Current Impacts on Semiconductor Manufacturing Equipment

Written by: Shawn Bloomer

Over the past two years, the world has been in short supply of semiconductor chips. Normally, increasing production would be the first response, however around the fourth quarter of 2021, semiconductor manufacturing equipment companies experienced an increase in demand for their products, which cascaded into a greater demand for semiconductors from this sector. With such a chicken-and-egg situation, production of equipment has slowed, and the industry has needed to adjust for this, which may have permanent impacts on the supply chain.

As the shortage has continued, we’ve seen that verticals have built protections into their designs to try and cushion the blow from the lack of semiconductors. For example, some automotive manufacturers have adapted by substituting newer parts for older alternatives. However, this is not sustainable, as the cost of the older parts potentially leaves little to no margin for profitability. It’s quickly becoming more common place to do this, even though these techniques were only meant to temporarily manage the lack of semiconductors. In turn, risk is shifting to manufacturers which tends to create more severe costs.

As demand continues to rise in an attempt to pull verticals out of this cycle, I believe that it will still be another year or more until semiconductor manufacturing equipment companies can fulfill their need for semiconductors. As we can all surmise, this is unlikely to be achieved without repairing the current machinery or building new lines, all of which need semiconductors to function in the first place. This cyclical dilemma cannot be ended without reducing demand from other markets and returning to “normal” lead times and availability and may not completely recover until 2024 or later. With the recent signing of the ‘CHIPS and Science Act’ by President Biden, the demand for semiconductor manufacturing equipment is sure to increase, all while the industry is already working hard to keep up with their current demand.

As the gap continues to widen, we’ve seen many customers begin to source for immediate needs, while also securing product for next quarter and beyond, out of a desire to “catch up” eventually. This method seems to be the best path forward and I would suggest that rather than waiting for the need for a component to become an emergency, companies forecast and source parts several quarters in advance through non-franchised channels where franchised is unable to meet demand. This will not only secure the correct inventory but give time for manufacturers to recover and build up stock.

While semiconductor machinery continues to work hard to source parts, it is important to keep up to date with the latest information. Contact a Converge representative today for assistance in locating and acquiring all of your difficult parts needs.

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About the Author

Man with goatee wearing black polo and red lanyard

With over 20 years of experience in the electronics industry, Shawn has experience in a variety of areas across the technology supply chain including sales, account management, business development and global account management. He now specializes in working with semiconductor manufacturing equipment design companies, helping strategize connected distribution and create better and more efficient supply chain solutions.

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