Chip shortage creates powerful new players

SAN FRANCISCO – Since 1989 Microchip Technology has been operating in a lost hole in the electronics industry, making chips called micro...

SAN FRANCISCO – Since 1989 Microchip Technology has been operating in a lost hole in the electronics industry, making chips called microcontrollers that add computing power to cars, industrial equipment and many other products.

Now a global chip shortage raised the profile of the company. The demand for Microchip’s products is more than 50% greater than what it can supply. This placed the Chandler, Arizona-based company in an unknown position of power, which it began exercising this year.

While Microchip normally allows customers to cancel an order for chips within 90 days of delivery, it began offering priority shipping to customers who signed contracts for 12 months of orders that could not be revoked. or reprogrammed. These commitments reduced the chances of orders evaporating when the shortage ended, giving Microchip more confidence to hire workers safely and purchase expensive equipment to increase production.

“It gives us the opportunity not to hold back,” said Ganesh Moorthy, president and CEO of Microchip, who announced on Thursday that last quarter profit tripled and sales rose 26% to $ 1.65 billion.

Such contracts are just one example of how the $ 500 billion chip industry is moving due to the silicon shortage, with many changes likely to outlive the pandemic fueled shortage. The absence of the tiny components – which has pinched car makers, game consoles, medical devices and many other products – has been a stark reminder of the basic nature of chips, which act as the brains of computers and other products.

Chief among the changes is a long-term shift in market power from buyers of chips to sellers, especially those who own factories that manufacture semiconductors. The most visible beneficiaries have been giant chipmakers like Taiwan Semiconductor Manufacturing Company, which offer services called foundries that make chips for other companies.

But the shortage has also greatly strengthened the influence of lesser-known chipmakers such as Microchip, NXP Semiconductors, STMicroelectronics, Onsemi and Infineon, which design and sell thousands of varieties of chips to thousands of customers. These companies, which manufacture many products in their own aging factories, are now increasingly able to choose which customers get how many of their rare chips.

Many favor buyers who act more like partners, taking steps such as signing long-term purchase commitments or investing to help chipmakers increase production. Importantly, chipmakers are asking customers to share more information earlier about which chips they will need, which helps guide decisions on how to scale up manufacturing.

“This visibility is what we need,” said Hassane El-Khoury, managing director of chipmaker Onsemi, a company formerly known as ON Semiconductor.

Many chipmakers have said they are using their new power with restraint, helping customers avoid issues like factory shutdowns and modestly raising prices. Indeed, defrauding customers, they said, could cause animosity that would hurt sales when the shortages ended.

Even so, the change in power was unmistakable. “Today there is no leverage” for buyers, said Mark Adams, managing director of Smart Global Holdings, a heavy user of memory chips.

Marvell Technology, a Silicon Valley company that designs chips and outsources manufacturing, has seen the shift in power. While giving foundries estimates of its 12-month chip production needs, it began providing them with a five-year forecast starting in April.

“You need a really good story,” said Matt Murphy, general manager of Marvell. “Ultimately, the supply chain is going to assign to who they think will be the winners.”

This is a substantial psychological shift for a mature industry where growth has generally been slow. For years, many chipmakers sold largely interchangeable products and often struggled to keep their factories profitable, especially if sales plummeted for items such as personal computers and smartphones that generated the most. great demand for chips.

But components are essential for more products now, one of the many signs that rapid growth may persist. In the third quarter, total chip sales jumped nearly 28% to $ 144.8 billion, said the Semiconductor Industry Association.

Years of industry consolidation have also depleted excess manufacturing capacity and left fewer vendors selling proprietary types of chips. So buyers who could once place and cancel orders with little notice – and play one chipmaker against another for lower prices – have less muscle.

One of the effects of these changes was to make chip factories more valuable, including some older ones owned by foundries. It is because new manufacturing processes have become so expensive that some chip designers do not look to the more advanced factories to manufacture their products. The result has been a tightening of demand for cheaper production lines that are five to 10 years old.

So some foundries, in a major shift in strategy, are starting to invest more money in older production technologies. TSMC recently announced that it will build such a plant in Japan. Samsung Electronics, one of the foundry’s main competitors, also said it was considering a new “legacy” factory.

But these investments will take several years to bear fruit. And they won’t solve the problems plaguing chips like microcontrollers, which are a microcosm for supply chain compression.

Microcontrollers combine the ability to perform calculations with built-in memory to store programs and data, often adding functionality that only comes from specialized factories. And the number of applications is skyrocketing, from brake and engine systems in cars to security cameras, credit cards, electric scooters and drones.

“We’ve probably sold more microcontrollers in the past year than in the past decade,” said Marc Barnhill, commercial director at Smith, a Houston-based chip distributor. The wait to receive some popular microcontrollers is now more than a year, he said, and product prices have increased 20-fold among merchants who buy and sell chips.

Amid the turmoil, companies that design or use chips have responded with new tactics. Some designers are tailoring their products to be made in different factories with greater manufacturing capacity, said Shiv Tasker, global vice president engaged in the practice for consulting firm Capgemini.

And customers who once bought chips based on price and performance are also thinking more about availability.

Consider BrightAI, a start-up that develops devices and software to help businesses connect equipment and other devices to the internet. Alex Hawkinson, its co-founder, said he redesigned a circuit board four times in six months to fit different chips. The company has also transferred some designers to China to overhaul the products faster with the components obtained there, he said.

Bigger chip users like automakers have started talking directly with manufacturers, rather than following the usual practice of working with subcontractors. Last month, General Motors forge an agreement with chipmaker Wolfspeed to secure a share of the semiconductors from a new plant that manufactures energy-efficient components for electric vehicles.

While the chip industry’s shift in power has helped Microchip, it has also come with its own headaches. Mr Moorthy said the company has been successful in producing more chips at its three main factories in Arizona and Oregon, as well as securing more foundry partners. But demand is growing faster than it can produce.

“We are falling further and further behind,” he said.

The expansion of Microchip’s own factories is not easy. On the one hand, the company has always relied heavily on purchasing used manufacturing equipment, but “it all dried up,” Moorthy said.

Acquiring new equipment can take 12 to 18 months and costs more, he said. While long-term purchase agreements have provided more stability to make such investments, Microchip and others are also hoping Congress will approve $ 52 billion in funding, which is expected to include grants to further subsidize production. of chips in the United States.

“Are we relying on him to run our business? No, ”said Moorthy. “Would that help some of our investment choices? Absoutely.”

Source Link



Africa,909,Americas,4292,Art & Culture,15745,Arts,6720,Arts & Design,1841,Asia,3514,Automobile,520,Baseball,775,Basketball,606,Books,4129,Business,5594,Celebrity,2633,Cricket,648,Crime,158,Cryptocurrency,1952,Dance,649,Defense,836,Diplomatic Relations,2496,Economy,1304,Editorial,260,Education,1424,Elections,308,Energy & Environment,3134,Entertainment,23391,Environment,3871,Europe,4455,Faith & Religion,235,Family & Life,817,Fashion & Style,3554,Finance,21199,Food & Drink,4030,Football,1227,Games,97,Gossip,10289,Health & Fitness,4374,Health Care,957,Hockey,248,Home & Garden,920,Humour,994,Latin America,49,Lifestyle,18139,Media,527,Middle East,1674,Movies,1953,Music,2879,Opinion,3746,Other,12786,Other Sports,5350,Political News,11324,Political Protests,2324,Politics,18464,Real Estate,2156,Relationship,106,Retail,3116,Science,2871,Science & Tech,10843,Soccer,336,Space & Cosmos,406,Sports,13117,Technology,3695,Tennis,682,Theater,1876,Transportation,313,Travel,2767,TV,3918,US,1279,US Sports,1481,Video News,3531,War & Conflict,1069,Weird News,998,World,17675,
Newsrust - US Top News: Chip shortage creates powerful new players
Chip shortage creates powerful new players
Newsrust - US Top News
Loaded All Posts Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS PREMIUM CONTENT IS LOCKED STEP 1: Share to a social network STEP 2: Click the link on your social network Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy Table of Content