May 21, 2024

A LOOMING ARTIFACT from the pandemic, which is expected to last until 2023–the global shortage of chips–has gladly started to diminish. In contrast to the situation at the mid-2021 point, when crimps within the supply chain for semiconductors began popping out in large numbers–supply and demand have become more of a problem.

In the past, as IEEE Spectrum revealed in the time since the original publication that supply chains are broken, and the disruptions due to this chip shortage have virtually transformed entire sectors of the technology industry. The automotive industry was one of them. As we outlined in 5 charts which help to understand the shortage of chips, the time finally brought carmakers to the top of a 52-week waitlist to receive the chips they required to run their entertainment and driving assistance systems. As chips finally arrived in factories, their production capacities were restored to their pandemic abilities at the end of 2022.

The passage of the CHIPS Act in the United States yielded a multibillion-dollar investment pool, much of which was devoted to increasing American manufacture of older generation chips that many industries – auto and other- rely on. In March 2023, the U.S. began disbursing CHIPS Act funding as the E.U. also contemplated joining the chip-stimulus market.

The goal of the $50 billion Washington’s spending is to stop U.S. industrial concerns from becoming victims of similar supply chain problems shortly. In the E.U., Chips Act legislation is a similar plan of action; important is strengthening the resilience of its member nations against such interruptions in the supply chain.

The story of the 29th June 2021 is as follows:

Historians are likely to be able to spend a lifetime analyzing the effects of the COVID-19 outbreak. However, the shortage of chips that it caused will be over shortly. Many analysts believe that the most troublesome needs will likely decrease during the 3rd or 4th quarters of 2021. The chips may take until 2022 to move across the supply chain and eventually into products. The supply relief will come from something other than the significant national investment made through South Korea, the United States, and Europe but from the older foundries and chip factories operating processes that are not at the forefront and on relatively tiny silicon wafers.

The automotive industry is a tiny chip-based end-user, yet it’s growing quickly. IDCBefore we go into how to end the shortage; it’s important to recap the circumstances that led to it. As a result of panic, lockdowns, and general uncertainty sweeping all over the globe, automakers had to cancel orders. But, these conditions also meant that many people re-created their home office, purchasing monitors, computers, and other tools. At the same time, schools everywhere were converting to virtual learning through tablets and laptops.

Additionally, the increased time spent at home meant spending more on entertainment, including T.V.s and gaming consoles. The five-year rollout and the ongoing expansion of cloud computing took over the space automakers had inexplicably released. When car manufacturers realized that people would still want to purchase their products, they were at the bottom of the line to get the required chips.

At $39.5 billion, The auto industry accounts for less than 9% of chip demand in revenues, per market analysis firm IDC. This figure is expected to grow by 10% per year until 2025. But the auto industry-that, which employs over 10 million people worldwide, is a subject that politicians and consumers are highly aware of, particularly those in Europe, the United States, and Europe.

The automotive industry’s chips are produced using processes designed to comply with safety standards that differ from the ones used in other sectors. However, they’re still manufactured using the same production processes as analog I.C.s and power management chips, display drivers, microcontrollers, and sensors used in everything else. “The common denominator is the process technology is 40 nanometers and older,” says Mario Morales, vice president of supporting technologies as well as semiconductors at IDC.

Cars depend on chips manufactured using older manufacturing processes, such as old-fashioned and 40-nanometer. These processes comprise the majority of the capacity that is installed.

This technology for manufacturing chips was at its most cutting-edge 15 years ago, or even earlier, and lines that make chips from these nodes account for 54 percent of the capacity IDC installs. The nodes of the past are usually used for 200-mm silicon wafers. To cut costs, the industry started moving to 300-mm wafers by 2000; however, much of the 200-mm infrastructure remained and expanded.

Despite the desperation of the auto industry, There’s a manageable rush to construct new 200-millimeter manufacturing facilities. “The return on investment just isn’t there,” says Morales. Several legacy node facilities in China aren’t functioning efficiently; however, “at some point, they will,” Morales says, further reducing the motivation to construct new factories. As per the industry group SEMI that the number of fabs with a 200-mm size will rise from 212 by 2020 and 222 by 2022. That’s about half the anticipated growth of more profitable 300-mm manufacturing facilities.

It is possible to find only a handful of new 200-mm fabs…

 …but businesses are investing in re-fitting older versions.

More than forty companies are expected to expand capacity by over 750,000 wafers per month from the start of 2020 until 2022’s end. The long-term trend that will run to 2024’s end is an increase of 17 percent in the capacity of 200-mm fabs. The cost of equipment used in these fabs is scheduled to increase to $4.6 billion by 2021, following reaching the $3 billion threshold in the year 2020, for only the second time in a long time, SEMI says. Then, the spending will drop by $4 billion by 2022. The cost for 300-mm fabrications is expected to be $ 78 billion in 2021.

The shortage of chips is occurring at the same time as regional and national efforts to increase advanced manufacturing of logic chips. South Korea announced an initiative worth $450 billion over the next ten years. While the United States is seeking legislation worth $52 billion, the E.U. could plow upwards of $160 billion into its semiconductor industry. Chipmakers have already been going on a spree of spending. In the world, capital equipment used for producing semiconductors grew by 56 percent throughout April 2021, as per SEMI. The SEMI three-month forecast for the 3rd June of 2021 World Fab Forecast indicates that ten new 300-mm fabs are expected to begin operations in 2021, with 14 more expected to be operational by 2022.

“The push for building I.C. capacity around the world will certainly drive fab investment of the current decade to a new high,” says Christian Dieseldorff, the sector of semiconductors for SEMI. “We expect to see record spending and more new fab announcements in the next few years.”

One snag that could delay the end of the supply is that some of the increased demand is coming from customers who are ordering twice to increase in stock, according to Jim Feldman, president of Semico Research. “I don’t know of any product that needs twice the amount of analog” compared to the previous year, Feldman says. However, manufacturers “don’t want a 12-cent part to hold up a 4K television,” which is why they’re buying with.


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