Flea shortage crisis enters ‘danger zone’, wait time hits record high

Shortages in the semiconductor industry, which have previously criticized automakers and consumer electronics companies, are getting worse, making it harder for the global economy to recover from the coronavirus pandemic.
Chip delivery times, the gap between ordering a chip and taking delivery, dropped to 17 weeks in April, indicating that users are increasingly desperate to secure supply, according to a study by Susquehanna Financial Group. It’s the longest wait since the company started tracking data in 2017, in what it describes as the “danger zone.”
Graph showing the wait time between ordering and obtaining a chip. (Graphic: Bloomberg)
“All major product categories are increasing dramatically,” Susquehanna analyst Chris Rolland wrote in a note Tuesday, citing power management and analog chip production times, among other things. “This is one of the biggest increases since we started tracking the data.”
Chip shortages are spreading industry after industry, preventing companies from shipping products from cars to game consoles and refrigerators. Automakers are now expected to lose $ 110 billion in sales this year as Ford Motor Co., General Motors Co. and others have to idle their factories for lack of critical components. This is hurting economic growth and jobs, as well as fears of panic that could lead to distortions in the future.
The chip industry and its customers view lead times as an indicator of the balance between supply and demand. A widening of the gap indicates that semiconductor buyers are more willing to commit to future supply to avoid a recurrence of deficits. Analysts are following these numbers as a harbinger of hoarding that can lead to the build-up of too many inventories and a sudden drop in orders.
“Long delivery times often force customers into ‘bad behavior’, including building up inventory, building up safety stock and double ordering,” Rolland wrote. “These trends may have spurred a semiconductor industry in the early stages of over-shipping above actual customer demand.”
The situation has been complicated by a resurgence of coronavirus cases in Taiwan, a key location for chipmaking. The country has closed schools, curbed social gatherings, and closed museums and public facilities. While businesses and factories are operating, the government may need to consider broader restrictions.
The country is home to Taiwan Semiconductor Manufacturing Co., which is the world’s most advanced chipmaker and counts Apple Inc. and Qualcomm Inc. among its many customers. Local manufacturers also produce less glamorous – but equally critical – chips, such as display driver ICs which have been a particularly painful bottleneck for global production.
The current 17-week level has risen from the 16-week level and marks a fourth consecutive month of “considerable” expansion, Rolland wrote.
Delivery times for some products are increasing sharply, even after months of shortage. Power management chips, for example, hit 23.7 weeks in April, a wait time about four weeks longer than a month earlier, according to Susquehanna.
Order lead times for industrial microcontrollers have been extended by three weeks, some of the biggest increases Rolland has seen since he started tracking numbers in 2017, he wrote.
Delays are often worse for small manufacturers, with helmet makers facing delays of more than 52 weeks, according to people familiar with the supply chain. This has forced companies to rethink products, shift priorities, and in at least one case completely abandon a project, one of the people said, asking not to be named because the information is not. public.
About 70% of companies tracked by Rolland have longer delivery times, compared to 20% who have seen their lead times contract. NXP Semiconductors NV, a major supplier of automotive chips, has lead times of over 22 weeks now, up from around 12 weeks at the end of last year. STMicroelectronics NV, another key supplier of automotive chips, saw their lead times increase from more than four weeks in April to more than 28 weeks.
These outsized increases may reflect oversupply from some customers, who might be concerned about the impact of shortages on their businesses. Historically, companies have been able to cancel chip orders without penalty, although that has started to change.
âFrom the January data, we’ve seen many big jumps in reported LTs,â Rolland wrote, referring to the timeframes. âWhile in previous years a sole proprietorship would typically drive their reported LT up and down by a few days in any given month, starting in this year we saw significant LT jumps that skewed our data.â