With Foundries at Full Utilization, Where do We Go From Here?

 

With supply uncertainty at levels not seen in over 30 years, the ongoing chip shortages continue to present numerous challenges and unparalleled levels of risk along the global electronics supply chain. Numerous factors, including the ongoing pandemic, have pushed foundries to their limits. 

With steep demand recovery, elongated lead times, and massive spikes in pricing, Supplyframe’s own data shows that current shortages could extend into 2023 at a minimum. There is no one-size-fits-all solution, but a combination of new investments, expanded capacity, and access to intelligence and insights can help leaders navigate the numerous challenges before them. 

The Cost and Complexity of Chip Manufacturing

Perhaps the most common reaction to a situation like this is to increase capacity to meet demand. In the case of complex components, sensors, and semiconductors, this is far easier said than done. 

We explored the topic of semiconductor manufacturing in a past article, detailing the complexity of the process and the sheer costs. In total, the process incorporates up to 1,400 steps and can take up to 20 weeks to complete. 

“It’s almost impossible to start chip manufacturing from scratch. This is why we are seeing industry consolidation: it has become so difficult and expensive to do, that companies couldn’t afford to do it on their own.” 

Alan Priestley, Europe Semiconductor Analyst at Gartner

There are very few companies who specialize in the production of semiconductors. Roughly three-quarters of the world’s total semiconductor manufacturing capacity comes from China, Japan, South Korea, and Taiwan, specifically from companies like TSMC and Samsung. 

It’s clear that capacity needs to increase, but even this will be a long and expensive process. Various companies are investing billions of dollars to expand production. GlobalFoundries, for example, recently announced a new factory near its headquarters in Malta, New York that will cost $1 billion in total, but will ultimately boost their own output of chips for industries like 5G and automotive. 

Over the next several years, new foundries will emerge around the world to increase capacity, but for those stuck in the shortages of the present, what can be done to mitigate risk and control costs? 

Navigating Global Component Shortages 

While the electronics value chain leverages investments and new capacity on a global scale, leaders across individual organizations need some sort of guidance on how to navigate an incredibly fragile situation. 

In an industry where decisions can affect billions of dollars in revenue, flying blind is simply not an option. This is why we created Supplyframe Commodity IQ. This new solution is our answer to the question of “What now?” 

Most market research solutions are static and rarely updated, if at all. Commodity IQ provides a fully up-to-date experience for subscribers, ranging across numerous commodity categories, and powered by both industry partners and our globe-spanning Design-to-Source Intelligence Network. 

A combination of timely insights, valuable data not found anywhere else, and expert analysis give industry leaders an edge and help them stay ahead of the curve. It also fuels smarter, more agile decision-making, opening the door for other Supplyframe Design-to-Source Intelligence solutions that can augment your capabilities even further. 

Global chip shortages aren’t going anywhere, but with the right intelligence and insights at your disposal, your organization will be able to weather the storm with minimal impact to your bottom line. Learn more about Supplyframe Commodity IQ today. 

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Bradley Ramsey
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