Showing posts for October 2021
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.
20 October 2021
Memory suppliers to benefit from strong demand and supplier shortages
While the downsides to electronic components shortages are well known, business is booming for smaller memory suppliers.
Sales of Samsung DRAM grew 26% in Q2 2021 without meaningful production capacity growth, and as supply-demand imbalances grow, memory suppliers like Samsung, Micron and others are turning to smaller suppliers to fill gaps.
As chip shortages continue, demand grows. Order books get filled off the page, creating longer lead times (up to 40-weeks) and extending standing orders. This is bad news for the end-product manufacturer but great news for suppliers, who see sales rise and bids increase to fuel record turnover and, in some cases, net profits.
The sector as a whole is booming, but no better example of taking the bull by the horns exists than Alliance Memory.
Alliance Memory is a US-based 30-year old DRAM manufacturer, billed as a legacy SRAM supplier and a leading domestic supplier of DRAM and flash memory. The company’s run rate in 2021 is double what it was in 2020.
In an interview with EPS News, Alliance Memory CEO David Bagby explains why: “we went out to customers struggling to get Samsung. Now we have maybe the best representation of DRAM and SRAM product of anybody out there.”
Memory upturn forecast to continue
IC Insights, the foremost authority on memory and chip demand, has predicted a new record high for memory demand in 2022.
Stronger DRAM pricing is expected to lift total memory revenue 23% in 2021 to $155.2 billion. The memory upturn is forecast to continue into 2022 to $180.4 billion, surpassing the all-time high of $163.3 billion set in 2018.
Demand for memory, including DRAM, SRAM and flash, is being driven by economic recovery and the transition to a digital economy. Unlike other technological cycles, the current cycle of digitalisation has weight behind it, fuelled by innovations in data centres, 5G and space networks, AI, robotics and IoT.
Sequentially, the average price of DRAM rose 8% in the first quarter of 2021. Another increase of 18-23% in Q2 sent memory suppliers into a spin. Demand is outstripping supply, creating a perfect storm for continued price increases.
Price increases expected to continue until late 2022
The price of memory is more sensitive to other electronic components because supply is controlled by a few big players. Smaller memory suppliers fill in gaps in supply, but the big guns like Samsung and Micron rule the roost.
When demand outstrips supply at the big guns, prices explode. We’ve seen it several times before, such as the memory price increase of 2018. Prices fell again in 2019, recovered a little in 2020, then soared again this year.
Memory is a commodity and companies are willing to pay big to get a hold of it. Bidding wars are not uncommon and 40-week lead times are normal today.
However, while the memory upturn is predicted to continue into 2022, Gartner says memory prices will dive at the end of the year, predicting that an “oversupply” of memory chips will develop as demand eases and supply increases.
13 October 2021
Electronic Component Shortage update
The ongoing electronic component shortage is one of the biggest challenges global supply chains face today, with demand for many components, from chips to actives and passives, well and truly outstripping supply.
A lot has happened in the last month, with new research and analyst insights pointing to when demand might ease (hint: it won’t be this year).
Here’s your latest electronic component shortage update:
Chip lead times hit all-time high
According to Susquehanna Financial Group, chip lead times hit an all-time high of 21-weeks in September, up from 20.2 weeks in August and 18 weeks in July. However, in a research note, Susquehanna analyst Chris Rolland said that while lead times for some chips got worse, lead times for others like power management chips saw relief.
Gartner says global chip shortage will persist until Q2 2022
Gartner predicts the global semiconductor shortage will persist through Q1 2022 but recover to normal levels by the second quarter of 2022. They rate the current shortage as moderate and the shortages of early 2021 as severe.
Chipmakers should brace for 'oversupply' in 2023
Analyst firm IDC predicts that the global chip shortage may well turn into an oversupply situation in 2023, sending prices diving. They say the industry will see normalisation by the middle of 2022, with a potential for overcapacity in 2023.
EU pushes for chip sovereignty
The EU will legislate for chip sovereignty with the forthcoming “European Chips Act”, bringing together the EU’s semiconductor research, design, and testing capabilities, so that EU countries can make demand meet supply as one nation. “Europe cannot and will not lag behind,” the EU said in a statement on the Chips Act.
Ford Europe predicts chip shortages could continue to 2024
In an interview with CNBC, Ford Europe chairman of the management board Gunnar Herrmann estimated the chip shortage could continue through to 2024. Herrmann also revealed a new company crisis in raw materials. “It’s not only semiconductors,” he says, “you find shortages or constraints all over the place.”
Tesla's China output halted on chips shortage
Tesla temporarily halted some output at its Shanghai factory for four days in August due to the chips shortage, shutting part of the production line for electronic control units (ECUs), a small but significant action that cost it millions in revenue.
New forecast says chip shortage to cost car industry $210 billion
The total estimated cost of the chips shortage to the car industry keeps rising, with a new report from AlixPartners predicting a global cost of $210 billion. This is nearly double what their first report predicted in May ($110 billion).
Counterfeit chips penetrating the supply chain
As a result of the chips shortage, some manufacturers are turning to riskier supply channels, leaving themselves vulnerable to counterfeits. As ZDNet reports, this puts low-volume manufacturers whose supply chains are less established at risk.
If you are worried about counterfeits in your supply chain, read our 8 Step Guide To Buying Electronic Components With Confidence and Avoiding Counterfeits.
If you are struggling to find those hard to find and obsolete components. Contact Cyclops Electronics today. Call 01904 415 415, email firstname.lastname@example.org or visit our website https://www.cyclops-electronics.com/.
06 October 2021
Rare earth metal prices explode
Prices for rare earth metals have exploded over the last 12 months, moving nearly 50% higher on average since March.
This development could push prices of electronics components higher than ever, as a perfect storm of expensive raw materials + limited production capacity + higher demand = rocketing prices.
As we are seeing with the global semiconductor shortage, fluctuations in supply chains ripple through the electronics industry.
Electronic component shortages have, in part, been caused by reduced mining quota for raw materials including rate earth metals. But the problem now isn’t a lack of mining, but the soaring demand for rare earth metals.
The high price reflects strong demand. Rare earth metals are used in most electronic components and devices, from integrated circuits to displays, vibration motors and storage, so it’s easy to see why demand is so strong.
For example, materials like neodymium and praseodymium used to make magnets have seen a 73% increase in demand in 2021. Holmium oxide used in sensors, terbium oxide used in displays and cobalt used in batteries have also seen increases.
Why have prices exploded?
China is the only country in the world with a complete supply chain for rare earth metals from mining, to refining, to processing. With over 55% of global production and 85% refining output, the world depends on them for rare earth metals.
In January, Beijing hinted at tightening controls for earth metal exports, triggering panic across the world and sending prices soaring.
For those of you who remember, rare earth prices exploded in 2011 when China’s export volumes collapsed. China cut export quotas of the 17 rare earth metals and raised tariffs on exports, sending prices soaring by more than 50%.
Talk about déjà vu!
Another factor for the price explosion is supply and demand. Even with China’s hints, demand for rare earth metals is outstripping supply. The world is using more electronics than at any time in its history, and rare earth metals are needed to make more of them.
It isn’t only relatively unknown materials like neodymium and praseodymium that are surging in price, but also more commonly known materials like tin, aluminium and copper, which have also surged in price in 2021.
So, in a nutshell, demand for rare earth metals is outstripping supply, and China (which has significant control over rare earth metals) has hinted at tightening exports, sending a shockwave through the supply chain.
The issue is bad and will take time to resolve. The United States is the second biggest producer of rare earth metals, and in February, President Joe Biden announced a review into domestic supply chains for rare earths, medical devices, chips and other resources, with a $30 million initiative to secure new supply chains.
Unfortunately for the world, China’s control of 55% of global production and 85% of refining output for rare earth metals means they control the market. Missteps, problems at home, and hints about tightening controls have already sent rare earth metal prices soaring, and it stands to reason they will continue creeping higher in the near-term.
Enter Electronic Component part number below.