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Managing the Semiconductor Shortage of 2021

The burgeoning semiconductor shortage of 2021 hit chipmakers “like a ton of bricks,” according to one distributor.  Of course, that’s not the phrase semiconductor suppliers would use.

But the supply chain is in the midst of a perfect storm. A convergence of events is creating what’s expected to be a shortage of CPUs, MPUs, memory, and discretes until at least calendar Q3. There were signs in October and November when chipmakers, expecting a seasonally soft Q4, eased back production and channel inventory. They were “comfortable” with current inventory levels in their supply chains, several said.

In the meantime, driven by the move toward electric vehicles (EVs) and incentives from the Chinese government, automakers there began stocking up on electronics in December. Globally, automakers overall saw an upsurge in demand as they shook off the quarantine effects of Covid-19. In Q3, chipmakers expected to see most vertical markets move up and to the right. Chip consumption in the consumer electronics sector also rose in Q4.

What the industry didn’t reckon with was the capacity of standalone foundries which manufacture for numerous brand owners and industries. Dale Ford, ECIA’s chief analyst, said Q4 came in a lot stronger than expected across all component categories the association tracks. In December, ECIA’s monthly component index, which has a baseline of 100, saw all component categories except inductors remain above 100.

“Based on our measurements Q4 was strong with only that one exception,” Ford said.

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