‘It’s a roller-coaster ride’: global chip shortage is making industries sweat

Dan Ruzycki, president of a small engineering firm, worries about what a global semiconductor shortage might be to fix concrete.

Mr. of Transtec Group in Austin, Texas. Rozycki’s company sells small sensors that are mounted on building, highway and bridge construction sites. Gadgets take temperature readings and send data wirelessly so that employees with computers can ensure that the material hardens properly.

Like many other things in the modern world, from computers and cars to cash registers and kitchen appliances, sensors require some common, inexpensive semiconductors that have suddenly become very commodity.

“Every month our product is becoming more popular,” Mr. Rosie said. “But we won’t be able to make it in several months.”

Shortage of semiconductors, Multibillion-dollar chip factories have sent shock waves through the economy, affected by epidemic disruptions and production issues. Questions about chips between both businesses and policymakers are trying to navigate the world’s dependence on small components.

Chip supply limitations are far from a new phenomenon. But previous problems typically have special types of chips, such as those that help store computer memory or process vast amounts of data. This time, customers are also scrambling to find an array of simple chips made in old factories. And those factories are difficult to upgrade.

President Biden in February Ordered a 100-day review The semiconductor supply chain, a process that attracted the CEOs of 19 large companies Virtual meeting monday. Congress has supported legislation aimed at more domestic chip manufacturing to reduce dependence on Taiwan and South Korea, which Mr. Biden proposed funding with $ 50 billion in his infrastructure plan.

Is the most focused Temporary closing Of Large american car plant. But the problem is affecting many other areas, most notably server systems and PCs used to distribute and consume Internet services that became critical during the epidemic.

“Every aspect of human existence is happening online, and every aspect of it is running on semiconductors,” said Pat Gelsinger, new chief executive Chip maker Intel, who attended a meeting with the president on Monday. “People are begging us for more.”

The lack of a chip potentially affects any company about adding communications or computing facilities to products. Several examples were described in 90 comments filed by companies and business groups to review the Biden supply chain, including a laundry list of requirements from industry giants such as Amazon and Boeing.

Personal computer giant HP said a shortage of semiconductors prevented the company from meeting the demand for computers ordered by schools. The company said rising chip prices made it harder for less-wealthy school districts to offer affordable hardware during the epidemic.

Mr. Rozycki Engineering Company in Austin is now among the lucky chip users. It planned ahead and has enough chips to manufacture about 50,000 sensors supplied to construction sites every year. But his distributor warns him that he may not be able to give more of them by the end of 2022.

“What is going to stop those projects?” Mr. Rozhiki asked. He is stepping into the market for other distributors who may have two required chips in stock. Other possibilities include redesigning the sensor to use different chips.

Supply problems are multifaceted as a semiconductor business worth approximately $ 500 billion. Manufacturers replace silicon wafers for chips in complex processes using chemicals, gases, and expensive machines. The finished chips cross national boundaries dozens of times to partners who package, test, and ship them to hardware manufacturers and distributors.

Incidents of fire at a Renesa electronics chip factory in Japan have been reduced this year, Dry in taiwan And a Cold snap in texas That temporarily shut down factories run by Samsung Electronics, NXP Semiconductors and Infineon.

“It’s a hell on earth right now,” said Jabil’s chief purchasing officer, Frank McKay, who buys billions of dollars of chips every year to assemble products, including Apple, Amazon, Cisco Systems and Tesla.

On any given day, he said, his company faces a shortage of 100 or so components and has to use all of its negotiating power to successfully achieve them. “But it’s a roller-coaster ride every day,” Mr. McKay said.

Other issues are likely to be fixed in 2022. Mr. Gelssinger said Intel was talking to auto industry suppliers about transferring some production of its chips to older Intel factories, possibly starting in six to nine months. But it may take a year to add new production equipment to the existing chip plant. A new construction takes three years.

“It’s going to be a long-term therapy,” said GlobalFoundries chief executive Thomas Culfield, a major American chipmaker who is doubling capital spending this year so that it can meet demand.

Chip buyers and brokers said that as of now, the chip distribution program has been spread from about 12 weeks to more than a year. This is bad news for companies such as Webcam start-up Voice Labs.

The company wrote in a note to customers in January, “We will get to know you directly about some bad news received this week.” “Some of our major suppliers informed us that they would only be able to supply one-third of the chips we needed to make Viz Cabs.”

The company, which is based in Kirkland, Wash., Has predicted problems with stocking a third version of its flagship webcam. The company’s website says that it has sold out with the expectation of more inventory in one to two weeks. Wise did not respond to requests for additional comment.

Supply problems can be a poignant topic, said Zach Supala, chief executive of San Francisco’s company Particle, which buys chips to make communications and computing equipment. It sells its equipment to thousands of companies that make products such as hot tubs, air-conditioners and industrial and medical equipment.

Particle has received enough chips to make its products so far, he said. But the company is asking customers to order back and forth to ensure that the demand is met.

When chips can be found, the price markup can be stark. A particularly obscure widget, a type of ceramic capacitor that usually sells for about 3 cents each, became difficult to find. When the Kovid-19 outbreak temporarily closed a factory in China.

The lack of capacitor affects the output of a popular cellular modem. Mr. Modla said that this modem, which typically sells for $ 10 to $ 20, reached $ 200 in the spot market. Customers like car companies may be prepared to pay such sums to keep the production of $ 40,000 cars, Mr. Supaela said. But not everyone can.

Some buyers suspect profiteering. Jens Gamperl, the chief executive of an online component exchange called Sorsangin, recalled a call from an executive who said that a chip, usually priced at $ 1, was listed for sale by the exchange for $ 32. Mr. Gamperl had to explain that his own company was forced to pay $ 28 for the component.

“That’s the kind of madness we see left and right,” he said.

In addition to a direct impact on hardware manufacturers, chip shortages can reduce shipments and raise the cost of servers and networking equipment to offer services such as streaming entertainment, distance education, and medical. They can also affect software manufacturers.

Said Tripp’s chief executive, Neveya Reeves, a Los Angeles start-up that creates a one-of-a-kind meditation app that exploits virtual-reality headsets from Sony and others. But the lack of a chip helped launch the console.

“We were expecting a big bump from the PS5,” she said. The company expects more consoles to arrive in the second quarter.

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