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To understand why the $ 450 billion semiconductor industry has gone into crisis, a useful place to start is a part of a dollar called a screen driver.
Hundreds of different types of chips make up the global silicon industry, with the most colorful of Qualcomm Inc. i Intel Corp. will earn $ 100 for each product in addition to $ 1,000. These work with powerful computers or the shiny smartphone in your pocket. In contrast, a screen driver is mundane: its sole purpose is to transmit basic instructions for illuminating the screen of your phone, monitor, or navigation system.
The problem for the chip industry, and more and more non-tech companies, such as automakers, is that there aren’t enough screen drivers to circulate. The companies that make them can’t keep up with the growing demand, so prices go up. This helps reduce supply and increase the costs of liquid crystal display panels, essential components for the manufacture of TVs and laptops, as well as high-end cars, planes and refrigerators.
“It simply came to our notice then. If you have everything else, but you don’t have a screen driver, you won’t be able to build your product, ”says Stacy Rasgon, who covers Sanford C. Bernstein’s semiconductor industry.
Now, the crisis of a handful of such seemingly insignificant parts (e.g., power management chips are also missing) is cascading through the global economy. Car manufacturers like it Ford Motor Co., Nissan Motor Co. i Volkswagen AG has already reduced production, which has led to estimates of more than $ 60 billion in lost revenue for the industry this year.
The situation is likely to get worse before it gets better. A rare winter storm in Texas destroyed strips of American production. A fire at a key factory in Japan will shut down the facility for a month. Samsung Electronics Co. warned of a “Serious imbalance” in the industry, while Taiwan Semiconductor Manufacturing Co. he said he can’t keep up with demand even though he has factories in more than 100% capacity.
“I’ve never seen anything like it in the last 20 years since our company was founded,” said Jordan Wu, co-founder and CEO of Himax Technologies Co., a leader display driver provider. “All applications are missing chips”.
The chip crisis was born out of an understandable miscalculation, as the coronavirus pandemic suffered last year. When Covid-19 began to spread from China to the rest of the world, many companies predicted that people would shrink as times got tough.
“I reduced all my projections. He used the financial crisis as a model, ”says Rasgon. “But the demand was really tough.”
People trapped at home started buying technology and then continued shopping. They bought better equipment and bigger screens so they could work remotely. They got their children new laptops for distance learning. They took 4K TVs, game consoles, milk appliances, air fryers and immersion beaters to make life in quarantine more enjoyable. The pandemic became an extensive black Friday online.
Car manufacturers were blinded. They closed factories during the closure while demand crashed because no one could reach the showrooms. They told suppliers to stop shipping components, including chips that are increasingly essential for cars.
At the end of last year, demand began to rise. People wanted to get out and didn’t want to use public transportation. Automakers reopened factories and passed the hat on to chip makers like TSMC and Samsung. Your answer? Behind the line. They could not make chips fast enough for their still loyal customers.
A year of poor planning led to the massive shortage of chips from manufacturers
Jordan Wu of Himax is in the midst of the storm of the tech industry. One recent March morning, the 61-year-old man with glasses agreed to meet at his Taipei office to discuss the shortage and why they are so difficult to resolve. He was eager to talk that the interview was scheduled for the same morning that Bloomberg News requested it, with two of its staff members joining and two others dialing by phone. He wore a mask throughout the interview, speaking carefully and articulating.
Wu founded Himax in 2001 with his brother Biing-seng, now president of the company. They began manufacturing controller integrated circuits (for integrated circuits), as it is known in the industry, for laptops and monitors. They went public in 2006 and grew with the computer industry, expanding to smartphones, tablets and touch screens. Their chips are now used in a variety of products, from phones and TVs to cars.
Wu explained that he can’t get more screen drivers by pushing his staff harder. Himax designs the screen drivers and manufactures them in a foundry like TSMC or United Microelectronics Corp. Its chips are made with what is artistically called “mature node” technology, equipping at least a couple of generations behind the most advanced processes. These machines engrave silicon lines with a width of 16 nanometers or more, compared to 5 nanometers for high-end chips.
The bottleneck is that these mature chip-making lines are running out. Wu says the pandemic generated such strong demand that manufacturing partners cannot produce enough display controllers for all the panels that go into computers, TVs and game consoles, in addition to all the new products in which companies they introduce screens such as refrigerators, smart thermometers. and car entertainment systems.
There has been a special tightening in driver integrated circuits for automotive systems, as they are generally manufactured in 8-inch silicon wafers, rather than more advanced 12-inch wafers. Sumco Corp., one of the leading wafer manufacturers, reported that the production capacity of the 8-inch equipment lines was about 5,000 wafers a month in 2020, less than in 2017.
No one builds more mature node manufacturing lines because it makes no economic sense. Existing lines are fully amortized and adjusted for near-perfect performance, meaning basic display drivers can be made for less than a dollar and more advanced versions for not much more. Buying new equipment and starting with lower yields would mean much higher costs.
“Building new capabilities is too expensive,” Wu says. Colleagues like it Novatek Microelectronics Corp., also based in Taiwan, has the same restrictions.
This deficit is shown in a rise in LCD screen prices. A 50-inch LCD panel for TVs doubled in price between January 2020 and this March. Matthew Kanterman of Bloomberg Intelligence predicts that LCD screen prices will continue to rise at least until the third quarter. There is a “shortage” of screen driver chips, he said.
LCD screen prices are rising
Liquid crystal display prices have risen during the pandemic
Bloomberg Intelligence, IDC
The aggravation of the situation is the lack of glass. Leading glass manufacturers reported accidents at their production sites, including a shutdown in a The factory of Nippon Electric Glass Co. in December and an explosion at the AGC Fine Techno Korea factory in January. Production is likely to remain limited at least until the summer of this year, said Yoshio Tamura, co-founder of display consultancy DSCC.
April 1st IO Data Device Inc., a major Japanese computer peripheral manufacturer, raised the price of its 26 LCD monitors by an average of 5,000 yen, the largest increase since monitors began selling two decades ago. A spokeswoman said the company could not make any profit without the increases due to rising component costs.
All in all it has been a fortune for the Himax business. Sales are up and their share price has tripled since November.
But the CEO does not celebrate. Their entire business is based on offering customers what they want, so their inability to meet their requests at such a critical time is frustrating. He does not expect the crisis, especially for automotive components, to end soon.
“We have not yet reached a position where we can see the light at the end of the tunnel,” Wu said.