Since the beginning of 2021, the discrepancy between the increasing demand for semiconductors and the lack of available supply has become a worldwide news event. In fact, semiconductor shortages have been reported across almost all major IC groups. While the most obvious impact has been within the automotive industry (the lack of critical semiconductors led to shutdowns of auto factories for all the major manufacturers), the shortage has undoubtedly generated supply chain risks across the board.
The Cause Behind the Shortage
Numerous factors played a role in straining the semiconductor ecosystem, all the way from foundry to backend OSAT capacity. Some of the most notable include:
- Increase in consumer purchases of digital devices during the COVID shutdown to enhance connection and productivity
- Accelerated build-outs of data centers
- 5G handset and infrastructure investments
- Exponential demand for cyber currency mining hardware
These factors all drove increased overall demand for a wide range of semiconductors, from microprocessors and power management ICs to memory controllers and various logic ICs. In addition, factory disruptions and US-China trade tensions exacerbated an already tight supply situation.
What This Means for Your Organization
With this backdrop in mind, LevaData analyzed the changes in lead times for the main semiconductor groupings. From January to April of 2021, semiconductor IC lead times increased 75% on average. For some of the more in-demand components, those increases have been even more dramatic:
- Programmable logic: 12 to 33 weeks (175% increase)
- Microcontrollers: 16 to 44 weeks (175% increase)
- Network interface ICs: 12 to 40 weeks (233% increase)
- Serial IO controllers: 9.5 to 39 weeks (311% increase)
In some instances, customers saw their lead times increase to 52+ weeks. In such cases, any new order for components will take a year or more to deliver. Given that most companies struggle to forecast more than six months out, this creates significant supply chain risks, putting a massive strain on revenue visibility and attainment.
Although LevaData believes such actions on behalf of semiconductor companies are a slight overreaction to the current supply/demand frenzy, all indications point toward a tight supply over the next nine to 12 months – at least until Q2’22 – while the industry works to expand capacity [ Update: What You Need to Know Moving Into Q3 ].
However, there are also indications that many customers are building larger component inventories than they have previously maintained. This could lead to some semiconductor supply corrections due to double-ordering and overbooking. In the meantime, robust planning, supply risk assessments, proactive order management, and real-time insights regarding supply trends are essential for any procurement team to stay ahead of a very competitive game.
What Your Organization Can Do to Stay Ahead
Companies that invest in supply chain analytics and visibility platforms are better positioned to react to market shifts and predict future market movements. This enables them to gather the right supply at the right time to ensure revenue attainment.
LevaData’s Supply Risk Navigator platform provides visibility into potential risks and obstacles by using community-based analytics and real-time market data. By offering clear, prescriptive, and predictive insights, your organization will remain nimble, adaptable, and, most importantly, successful. Find out more about how LevaData’s revolutionary, AI-driven platform will help you mitigate supply chain risks and keep your operations moving forward today.
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