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Semiconductor Supply Chain Shortages
Over the past 3 months there has been a significant increase in Semiconductor shortages, as the COVID-19 coronavirus continues to impact economies, trade, manufacturing, and even consumer buying habits. Companies producing electronic products will need to plan carefully to dodge some looming component supply chain pitfalls in 2021.
President Joe Biden recently signed an executive order, "CHIPS for America Act in the FY 2021 National Defence Authorization Act (NDAA)", to identify and alleviate short term semiconductor shortages and encourage more US manufacturing through incentives for companies to manufacturer these devices in the US. Meanwhile, board members from the Semiconductor Industry Association sent Biden a letter "urging him to include substantial funding for semiconductor manufacturing and research in the administration's economic recovery and infrastructure plan". The letter cited that Semiconductor manufacturing in the US has dropped from 37% in 1990 to only 12% globally in 2020. SIA Board members included executives from companies including Cree, GlobalFoundries, Intel, Micron Technology, Xilinx, TI, Qualcomm, ON Semi, Nvidia and others. Longer term this could help the US semiconductor manufacturers gain market share, improve national security, while providing a more robust supply chain of authentic and trusted component sources.
The automotive industry has been hit especially hard by the shortage of semiconductors with VW stopping production of Audi and VW brands in Europe, China and North America with 10,000 employees furloughed. GM also has stopped production for Chevrolet Malibu, Equinox, Cadillac XT4 SUV and GMC Terrain vehicles while Chevy Blazer, Colorado and GMC Canyon pickups are only able to be partially completed due to the component supply chain shortages. GM expects to a $1 - $2.5 billion USD revenue impact in 2021 while Ford the #2 US automakers expects production cutback to cost between $1.5 and $2 billion USDs. Meanwhile other manufacturers have had their production impacted as well; factories owned by Toyota, Honda, Subaru have been similarly impacted by the chip shortages and IHS Markit predicts a $60 billion USD loss in sales in 2021 by the global automotive industry.
CNBC reported the key reasons for the chip shortages are based on:
- Demand for these chips has soared during the coronavirus pandemic as people snapped up game consoles, laptops and TVs to help get through lockdowns.
- Now, many of these products — including certain Chromebook laptops and next-generation consoles like the Xbox Series X and the PlayStation 5 — are sold out, or subject to lengthy shipping times.
- It's just one of a number of factors that has driven demand for semiconductors, but as supply struggles to keep up, it's the chip-reliant car industry that has been hit especially hard.
These chip shortages can be observed directly in lead time data received by IHS Markit from major leading distributors. In fact, over the past year, 11% of all semiconductor parts had more than 10 weeks added to lead times, 18% increased from 5 to 10 weeks and 75% had an increase overall, most coming in the past three months. Additionally, 16 manufacturers have experienced a lead time increase over 15 weeks for some part types manufactured while 5 manufacturers had an increase over 20 weeks for select part types.
Based on component lead time data received by IHS Markit, there has been some significant lead time increases, mainly for Semiconductors from Feb. 2020 to Feb. 2021. The chart below identifies the semiconductor part types have been impacted the most with much of the increases in lead times coming in the first quarter of 2021. Microprocessors and Microcontrollers devices have seen the largest increases, but shortages have been observed for discrete semiconductors, memory, logic, consumer and interface type integrated circuits as indicated below:
In summary, electronic manufacturing companies will need to plan component buys carefully to meet production and business goals. Successful companies will use rich component information sources to identify shortages and secure critical component supplies from distributors and manufacturers contractually. For more information how IHS Markit can help with component information needs, please visit the URL provided in the link below:
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The IHS Markit light vehicle production forecast has been cut by 6.2% or 5.02M units in 2021, and by 9.3% or 8.45M… https://t.co/JK2K96SGi2