【Editor's Note】This article has two authors, semiconductor veteran Zhou Xiaoyang (Gilbert), Xi'an Jiaotong University Microelectronics alumni, and Xi'an Jiaotong University School of Management Professor Zhou Xiaoyang; the article was first published on the WeChat public account Lao Zhou Gong, and was published with permission from The Microgrid.
Since the beginning of 2020, there has been a gradual shortage of chips around the world, and it has intensified. How serious is the "missing core" problem? According to the CEO of Globalfound Semiconductor, the company's chip production capacity until the end of 2023 has been fully ordered. And, according to his prediction, the problem of "lack of cores" cannot be completely solved in the next 5 to 10 years, and the global semiconductor supply chain may be in a tight supply situation for a long time. The same situation has occurred in other wafer foundries, with foundry fees rising, predetermined capacity requiring partial or full prepayment, and pre-booked capacity for the next year or two.
The problem of "missing cores" is fully reflected in the automotive industry, and data from forecasting agency AFS (AutoForecast Solutions) shows that as of November 14, 2021, the global automotive market due to the shortage of chip supply has reduced production by as much as 10.097 million units. Production in Europe was 2.859 million units this year, production in Asia was 3.677 million units (1.981 million units in China), and production in North America was 3.152 million units this year. Moreover, according to AFS's forecast, the cumulative production reduction of the global automotive market this year may reach 11.263 million units. Some car manufacturers plan to deliver "short of two" products: ideal car let users choose to deliver the 3 radar version model that lacks 2 radars in advance or wait until December to deliver the complete 5 radar version; Xiaopeng Automobile issued an announcement that if the owner chooses to reload the radar after picking up the car, he will receive X PILOT software for free, and will be reloaded with radar in batches from March 31, 2022 Tesla delivered models in the U.S. market that lack the rear Typc-C interface (reserved holes) and mobile phone wireless charging pads, and plans to start refilling them in December.
So, why is there a sudden wave of lack of cores, and it is so violent, so unprecedented? Is it because of the sudden increase in global demand, and the increase in global chip capacity/output cannot keep up with the increase in demand? What's the problem?
One. Overview of the demand side over the past two years
Among all the terminals that use chips, mobile phones have the largest demand for chips (because first, there are many chips used on each mobile phone; second, the production and sales of mobile phones are the largest), followed by computers (including tablets), home appliances, cars, etc.
1. Mobile phone demand side
Table 1 shows the changes in sales of mobile phones, the largest consumer of chips.
Table 1: Global mobile phone sales change table
As can be seen from Table 1, if you only look at the sales changes in the third quarter of each year in the past three years, the global annual draw growth rate in the past two years is only 2.11%, considering the accuracy of statistics and the volatility of each quarter, and then considering the annual technical iteration of the chip and the increase in storage capacity, the value demand for the chip should increase by less than 10%.
2. Computer demand side
Table 2 shows the shipment volume and year-on-year growth rate of the world's top five traditional PC manufacturers in 2020.
Table 2: Global computer shipments 2019VS2020
Table 3 shows global desktop, notebook and workstation shipments (market share and annual growth).
Table 3: Global computer shipments 2021Q2vs2020Q2
It can be seen that the growth rate of the computer industry in 2020 to 2019 and Q2 in 2021 to Q2 in 2020 is about 13%. Considering that computer sales are about a quarter of mobile phones, this growth rate has less impact on chip demand.
3. Automotive demand side
In 2021, car production is the most missing core. Table 4 shows the 2020 Global Automotive Group Sales Rankings.
Table 4: 2020 Global Auto Group Sales Rankings
In July 2021, the international credit rating agency Standard & Poor's recently released a report that raised its growth forecast for the global automotive industry. Global vehicle sales are expected to be around 83 million to 85 million units in 2021, an increase of 8% to 10%. According to the analysis of Standard & Poor's, after the severe impact of the epidemic in 2020, the global auto industry has gradually accelerated the pace of recovery, especially since the second half of 2020, some countries have adopted relevant support policies and stimulus measures, which have driven automobile sales.
Through Table 4 and the above expressions, the annual car sales in 2021 are basically unchanged compared to 2019, of course, the demand for computing power and power chips for new cars has increased significantly. Similarly, growth in other large chip users, such as home appliances, was moderate in 2020 and 2021.
In summary, from the perspective of the demand side of the chip, the total demand for the chip, equivalent to how many 8-inch wafers are needed, is still quite moderate in 2020 and 2021.
Two. The situation on the supply side of chips in the past two years
Of the 17 global semiconductor companies expected to have sales of more than $10 billion in 2021, as shown in Figure 1. It includes 6 fabless-free companies (Qualcomm, Nvidia, Broadcom, MediaTek, AMD and Apple) and a pure foundry company (TSMC). Three other semiconductor companies (AMD, NXP and Adenos) will join the list of "super-suppliers" to watch in 2021.
Table 5: Sales of major semiconductor companies
Overall, sales of super-suppliers are expected to grow by 26% in 2021 compared to 2020. Assuming that 70% of the revenue growth comes from price increases and 30% from increased supply, then the average supply increase over the past two years is 7.8%, and this growth rate fully or substantially supports the increase in demand for chips in the terminal market over the past two years.
So, why is there a global wave of core shortages? Why is the lack of core so serious?
Three. The origin of the lack of cores
1. Huawei's business has been sanctioned, and on September 15, 2020, the effective date of the US ban on Huawei, chip companies using US technology will not be allowed to supply Huawei without permission. Major international suppliers have made full efforts to stock Up for Huawei before the effective date of the sanctions (a large part of the production capacity has been allocated to Huawei), affecting the supply of chips to other customers and causing supply shortages;
2. The high price of cryptocurrencies such as Bitcoin has caused a significant increase in demand for miners and mining machine chips (including GPUs), and the production capacity demand for advanced wafer foundry processes accounts for more than 10% of TSMC, etc., and the mining chip foundry is not sensitive to price, and even 100% advance payment, which once squeezed out the production capacity demand of other normal terminals for foundries, further causing a tight supply;
3. Due to the sanctions imposed by the United States on Huawei, the first few major mobile phone suppliers have accurately predicted that huawei mobile phone supply and sales will fall off a cliff, each (Samsung, Apple, Xiaomi, OPPO, VIVO) has formulated an aggressive strategy to seize Huawei's market share, are actively stockpiling chips and mobile phone terminals, ready to do a big job, the number of stockpiles in the first five is far greater than Huawei's reduced mobile phone sales, making chip supply worse;
4. Due to the new crown epidemic and some other natural disasters, the world's famous chip suppliers have caused certain production suspensions and production cuts from time to time, although the percentage is very small, but the psychological impact on the industry is great;
5. Many enterprises, especially car companies and computer manufacturers, learn from Toyota's experience, implement JIT (real-time supply, zero inventory), affected by the above, forced to adjust the strategy, the zero inventory target into a half-year inventory target, which is equivalent to increasing the demand of the entire industry by 50% / year, which is no industry's supply chain can afford!
6. In the tense situation of short supply and demand in the whole industry, middlemen have also begun to hoard goods and increase prices, and the whole industry has become extremely difficult.
In summary, the overall shortage of global chips is not caused by the overall surge in demand, several major factors causing the shortage are gradually disappearing or have disappeared, and the world is also actively increasing production capacity, the cycle of increasing production capacity is about 12 months (with ready-made plants) to 36 months (starting from infrastructure), taking into account that the general international manufacturers will reserve a certain area of plants (one of the authors before a world's forefront of the old owner stipulates that the plant utilization rate forecast > 85% of the time to start to build a new plant), due to the channel supply tension ease, channel hoarding will gradually release, the overall shortage of global chips in 2022 will be able to solve, or even faster.
Four. Out of stock of automotive chips
Compared with the overall shortage of the entire integrated circuit industry, the lack of core in the automobile industry has different reasons. As can be seen from Table 4, global automobile sales in 2020 due to the epidemic, there is a large decline, about 15%, global auto manufacturers follow the concept of JIT, large-scale reduction of chip orders, and other consumer industry areas of chip supply is extremely tight, so the majority of chip suppliers to share the production capacity to non-automotive demand, but car companies in 2021 when the demand increases, increase orders has been too late. In addition, due to the certification cycle of the vehicle specification chip in 12 to 18 months, the car factory can not change the chip model and supplier in time, resulting in the supply of automotive chips and its shortage, and can not be alleviated in the short term. In addition, car companies have also begun to increase inventory under possible conditions for the sake of insurance, but each stock has a short board, there is a stock, are not complete, and due to the explosive growth of new energy vehicles, the demand for automotive chips, especially power chips, can not be alleviated in a short period of time. Therefore, automotive chips, especially automotive power chips, cannot be alleviated in 2-3 years.
Due to the gradual transition of the new energy vehicle owner's drive module (chip) to silicon carbide (due to the high efficiency of silicon carbide, high temperature resistance, high pressure resistance, high reliability), the supply of qualified and efficient silicon carbide chips in the next few years is extremely limited, and the shortage of silicon carbide chips will be more serious and last longer.
Five. The relationship between capacity shortage and shortage of foundry
The capacity of the top five foundries (even non-mainstream foundries) in 2022 has been booked out, and customers have paid an advance payment, especially China's small new design companies, and they can't get the capacity of wafer foundries. Similarly, the production capacity of the packaging and testing foundry is also very tight. There is also the fact that in the past two years, the entire Chinese mainland, and the purchased capacity (equipment) is about the sum of the past decade.
It can be seen that in 2022, the production capacity of both wafer foundry and packaging and testing foundry is insufficient, especially the production capacity of design companies that Chinese mainland, but is the lack of capacity equal to shortage of goods? According to Professor Wei Shaojun's report on December 22, 2021, the statistics in 2021 covered 2810 design companies, 592 more than last year's 2218, an increase of 26.7%. In 2021, the sales revenue of 2810 enterprises is expected to be 487.75 billion yuan, an increase of 20.4% over 405.04 billion yuan in 2020. Excluding the double-calculated part, the overall revenue in 2021 was 458.69 billion yuan, an increase of 20.1% over 381.94 billion yuan in 2020.
There is no doubt that we can not draw an equal line between the lack of capacity and the shortage of goods in the foundry, if all the design companies can get the capacity they want, all produce the amount they plan to produce (please note that this plan is made when the market as a whole is short of cores), then the market will be surplus, there will be design companies whose products cannot be sold, or cannot be sold out. Moreover, China does not need so many design companies, and some design companies, whether they can get foundry capacity, will say goodbye to this era. Just like some mobile phone manufacturers say, due to the impact of chip shortages, their production and sales have been affected, but the entire mobile phone market, in addition to a very few mobile phones, is still very good to buy, or a buyer's market!
Therefore, the lack of FOUNDRY capacity does not equal the lack of core, does not mean that the supply exceeds demand. However, due to the full horsepower of various design companies, the wafer foundry in 2022 will still be very tight, and the production capacity tension of some process nodes and characteristic processes will continue until 2023!
At the time of publication of this article, the industry has sent news that the orders obtained by the packaging and testing foundry have begun to decline, and some individual branches of the large sealing and testing factories have stopped work in advance for the New Year!
Six. Chinese mainland capacity issues
According to our country's development strategy and the goal of localization rate, SMIC co-CEO Zhao Haijun said at the core research forum, "From a strategic point of view, we need to build domestic production capacity to at least 30% to meet the needs of the global market, we should grow 5 times, at least 10 years of development space." Therefore, from this point of view, the effective capacity demand for wafer foundry in this Chinese mainland will continue to increase, and the wafer foundry capacity Chinese mainland will continue to be in short supply in the next few years. Of course, considering the position and market share of Chinese mainland in the sealing and testing industry, the production capacity and demand of the packaging and testing FOUNDRies will be relatively balanced in the next few years.
In summary, the overall global core shortage will certainly be greatly alleviated in 2022, however, the shortage of automotive chips, power chips and silicon carbide chips will continue for several years!