Analysis: Global chip shortage threatens production of laptops, smartphones and more

DB HiTek

17/12/2020 12:43

* Huawei bulk-buying, Japanese fire, French strike blamed
    * Under-investment in 8-inch chip plants also a cause
    * Consumer demand has picked up quicker than expected 

 (Updates GlobalFoundries statement)
    By Hyunjoo Jin, Douglas Busvine and David Kirton
    SEOUL/BERLIN/SHENZHEN, China, Dec 17 (Reuters) - Makers of
cars and electronic devices from TVs to smartphones are sounding
alarm bells about a global shortage of chips, which is causing
manufacturing delays as consumer demand bounces back from the
coronavirus crisis. 
    The problem has several causes, industry executives and
analysts say, including bulk-buying by U.S. sanctions-hit
Chinese tech giant Huawei Technologies  HWT.UL , a fire at a
chip plant in Japan, coronavirus lockdowns in Southeast Asia,
and a strike in France. 
    More fundamentally, however, there has been under-investment
in 8-inch chip manufacturing plants owned mostly by Asian firms,
which means they have struggled to ramp up production as demand
for 5G phones, laptops and cars picked up faster than expected.
    "For the whole electronics industry, we've been experiencing
a shortage of components," said Donny Zhang, CEO of
Shenzhen-based sourcing company Sand and Wave, who said he faced
delays in obtaining a microcontroller unit that was key to a
smart headphone product he was working on. 
    "We were originally planning to complete production in one
month, but now it looks like we'll need to do it in two."
    A source at a Japanese electronics component supplier said
it was seeing shortages of WiFi and Bluetooth chips and was
expecting delays of more than 10 weeks. 
    The automotive industry in China, which flagged the issue
earlier this month, is anticipating production at some Chinese
carmakers to be affected in the first quarter of next year,
according to a senior industry association official.
 urn:newsml:reuters.com:*:nL8N2IO183
    
    SURGING DEMAND
    Consumer demand in China, especially for cars, has snapped
back unexpectedly quickly from the coronavirus crisis, and
orders for products such as laptops and mobile phones in regions
still struggling with pandemic restrictions, such as Europe and
the United States, have also picked up.  
    "Since (these products) all compete for the same fab
(fabrication plant) resources the shortage is across all of
these sectors and others as well. These are just the most
apparent right now," said Kevin Anderson, a senior analyst at
Omdia. 
    Dutch automotive chip supplier NXP Semiconductors  NXPI.O 
has told customers it must raise prices on all products because
of a "significant increase" in materials costs and a "severe
shortage" of chips, Reuters reported this month.  urn:newsml:reuters.com:*:nL1N2IN03B
    "Business came back much faster than we expected," NXP CEO
Kurt Sievers told German business daily Handelsblatt in an
interview on Dec. 11. "Many customers ordered too late. As a
result, we are not able to keep up in some areas."
    Other short-term triggers for the chip shortage include
stockpiling by telecoms giant Huawei ahead of mid-September when
its suppliers had to comply with U.S. sanctions, CICC analyst
Huang Leping said in a note on Dec. 11. 
    This was aggravated by Huawei's rivals such as Xiaomi
seeking to gain market share by stepping up orders of
components, he added.  urn:newsml:reuters.com:*:nL1N2I90MQ
    Xiaomi and Huawei declined to comment. 
    Electronics makers including Panasonic Corp  6752.T  and
Yamaha Corp  7951.T  also warn they face some chip shortages
that are slowing production of audio equipment and video cameras
after a massive fire in October damaged a chip plant owned by
Asahi Kasei Microdevices Corp (AKM), a unit of Asahi Kasei Corp
 3407.T , in southern Japan.
    Concerns have surfaced too over strikes in France at
chipmaker STMicroelectronics  STM.PA . 
    Eric Potard, leader of the CFDT union at the group, said the
strike resulted in a fall in activity of about 8%. STMicro,
however, said it had no impact on production.     

    'FULL CAPACITY'
    The surge in demand has meant 8-inch plants, which tend to
make older, less sophisticated chips, are under strain, analysts
and industry sources said. 
    Taiwan's TSMC dominates the market for contract chip
manufacturing, with Samsung trailing a distant second, followed
by the likes of SMIC, GlobalFoundries and UMC, according to
Trendforce data. 
    "The problem seems chiefly to be at the foundries," said a
European semiconductor industry source, who said TSMC and
GlobalFoundries in particular looked to be under pressure. 
    "It looks like they are pretty much at the limit," the
source said, referring to TSMC.
    TSMC, which counts Apple and Qualcomm among customers,
declined to comment, but referred to comments its chairman made
this week that described the firm's capacity as "tight". 
    A GlobalFoundries spokesman said it was investing in
"capacity growth to meet this unprecedented demand". The firm is
currently increasing its production levels and plans to double
its yearly average capital expenditure next year to further
expand capacity, he added. 
    An official at South Korean foundry firm DB Hitek, which
makes chips for the likes of Apple to use in its tablets, said
its 8-inch plants were running at full capacity at least for the
next six months, with tight supply anticipated until the second
half of next year.
    The United States has also curbed the ability of China's top
chipmaker, SMIC  0981.HK , to get U.S.-made equipment and raw
materials, exacerbating the supply crunch. SMIC did not respond
to a request for comment. 
    Foundry firms like DB Hitek, UMC and SMIC said in recent
company statements their factories were running at full capacity
in the third quarter.
    "We expect our utilisation rates to remain solid for the
time being," DB Hitek told Reuters.

 (Reporting by Hyunjoo Jin in Seoul, Douglas Busvine in Berlin,
David Kirton in Shenzhen, China, Makiko Yamazaki, Maki Shiraki
and Noriyuki Hirata in Tokyo, Mathieu Rosemain in Paris, Ben
Blanchard in Taipei and Brenda Goh in Shanghai; Writing by
Brenda Goh; Editing by Mark Potter)
 ((brenda.goh@thomsonreuters.com; +86 (0) 21 2083 0088; Reuters
Messaging: brenda.goh.thomsonreuters.com@reuters.net))