The Great Semiconductor Drought May Be About to Collapse • The Register

It’s not your imagination – it really does make it easier to find critical semiconductors.

According to Susquehanna, a company that studies markets to inform its complex stock trading strategies, semiconductor lead times were down an average of four days over the past month. “September represents the first real signs of [lead time] Capitulation in our data,” wrote analysts in the company’s latest SemiSIGNals report.

Power control silicon, metal-oxide-semiconductor field-effect transistors (MOSFETs), and clock and timing chips saw the biggest improvements, with lead times falling 13-16 days in September.

While product delivery lead times are heading in the right direction, the report still classifies them as a “danger zone.” On average, the lead times of 26.3 weeks are still around half a year. For some components – such as microcontroller units, MOSFETs, insulated gate bipolar transistors and automotive products – the situation remains bleak.

Shortages are still palpable in the latter category, as just last month Toyota reported it was again facing delays and warned it would have to close its Japanese factories for up to 12 days due to a shortage of parts.

Delivery times for some chips can still exceed a year.

According to the report, once lead times drop to 10 to 14 weeks, the great semiconductor drought will be over. Some market segments are converging. Delivery times for optoelectric components fell to 20.7 weeks.

While there’s reason to believe semiconductor supply will continue to improve over the next few months, the report claims some chipmakers aren’t helping by prioritizing larger orders from major customers. As a practical example, consider how network provider Arista spent $4.3 billion to improve its supply of critical components and reduce lead times for its own customers.

As the chip shortage eases, the industry faces a potential slump in demand due to the shaky state of the global economy.

Concerns about the future outlook were highlighted this week, as financial analysts downgraded their forecasts for Taiwan foundry giant TSMC amid fears of a slowdown in technology spending. The decision came after TSMC announced it would cut its capital expenditure budget by at least 10 percent due to the semiconductor slowdown.

Some chipmakers don’t seem to have gotten the memo and are pushing on. Micron, for example, recently announced a $100 billion chip factory destined for New York State.

We have already seen market corrections in this direction in the PC market. During their recent earnings calls, Intel, AMD and Nvidia have all reported falling demand for PC and gaming hardware. Intel was arguably the hardest hit in the second quarter, posting a 25 percent decline in its client computing group. A Gartner report released last week found that PC sales were down 20 percent year-over-year.

While there are signs that supply and demand may be rebalancing, recent geopolitical factors could change that. Earlier this month, the Biden administration slammed the hammer on China, barring exports of US chipmaking equipment and software to some of China’s largest chipmakers, including Yangtze Memory Technologies Co. ® The Great Semiconductor Drought May Be About to Collapse • The Register

Rick Schindler

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