Showing posts tagged 'memory'
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.
29 September 2021
Communications including 5G will drive the components market
According to IC Insights, the communication sector’s share of integrated circuit sales reached 35% in 2020 and is expected to grow to 36.5% by 2025. For perspective, the automotive sector’s share of integrated circuit sales was 7.5% in 2020 and will grow to 9.8% by 2025 - significantly less than communications.
What’s driving such high demand for ICs in the communications sector?
There are four big tailwinds:
- Edge computing
- Internet of Things
- AI (artificial intelligence), MI (machine learning) and data analytics
5G is the main driver for components demand, with 5G infrastructure rollout happening slowly, but surely. We are nowhere near a complete version of 5G, and networks are in a race against time to deliver a reliable service.
The first step for networks is replacing low-band 4G spectrum, followed by mid-band spectrum that uses 2.5, 3.5 and 4.5 GHz, enabling faster data speeds. The final step is the rollout of millimetre wave, which enables true 5G speeds. Millimetre wave also happens to be a precursor for next-generation 6G.
On top of 5G infrastructure rollout you have more 5G-enabled devices coming to market, such as smartphones, tablets and laptops. Smartphones, in particular, are leading the way for 5G adoption, putting faster data in our hands.
The rapid growth in IC demand in the communications sector also stretches to other components like modems, memory and antennas. 5G isn’t just an IC boon - it’s a boon for all the electronic components needed for 5G.
Second to 5G we have edge computing, which by a miraculous twist of fate is needed to deliver a 5G experience (and needs a whole lot of components).
Edge computing puts compute capabilities relatively close to end users and/or IoT endpoints. In doing so, it reduces latency, while 5G delivers faster data speeds, providing a seamless experience on certain devices.
Internet of Things
IoT describes a network of connected smart devices that communicate with each other. For example, a vital sign monitor in a hospital could communicate with medicine dispensers and automate medicine dosages for doctors.
The Internet of Things has been talked about as a trend for several years, but we now have real applications that are useful.
AI (artificial intelligence), MI (machine learning) and data analytics
AI (artificial intelligence), MI (machine learning) and data analytics require enormous, powerful data centres to power them. These data centres require significant investment in chips, memory and other electronic components.
Also, AI, MI and data analytics need cloud computing, edge computing and in some cases 5G to deliver a real-time experience.
By 2025, the communications sector is forecast to have a 36.5% usage share of integrated circuits, making it the biggest consumer of semiconductors.
Demand for integrated circuits, discrete circuits, optoelectronics and sensors will grow to an all-time highs thanks to the industry tailwinds in this article. The future is bright, but to stay ahead, a robust supply chain will be needed.
Electronic components distributors like Cyclops are helping supply meet demand, while the communications sector battles to secure chip orders. Call us today at +44 (0) 01904 415 415 or email firstname.lastname@example.org
01 September 2021
Component Prices Rise 10% to 40% - But why?
While component price rises are expected when demand outstrips supply, the scale of recent increases has come as a shock to many businesses.
In its Q3 Commodity Intelligence Quarterly, CMarket intelligence platform Supplyframe reports that some electronic components have seen prices rise by as much as 40%, making it uneconomical for products to be made.
In particular, semiconductors, memory, and modems are seeing 10 to 40% price increases, exceeding what most analysts envisioned for 2021.
Why are prices rising?
Price rises start with materials. There are long lead times for many raw materials, causing shortages. Add rising commodity prices and difficulties transporting products and you have a disrupted manufacturing economy.
You also have to factor in the impact of the coronavirus pandemic, which has caused labour shortages and disrupted the manufacturing economy with shutdowns.
Logistics is also a big fly in the ointment for electronic components. The industry is recovering from COVID-induced shutdowns and travel restrictions are causing problems at borders, creating delays that ripple through the supply chain.
Supply and demand
The bulletproof economics of supply and demand also rule the roost for electronic components, and demand is higher than it has ever been.
We are in a situation today where most electronic components manufacturers are running at 99-100% capacity and can’t keep up with demand.
Demand is outstripping supply for chips, memory and communications components like integrated circuits, discrete circuits, optoelectronics and sensors, creating a bidding war as manufacturers scramble to get what they need.
Growing demand for new technologies
Emerging technologies like artificial intelligence, machine learning, virtual reality, augmented reality and edge computing are fuelling demand for smarter chips and data centre modernisation, while technologies like 5G and Wi-Fi 6 are demanding infrastructure rollout, which requires significant investment.
Across the board, technology is booming. Manufacturers are making more products for more people, and they must do so while balancing costs at a time when component prices are rising - no easy feat even for established businesses.
Everyone is raising prices in line with their own cost increases, from semiconductor manufacturers to outsourced fabs and suppliers. At 10 to 40%, these increases are putting pressure on supply chains and businesses.
How many price increases will target markets absorb? How can we sustain production without significant margin pressure? These are the challenges facing manufacturers, who are stuck between a rock and a hard place right now.
There are a few solutions:
- Equivalents: Source equivalent components from different brands/makers/OEMs that meet size, power, specification, and design standards.
- Use an electronic components distributor: Distributors are the best-connected players in the industry, able to source hard-to-procure and shortage components thanks to relationships with critical decision-makers.
Prices will fizzle down, eventually
Although research published by Supplyframe says pricing challenges will remain through early 2023, they won’t last forever. Price rises should fizzle out towards the end of 2021 as manufacturers catch up to orders and reduce disruption.
If you are experiencing an electronic component shortage, we can help. Email us if you have any questions or call us on 01904 415 415 for a chat with our team.
06 May 2021
Top Manufacturer Lead Time Update
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