What’s caused the current supply chain disruption?
by
Brian Dunleavy, Commercial Director, Viadex
We are all aware of the supply chain shortages that are affecting the IT industry currently and I wanted to share some findings that highlight 3 areas that will have an impact across multiple industries:-
Electronic components demand:-
- Overall demand for semiconductors of all types — from basic microcontrollers and memory chips to the most sophisticated high-performance processors — has grown over the past decade, as smartphone usage and computing power boomed.
- At the same time, the automotive industry is increasingly betting on high-tech advancements for vehicles, which involves the use of many more chips.
- As the industry entered 2020, high demand was already expected in the mobile chip area because of the rollout of 5G devices.
Over-reliance on Taiwan’s TSMC:-
- Just one Taiwanese company, TSMC, holds over two-thirds of the global capacity for producing the most advanced semiconductor chips.
- TSMC’s importance lies in the critical role it plays in the entire semiconductor supply chain; it also manufactures chips for other chipmakers or for fabless chip designers, such as Broadcom, Qualcomm, Nvidia, AMD or Texas Instruments.
- Therefore, any disruption to Taiwan’s manufacturing activities would have a rippling effect on the global electronics supply chain.
The Covid-19 pandemic:-
- Initially, the problem was only a temporary delay in supplies as factories shut down when the coronavirus pandemic first hit.
- In February 2020, lead times — duration between when an order is placed and when it gets filled — stretched to 15 weeks on average. However, although production got back to normal, a new surge in demand was driven by changing habits fueled by the pandemic.
- U.S. restrictions on China’s Huawei sparked widespread stockpiling of chips – with imports climbing to almost $380 billion in China.
- These two main factors – delays caused by the early 2020 shutdowns and a huge increase in demand – combined to create the shortage scenario that many industries are now facing.
What is the expected impact of these shortages?
The semiconductor shortages have meant whereas previous shortages were driven mainly by processor availability shortages can be seen across multiple components such as:-
- Integrated Circuits
- Controllers for LCD Panels
- Power Management Chips
- Battery Controllers
Market pricing will continue to increase over the coming months with and all vendors now having acknowledged supply constraints – below are some latest links on the topics:-
