Supply chain balance is an elusive goal

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The recent semiconductor supply crisis is occurring in the manufacturing equipment industry. ASML, the only manufacturer of important EUV lithography machines used in fabs, Recently announced We don’t get enough lenses from our supplier Zeiss to meet our needs.

The chip industry expects to build more than 20 fabs over the next few years to improve the global semiconductor shortage. Currently, these factories can face headwinds due to lack of manufacturing equipment.

Don’t rain in anyone’s parade. But this may not be a bad thing. For the electronics supply chain, the worse than the shortage is the excess of semiconductors.

The new fab advances semiconductor manufacturing and design. They don’t just mass-produce more chips. But this shortage is bad, but it’s worth looking back at the 2000-2001 inventory surplus. It literally changed the way supply chains do business.

The dot.com boom in the late 1990s stimulated demand for everything Internet-enabled. The component orders weren’t really scrutinized, so the highly anticipated OEM and EMS providers placed orders with multiple distributors and suppliers. When the dot-com bubble burst, there was an excess of $ 13 billion on chips alone.

Customers have pushed the surplus back to distributors and EMS partners who had to cancel millions of dollars worth of inventories. There was a grudge among the supply partners. Parts prices plummeted and the gray market thrived. Processes such as JIT, BTO, lean, and purchasing pattern monitoring were gradually introduced.

Ironically, these practices contribute to the current shortage. However, adding more chips is not the solution.

my EE Times Colleague Stefani Munoz recently spoke with Tirias Research founder and chief analyst Jim McGregor about offering an imminent fab to everyone for free.

Capacity is only part of the story

“There is definitely a possibility of oversupply,” McGregor said. “Even if demand is maintained (assuming there are no economic downturns or industry corrections), we may still be heading there.” Intel now has four latest fabs. I’m trying to build. He said TSMC and Samsung are also adding capacity. “If you add up all the capacity that could be online, you could definitely overshoot. This isn’t the first time.”

Supply, supply chain

Capacity is not the only issue. Poor predictions set the stage for the latest tip crunch. The global supply chain has been overturned by Covid and has not yet recovered. There is a shortage of semiconductor materials. Due to pollution, Western Digital’s NAND flash output has recently stopped. Airports and ports are open and closed around the world. Logistics costs are skyrocketing and geopolitics is influencing the flow of goods.

Russia’s invasion of Ukraine threatens global supply neon Used for chip manufacturing.

According to McGregor, the goal is not just to keep up with demand, but to balance manufacturing. The Asia Pacific region remains a hub for electronics production.

“This part [buildup] Geopolitics has been confused in the last few years and I don’t know what will happen, so I’m rebalancing again. Even if it exceeds demand, it is important to have more manufacturing capacity in other regions, especially in Europe and North America, “he said.

The shortage wasn’t all bad for the tip company.They were able to Raise the price.. Revenue continues to grow. Insatiable demand has little downside — when it falls, it’s time to worry.

But for all the stories of agility, the increase in production is notoriously slow, and factories are a costly long-term investment. ASML CEO Peter Wennink states that Zeiss faces the same hurdles. “Once the factory is ready, we need to order the manufacturing equipment. They need to hire people. And … it takes more than 12 months to make the lenses,” he said. Financial Times.

McGregor is hoping for a fix. “Our economy has been booming for a long time and the pandemic was a moment in terms of adjusting demand. If anything, it has increased, especially in terms of technology. There will be corrections. The problem is , When and how much. “

In McGregor’s previous point, fab capacity is also about balance. The number of new fabs may not be as important as where those factories will be built.

The supply chain exists, in part, to manage the imbalance between supply and demand. New and welcome practices are emerging. Digitization improves connections and information provision with partners. Distributors offer supply chain solutions, not just parts. Engineers consider procuring components as they develop their designs. Contracts focus more on customer commitment than on price reduction goals. Sustainability is a general goal.

This time, the lack of chips will be the catalyst for evolution.

author: Barbara Jorgensen

Barbara Jorgensen

Barb Jorgensen is Editor-in-Chief of the supply chain publication EPS News and has been responsible for the manufacture, procurement and business of electrical devices for over 25 years. Barb spent most of his career at Electronic Business magazine and EBN. He is freelance; then he founded the online publishing EPS News with two industry veterans Bolaji Ojo and Gina Roos. EPS News was acquired by AspenCore in 2017.

https://epsnews.com/2022/03/30/supply-chain-balance-is-an-elusive-goal/ Supply chain balance is an elusive goal

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