starting from infrastructure construction). Considering that general international manufacturers will reserve a certain area of factory buildings (one of the authors’ former world-leading employers stipulates that when the factory utilization rate is predicted to be
>85%
, it is necessary to start planning to build a new factory), as the channel supply tension eases, channel stockpiles will gradually be released, and the overall global chip shortage will definitely be resolved in
2022
, or even faster.
4.
Shortage of automotive chips
Compared with the overall shortage of the entire integrated circuit industry, the chip shortage in the automotive industry has different reasons. As can be seen from Table 4, global automobile sales in
2020
have a large drop of about
15%
due to the epidemic
. Global automobile manufacturers have adopted
the concept of
JIT
and have reduced chip orders on a large scale. However, the supply of chips in other consumer industrial fields is extremely tight. Therefore, most chip suppliers have allocated their production capacity to non-automotive demand. However, when the demand of automakers increased in
2021
, it was too late to increase orders. In addition, since the certification cycle of automotive chips is
12
to
18
months, car manufacturers cannot change chip models and suppliers in time, resulting in a shortage of automotive chips, which cannot be alleviated in the short term. Furthermore, in order to be on the safe side, automakers have also begun to increase inventory under possible conditions, but each company has shortcomings in stocking, and the stock is not complete. At the same time, due to the explosive growth of new energy vehicles, the demand for automotive chips, especially power chips, has exploded, which cannot be alleviated in a short period of time. Therefore, automotive chips, especially automotive power chips, cannot be alleviated within
2-3
years.
As new energy vehicle main drive modules (chips) gradually transition to silicon carbide (due to silicon carbide's high efficiency, high temperature resistance, high pressure resistance, and high reliability), the supply of qualified and efficient silicon carbide chips will be extremely limited in the next few years, and the shortage of silicon carbide chips will be more serious and last longer.
5.
The relationship between OEM capacity shortage and stock-outs
The production capacity of the top five wafer foundries (even the inferior foundries)
in
2022
has been fully booked, and the customers have paid in advance. Especially small new design companies in China cannot get the production capacity of wafer foundries. Similarly, the production capacity of packaging and testing foundries is also very tight. There is also a fact that the entire mainland China has purchased about the total of the past ten years in the past two years.
It can be seen that
in
2022
, both wafer foundry and packaging and testing foundry have insufficient production capacity, especially for design companies in mainland China, but does lack of production capacity mean shortage of goods? According to Professor Wei Shaojun's report on
December
22, 2021,
the
2021
statistics
cover
2,810
design
companies,
592
more
than last year's
2,218
, an increase of
26.7
%
.
In
2021
,
the sales revenue of
2,810
companies is expected to be
487.75
billion yuan,
an increase
of 20.4%
from
405.04
billion yuan
in
2020.
Excluding the duplicated part,
the overall revenue in
2021
is
458.69
billion yuan,
an increase
of 20.1%
from
381.94
billion yuan
in
2020
.
There is no doubt that we cannot equate the lack of foundry capacity with shortages. If all design companies can get the capacity they want and produce the amount they plan to produce (please note that this plan is made when the market is short of chips as a whole), then the market will definitely be in excess, and there will definitely be design companies whose products cannot be sold or cannot be sold out. Furthermore, China does not need so many design companies. Some design companies will say goodbye to this era regardless of whether they can get foundry capacity. Just like some mobile phone manufacturers said, due to the impact of chip shortages, their own production and sales have been affected, but the entire mobile phone market, except for a few individual models, is still very good to buy, and it is still a buyer's market!
Therefore, lack of foundry capacity does not mean a shortage of chips, nor does it mean that supply exceeds demand. However, since all design companies are working at full capacity to prepare stocks,
wafer foundry in
2022
will still be very tight, and the capacity constraints of some process nodes and special processes will continue until
2023
!
At the time of publication of this article, news has come from the industry that orders for packaging and testing foundries have begun to decline, and some individual branches of some large packaging and testing companies have already stopped operations in advance for the New Year!
6.
Production capacity issues in mainland China
According to our country's development strategy and the target of localization rate, Zhao Haijun, co-
CEO
of SMIC
, said at the forum of Xinmou Research,
"
From a strategic perspective, we need to build domestic production capacity to at least meet
30%
of global market demand
. We should grow
five
times, which requires at least
10
years of development space
.
"
So from this perspective, the effective production capacity demand for wafer foundry in mainland China will continue to increase, and the wafer foundry capacity in mainland China will continue to be in short supply in the next few years. Of course, considering the status and market share of mainland China in the packaging and testing industry, the production capacity and demand of packaging and testing foundry will be relatively balanced in the next few years.
To sum up, the overall global chip shortage will
be greatly alleviated
in
2022.
However, the shortage of automotive chips, power chips and silicon carbide chips will continue for a few years!
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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