Showing posts tagged 'china'
27 October 2021
Why is chip sovereignty so important?
The US and EU are planning for chip sovereignty, aiming to defend domestic chip supplies and move manufacturing back home.
At first glance this is a tall order, considering most chips are made in China and China controls 55% of rare earth metal production, but it is nether the less crucial to ensure that the Western world has access to the chips it needs.
The need for chip sovereignty
As the electronics industry battles on with chip shortages, we are seeing car plants cut production and companies delay product launches.
These are only a few examples of measures applied like sticky plasters over supply chains that have been bleeding for years.
We are in a situation where electronic components manufacturers are running at 99-100% capacity. Demand has soared for all types of components, from chips and memory to diodes and displays, squeezing supply chains.
Quite simply, demand is outstripping supply.
Many of the problems in the supply chain are geopolitical and logistical in nature, so by moving manufacturing back home, nations like the US and the EU will be able to control the supply chain (or most of it) and make supply meet demand.
The EU will legislate to push for chip sovereignty with the forthcoming “European Chips Act”. It aims to stop European countries from competing with each other for chips, instead having them work together to compete globally.
The US isn’t legislating for chip sovereignty, but the Biden administration used its first budget proposal to Congress to call for domestic funding to fight semiconductor shortages, with figures up to $50 billion being touted.
The UK is at odds with the US and EU with no chip sovereignty in sight.
Simply put, the UK is selling off chip firms, with $42 billion sold since 2010 (figures from US research). For example, In July, the UK’s largest chip plant was acquired by Nexperia - a Dutch firm wholly owned by Shanghai-based Wingtech.
This raises concerns over the future of UK chip manufacturing. Industry funding is seriously lacking too, putting the UK firmly behind the US and EU.
Companies are a successful case study
As countries continue to struggle to meet demand for chips, some companies have taken matters into their own hands.
Apple produces their own chip called the M1 for the MacBook Air and iMac, and Google is doing the same with the Tensor chip, used in the Pixel 6 smartphone.
By moving away from Intel and Qualcomm respectively, Apple and Google have taken greater control over their supply chains, cutting out many geopolitical and logistical issues and unlocking greater pricing power.
With the global chip shortage showing no signs of abating and rare earth metal prices soaring, supply chains are only going to get squeezed more in the near future.
Chip sovereignty will be important for nations to meet demand and reduce reliance on China, Taiwan, and other countries a very long way away.
However, while the EU legislates for chip sovereignty, and the Biden administration pushes Congress for domestic chip funding, the UK continues to sell off chip firms to foreign investors. This will bite down hard when chip imports take a hit.
22 April 2021
Why We're Facing a Global Semiconductor Shortage
The world is experiencing a semiconductor shortage at a time when demand for semiconductors is at an all-time high. Manufacturers can’t make enough of them and we’re now seeing this affect the availability of products.
You probably remember last year Sony released the PlayStation 5 and Microsoft released the Xbox Series X. AMD released the Big Navi GPU (RX 6000) and Apple released the iPhone 12 range. What all these products have in common is they were all directly affected by the semiconductor shortage. Demand well and truly exceeded supply.
What’s causing the shortage?
A perfect storm has hit the semiconductor market. It isn’t one thing but a combination of different things that’s causing the shortage today.
The COVID-19 pandemic
When the COVID-19 pandemic hit, car and commercial vehicle sales took a hit. Estimates suggest that sales fell by 50% or more within a single month. In response, car manufacturers scaled back orders for semiconductors and other parts.
At the same time, demand for electronics chips soared as more people spent time working from home and on furlough.
Laptops, smartphones, drones, smartwatches, tablets, kitchen appliances - everything has a semiconductor nowadays. Then you have IT, data centres, internet infrastructure and cloud and edge computing. All are powered by semiconductors.
And so, the factories that were at capacity making semiconductors for cars switched to making semiconductors for electronics. This was a blessing in disguise for factories because semiconductors for electronics have a higher margin. However, it has caused a problem for car manufacturers who now need to ramp up production.
The situation now is this - car sales are picking up and car manufacturers are fighting for orders against electronics manufacturers. Factories are at capacity and can’t make enough to go around. This is feeding through to nearly every sector.
Ultimately, this is the result of poor planning from car makers who cut orders too deeply last year at the beginning of the COVID-19 pandemic.
Even before the COVID-19 pandemic hit, there weren’t enough factories to meet semiconductor demand. There were long lead times in 2019 because semiconductor demand outpaced the ability of factories to make them. This problem has persisted through to 2021 and has been compounded by the COVID-19 pandemic.
With most factories running at 99-100% capacity, there is very little room for boosted output. You would think that the solution is to build more factories, but this would not solve the problem today or even a year from now because semiconductor fabs take at least a year to build with another 6-12 months in setup time.
Semiconductor manufacturers are investing in new factories, expansion and more efficient technologies, but short-term solutions these are not.
The US is attempting to bring semiconductor manufacturing to US soil to remedy this or at least reduce dependency on foreign suppliers.
US and China trade war
Calls for domestic manufacturing are heating up in the US and China, the result of a trade war brought about mostly by supply chain disruptions related to the COVID-19 pandemic.
Reports in May 2020 that the Trump administration was in talks with Intel, TSMC, and Samsung about building US chip factories proved true. In 2021, with a new president and Biden administration, these talks are persisting.
The reason a technology trade war broke out between the US and China is because the US imposed a 25 per cent tariff on $34 billion of Chinese imports in 2018. There has been bad blood ever since with threats and action on both sides.
This eventually affected the semiconductor supply chain because in 2020 the US turned to export restrictions targeting the semiconductor supply chain to safeguard critical infrastructure in the telecommunications sector. This followed a 2019 ban on the Chinese company Huawei for “national security reasons”.
For example, one of the consequences of export restrictions was that American firms were cut off from chips made by China's Semiconductor Manufacturing International Corporation - the third largest chip maker in the world with 11% market share.
Local production problems
Factory shutdowns due to natural disasters, bad weather and the COVID-19 pandemic have caused semiconductor supply chain issues.
Most of the world’s semiconductors are manufactured in Taiwan. Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, has a 28% market share. The second largest, UMC, also based in Taiwan, has a 13% market share.
Taiwan is experiencing serious water droughts in 2021. Millions of tonnes of water are required to manufacture semiconductors every week. Taiwan Semiconductor Manufacturing is having to bring water in on trucks and UMC are doing the same. This has caused significant drops in manufacturing efficiency.
The US is also experiencing shutdowns. NXP Semiconductors had to shut its plant in Austin, Texas, due to winter weather in February 2021.
Factory shutdowns cause order backlogs and extended lead times. Orders persist and pile in whether a factory is down or not. This squeezes supply chains, causing a shortage.
How long will the semiconductor shortage persist?
We expect the semiconductor shortage to persist through 2021 but ease towards the end of the year as demand for electronics chips decreases as COVID-19 lockdowns end. This will cause a shift in supply from electronics semiconductors to automotive semiconductors which will provide the industry with a much-needed equilibrium.
The world’s largest semiconductor manufacturers - TSMC, UMC, SMIC, Samsung, Intel, SK Hynix - are investing in increased output. Many investments were in the pipeline as early as 2019 and are expected to yield results at the end of 2021.
Right now, there is a serious imbalance in the demand for semiconductors, one that our existing infrastructure is not built to cope with. This imbalance will ease over time.
How can supply chains continue to meet demand?
If you have been impacted by the semiconductor shortage you can meet demand by partnering with an electronics components distributor like us.
We specialise in the procurement and delivery of semiconductors and parts for a wide variety of industries from the world's leading manufacturers. You can find out more about what we do here. Email us if you have any questions.
04 November 2020
How the electronic supply chain has been divided by COVID-19
Amidst doom and gloom predictions of global economic fallout from COVID-19 and further human and social ramifications, the electronics industry is quietly confident that demand for products will not stall this year or shortly.
This makes for a morale-boosting headline, but underneath the battle lines, there is a trade war raging as a result of a divided supply chain.
Equipment manufacturers are struggling to get a hold of components and component manufacturers are struggling to make enough new components. This, the result of a virus that has thrown the world into unchartered territory and forced elected leaders into making profound decisions that have affected our way of life.
The electronics sector is healthy for now, but keeping it going has required change and intelligent thinking. This is how the electronic supply chain has been divided by COVID-19:
The battle for stock
With the production capacity for electronic components down as a result of COVID-19, it is no surprise that the components' supply chain has been impacted. Fewer components are being made, creating a shortage of stock.
As a result of this, we are now seeing a shift in behavior from manufacturers, who are component hoarding and paying over-the-odds for stock to meet demand. This has reduced the number of components available on the open market, creating a shortage, and the issue is compounded by a lack of new production.
Supply moving away from China
As a result of the coronavirus in China, which has devastated the workforce and adversely impacted the country’s social reputation, manufacturers are beginning to seek alternatives to meet the demand for electronic components.
Taiwan, South Korea, Singapore, Malaysia, the United States, Japan, Vietnam, the Philippines, and Germany are all rich manufacturers of electronic components. We are now seeing greater diversification in supply chains. This is good news for the global economy, but not so much for China and Hong Kong.
Changes in supply chain planning
COVID-19 has forced manufacturers to pivot their supply chains to boost efficiency. From being more flexible with transportation to estimating capacity and accelerating production, manufacturers are doubling up on decision-making processes.
The optimization of production and distribution capacity are key areas, so that production can continue to meet demand while managing health. Available inventory has now become a more important factor than ever too - no longer can manufacturers rely on a steady supply of components. Orders must be planned.
Closer partnerships with electronic component distributors
Pre COVID, manufacturers typically kept the procurement of electronic components in-house with a slick and efficient operation. Inventory would be automatically updated with component orders placed electronically between supplier and manufacturer.
If COVID has taught manufacturers one thing, however, it is that you can never rely on one single supplier to deliver. One failure breaks the system.
This has led manufacturers to partner with component distributors who can deliver the stock they need. The sourcing of components is being increasingly outsourced, which brings some inefficiencies, but is necessary to keep things ticking over.
12 June 2019
Worries about the rare earth minerals needed for high-tech products
Rising tensions between US and China have sparked worries about the 17 rare earth minerals needed for high tech products like robotics, drones and electric cars.
China recently raised tariffs to 25% on rare earth exports to the U.S. and has threatened to halt exports altogether after the Trump administration raised tariffs on Chinese products and blacklisted telecommunications giant Huawei.
With names like europium, scandium and ytterbium, the bulk of rare earth minerals are extracted from mines in China, where lower wages and lax environmental standards make production cheaper and easier.
But trade experts say no one should panic over China’s threats to stop exporting the elements to the U.S, since there are rare mineral mines in California, Australia, Myanmar, Russia and India, which could step in when needed.
“The sky is not falling,” said Mary B. Teagarden, a China specialist, professor and associate dean at the Thunderbird School of Global Management in Phoenix. “There are alternatives.”
Simon Lester, associate director of the centre for trade policy studies at the Cato Institute think tank in Washington, agreed. “Over the short term, it could be a big disruption, but companies that want to stay in business will find a way,” he said.
Although the US is among the wold’s top countries for rare earth’s production, it is also a major importer for the minerals, looking to China for 80% of what it buys, according to the US geological Survey.
Mountain Pass, located in San Bernardino County, California, was once top supplier of the world’s rare earth minerals, but China began taking over the market in the 1990s and the U.S. mine stopped production in 2002. Mountain Pass later restarted production only to close again amid a 2015 bankruptcy. Since then, Mountain Pass has focused on achieving greater autonomy with a $1.7 billion separation system set to go online late next year that would allow it skip sending rare earths ore to China for that step.
Australian rare earths production giant Lynas Corp. Ltd. this month announced a proposed deal with Blue Line Corp. of Texas for a separation facility at an industrial site in Hondo, Texas.
There may be other options, too. Deposits of rare earths have been detected in other U.S. states including Wyoming and Alaska, as well in several remote areas of Canada. The Interior Department is calling for more prospecting and mining of “critical minerals,” including on public lands currently considered off-limits, and even in oceans.
“We have to be more forward thinking,” said Alexander Gysi, an assistant professor in geology and geological engineering at the Colorado School of Mines in Golden. “It would be better for the U.S. to have a greater range of sources for rare earths.”
Enter Electronic Component part number below.