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Will the semiconductor shortage crisis continue?

Author : Shenzhen Crown Lighting

Update time : 2021-06-22 15:56:20

Will the semiconductor shortage crisis continue?

Semiconductor refers to a material whose conductivity is between that of a conductor and an insulator at room temperature.
Semiconductors are used in integrated circuits, consumer electronics, communication systems, photovoltaic power generation, lighting (like Commercial Solar Powered LED Street, outdoor led light and indoor led lighting) high-power power conversion and other fields. For example, diodes are devices made of semiconductors.

Recently (8th), the chief analyst of IHS Markit said that by April 2021, suppliers’ semiconductor input delivery delays will be longer than after the 2008-2009 global financial crisis, and they will almost enter the 2019 epidemic with major economies. The relevant blockade lasted the same length of time. During the epidemic, there was a sharp and unexpected surge in demand in industries-automobiles and parts, while household goods and technical equipment were the most affected.

As the price increases, the delay time has increased, which indicates that the semiconductor input manufacturer is operating at or near full load. Historically, output growth has been in response to longer delays. We can see this from the monthly PMI data of the three most affected industries from 2009 to 2021. Once the delivery time exceeds the long-term average of the pmi survey, this correlation will break. The possibility of further price increases in the short term is very high. If there is spare capacity, the delivery time of these departments will not increase. Assuming that the delivery time continues to remain at the level of October 2020, then we can estimate the output of these departments due to the increase in delivery time from January to April 2021:

US$182 billion for automobiles and parts;
$73 billion in household goods;
72 billion U.S. dollars are used for technical equipment.
Supply chain pinch

There are tight shortcomings in the supply chain, because global electronic product exports are concentrated in the Asia-Pacific region. However, the experience of the major suppliers varies. Since 2021, the export of semiconductor-related products has been at the lowest level since 2007, and the contraction has been concentrated in mainland China and Taiwan. The main constraining factor of container throughput is the container throughput: in mainland China ports, the container throughput in February showed a cyclical decline, but the throughput of Shanghai Port was the lowest level in more than 10 years in February of the 20th century. This shows that the production level in Mainland China during the Spring Festival is higher than usual, while the supply of containers at Chinese ports is still in short supply.

Taiwan, China: A single point of failure? China Taiwan Semiconductor Manufacturing Company (TSMC) accounts for more than half of the global semiconductor manufacturing plant revenue. Almost all the production capacity (92%) of advanced semiconductor manufacturing is provided by TSMC. The semiconductor manufacturing industry is highly dependent on water, but supply was interrupted due to the drought in Taiwan in February 2021, the worst drought in 60 years. By the end of April 2021, TSMC had begun to use tankers to transport water from reservoirs to production facilities, which was the first time since 2015.

If the semiconductor supply chain is concentrated in Asia, which countries will be disrupted in which sectors? The import-export trade flow table truly reflects the import and purchase of computer electronic products, including semiconductors.

For example, in Malaysia, electronic products account for 61% of the total investment; in South Korea, 60%; in China, 56%. Only Israel, where electronic products account for 62% of total input purchases, is more vulnerable. The information technology and telecommunications industries face the most serious situation of continuing shortages.

Supply chain diversification
Any policy to move semiconductor manufacturing out of the region will be very expensive: the cost of a new processing plant will be between US$5 billion and US$20 billion. Most of the planned capital expenditures are in Asia. And equipment manufacturers rely on highly specialized component suppliers, mainly in Asia. Therefore, any attempt to diversify may be beneficial to Asian countries/regions. In view of the large scale of semiconductor and electronics manufacturing clusters in Asia, Asia will still be one of the regions with the fastest growth in sales and capital expenditures.

Outlook
IHS Markit predicts that in 2022, the slowdown in demand for electronic components will bring supply and demand closer to balance. Taking into account the changes in the demand pattern, the pricing of specific categories will show a certain degree of flexibility. Taking into account the complexity, interdependence and high capital expenditures of the semiconductor supply chain, the risk of mismatch between supply and demand will still be high, and downstream industries will compete to deploy in semiconductor manufacturing companies.

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