2h | Alan Burkitt-Gray
The new US commerce secretary, Gina Raimondo, met leaders from the semiconductor industry yesterday to discuss the global shortage of chips and the effect on industry.
A number of companies in the global telecoms and data centre industries have told Capacity that they are suffering from shortages. Others, though, insist matters are under control.
Raimondo did not propose any specific action for the US, though she acknowledged that “semiconductors play a unique role in our economic and national security, and when semiconductor supply chains are disrupted, the impact is felt across the economy”.
She pointed the CEOs and other leaders to the US government’s desire “to monitor supply chain issues” and said she wanted “the remit and tools to address them”.
Raimondo wants more meetings: “Our goal for these conversations is to bring together a range of industry leaders to get more information on the impact the shortage is having on their industry, what are the short-term and long-term solutions that we can tackle together, and where specifically the Administration can be most helpful.”
According to a number of commentators, the Ford car company believes the shortage may last until next year. But major chip makers are investing in the US — the focus of Raimondo’s interest yesterday.
Among the world leaders, Taiwan Semiconductor Manufacturing Co (TSMC, pictured), Intel and Samsung, are “planning to spend nearly $50 billion between them on new facilities in the US. But those plants can’t be built overnight”, said Bloomberg commentator Brooke Sutherland a few days ago.
The shortage has affected the car industry, but its impact on telecoms and data centres is less pronounced.
US company Juniper Networks told Capacity: “There is a worldwide shortage of semiconductors impacting many industries. Similar to others, we are experiencing ongoing supply constraints which have resulted in extended lead times.”
NEC in Japan was more dismissive: “Although we cannot say there has been zero influence, we can say that it has been very limited,” an official in Tokyo told us.
Chinese company Huawei — which is building up its own semiconductor factories to address the embargo by US suppliers — said that in the telecoms and data centre industry “certain sectors are feeling the pinch” but said “it’s mostly the older chip technologies” that are affected — in other words, chips that use dimensions 10nm or more in their designs.
A Huawei executive said that “5G is of course newer and utilises advanced technologies” of less than 10nm dimensions “so for the most part there has been limited effect in this sector”.
Ericsson quoted a comment by CEO Börje Ekholm in the company’s latest quarterly report, in April. He said: “With proactive and continuous measures for supply chain resilience we have to date been able to manage the global semiconductors shortage situation without impact on our customer deliveries.”
Nokia did not reply to Capacity’s enquiry. Another company said: “We have considered the [request] and feel that actually any comment from us could be misinterpreted as market moving information, as it is such a hot topic. Therefore we respectfully decline to be involved this time.”
Juniper added: “While we have invested to strengthen our supply chain and increased inventory levels over the course of the last year, we are working closely with our suppliers to further enhance our resiliency and to mitigate recent disruptions outside of our control. Despite these actions, we believe extended lead times will likely persist for the next few quarters. While the situation is dynamic, at this point in time we believe we will have access to sufficient supply to meet our full-year financial forecast.”
The shortage is, of course, good for the chip makers. Qualcomm’s CEO-elect Cristiano Amon told Bloomberg in April that the company was bullish about the current quarter, “buoyed by surging demand for 5G handsets”.
Most market analysts have focused on the impact on the car industry, while noting that the chip industry is growing healthily. International Data Corporation (IDC) said this month that worldwide semiconductor revenue grew to US$464 billion in 2020, an increase of 10.8% compared to 2019.
IDC said the semiconductor market will reach $522 billion in 2021, a 12.5% year-over-year growth rate. IDC said it anticipates continued robust growth in consumer, computing, 5G and automotive semiconductors.
But “supply constraints will continue through 2021”, said IDC. “While shortages initially occurred in automotive semiconductors, the impact is being felt across the board in semiconductors manufactured at older technology nodes.” That supports Huawei’s comment about the effect being most pronounced for older designs of chips.
IDC noted that “the market for semiconductors in computing systems, such as PCs and servers, outpaced the overall semiconductor market, growing 17.3% year over year to $160 billion in 2020”.
Phil Solis, research director for connectivity and smartphone semiconductors at IDC, said: “Mobile phone shipments fell by more than 10% in 2020, but mobile phone semiconductor revenues grew by 9.1% due to a shift to higher priced 5G semiconductors, more memory per phone, sensors, and RF [radio frequency] support for more spectrum bands.”
Fitch Ratings noted that there is a “significant uptick in industry capital spending” that “is mainly dedicated to leading-edge capacity, which is used for cutting-edge technology such as 5G, internet of things and artificial intelligence”. It noted that TSMC’s $30 billion 2021 capital spending budget was a 50% increase on 2020.
It pointed out that supply constraints were being worsened by a number of events, “including the Texas storms in February”, a factory fire in Japan, “and the water stress caused by Taiwan’s extended drought”.
A third analyst, GlobalData, said that “China is accelerating investment in next-generation enabling technologies”, and is “well-positioned to lead in the emerging internet of things (IoT) arena, as chip technology is one of the key enablers for IoT”.
GlobalData pointed out that “China has set a target of becoming 70% self-sufficient in semiconductor production in the next 10 years”, noting a $1.4 trillion government-backed programme “to support R&D in key enabling technologies, including semiconductors, AI, robotics, 5G, 6G, cloud, super-computing, and quantum computing over the next five years”.
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