Monday, 17 May 2021 08:50

Chip shortage seen lasting well into second quarter of 2022 Featured

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Chip shortage seen lasting well into second quarter of 2022 Pixabay

The existing global shortage of semiconductors is expected to last through this year and into the second quarter of the next, the technology analyst firm Gartner has said, adding that normal levels of supply would resume after that.

In a statement, the company pointed out that the shortage had started initially with devices used for power management, display and micro-controllers made on legacy nodes at 8-inch foundry fabs which had a limited supply.

"The shortage has now extended to other devices, and there are capacity constraints and shortages for substrates, wire bonding, passives, materials, and testing, all of which are parts of the supply chain beyond chip fabs," the statement said.

"These are highly commoditised industries with minimal flexibility/capacity to invest aggressively on a short notice."

Although most categories would be supplied as needed by the second quarter of 2022, substrate capacity constraints could extend well into the final part of the year, Gartner said.

“The semiconductor shortage will severely disrupt the supply chain and will constrain the production of many electronic equipment types in 2021," said Kanishka Chauhan, principal research analyst at Gartner.

"Foundries are increasing wafer prices, and in turn, chip companies are increasing device prices."

The analyst firm listed four actions that that OEMs who depend directly or indirectly on semiconductors to mitigate risk and revenue loss:

"Extend supply chain visibility – The chip shortage makes it essential for supply chain leaders to extend the supply chain visibility beyond the supplier to the silicon level, which will be critical in projecting supply constraints and bottlenecks and eventually, projecting when the crisis situation will improve.

"Guarantee supply with companion model and/or pre-investments – OEMs with smaller and critical component requirements must look to partner with similar entities and approach chip foundries and/or OSAT players as a combined entity to gain some leverage. Additionally, if scale allows, pre-investing in a commoditised part of the chip supply chain and/or foundries, could guarantee the company a long-term supply.

"Track leading indicators – While no relevant parameter by itself will project how the shortage situation will evolve, a combination of relevant parameters can help guide organisations in the right direction.

"Diversify supplier base – Qualifying a different source of chips and/or OSAT partner will require additional work and investment, but it would go a long way in reducing risk. Additionally, creating strategic and tight relationships with distributors, resellers and traders can help with finding the small volume for urgent components."

Gartner research vice-president Gaurav Gupta said: “Since the current chip shortage is a dynamic situation, it is essential to understand how it changes on a continuous basis.

"Tracking leading indicators, such as capital investments, inventory index and semiconductor industry revenue growth projections as an early indicator of inventory situations, can help organisations stay updated on the issue and see how the overall industry is growing.”


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Sam Varghese

Sam Varghese has been writing for iTWire since 2006, a year after the site came into existence. For nearly a decade thereafter, he wrote mostly about free and open source software, based on his own use of this genre of software. Since May 2016, he has been writing across many areas of technology. He has been a journalist for nearly 40 years in India (Indian Express and Deccan Herald), the UAE (Khaleej Times) and Australia (Daily Commercial News (now defunct) and The Age). His personal blog is titled Irregular Expression.

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