Munich, Düsseldorf Delivery date autumn 2023: Rainer Koppitz has to wait two years for some chips. The semiconductor manufacturers are nowhere near keeping up with production. “The order books are full to the brim, but we still have short-time working time and again,” says the CEO of the electronics company Katek, annoyed. “We generate between 10 and 30 percent less sales in all business areas because the chips are missing.”
However, the manager is convinced that he will soon get the coveted components again. From the first quarter of next year on, the supply of semiconductors will improve significantly. Koppitz, who employs 2600 people, is in daily contact with the chip companies and knows their capacity planning.
More and more industry experts assume that the outlook will gradually normalize in 2022, depending on the industry and product. There are four reasons for this:
One of the reasons for the optimism: More chips are being produced – and the phenomenon of over-ordering disappears. Those who need 100,000 chips are currently ordering 300,000, says Katek boss Koppitz – in the hope of getting at least part of the order delivered. But that should change at the beginning of next year. “As soon as the purchasers of the components notice that there is relaxation, excessive inventories are reduced and inflated or-quantities go back to normal,” predicts the manager.
Semiconductor manufacturers have been expanding their factories significantly since the beginning of the year. Europe’s largest chip manufacturer, Infineon, has announced that it will halve its spending on new equipment in the fiscal year that has just begun. Infineon is also in the process of ramping up a new plant in Villach step by step. The Dax group had brought the opening forward by three months to this summer.
Other chip manufacturers are also inaugurating new plants. A location for silicon carbide chips from the US company Wolfspeed will be launched at the beginning of the year. Components made from the innovative material are in great demand, especially for electric cars, because they enable greater ranges.
2. End of the PC boom
At the same time, the demand for products that require a lot of chips is falling. The last home office has now also been equipped with a new laptop. The boom in demand for PCs and notebooks triggered by the pandemic is coming to an end. According to Gartner market researchers, the manufacturers shipped only one percent more computers in the third quarter than in the previous year. According to Gartner analyst Mikako Kitagawa, private users would spend more money on things other than computers as the corona restrictions were increasingly dismantled.
The decline in demand will benefit buyers from other industries, because computer manufacturers are large consumers of chips: According to Gartner, the three leading PC manufacturers Lenovo, Dell and HP are among the ten best-selling customers in the semiconductor industry.
The latest forecast from Micron, the world’s fourth largest chip maker, also suggests that the overheated market is cooling off. The memory chip specialist expects sales of $ 7.65 billion for the current quarter, which is about a billion less than analysts had expected. Since demand is normalizing overall, falling prices must even be expected, according to analyst Kinngai Chan from the research firm Summit Insights.
3. More transparency and greater reliability
That’s not all: up to now, large chip consumers such as car manufacturers and semiconductor manufacturers have rarely spoken to each other. The components were usually procured by the automotive suppliers. That is changing right now. This makes the market more transparent and there is no longer any need for overdrawn orders.
General Motors, for example: The US group is building “direct relationships” with semiconductor manufacturers, CEO Mary Barra recently said. If the car brands give fixed purchase guarantees, they can hope for reliable delivery in return. This should also ensure that there are fewer delivery bottlenecks in the coming year.
Europe’s largest chip manufacturer plans to invest 2.4 billion euros over the next twelve months, 50 percent more than last year.
(Photo: Bloomberg)
GM has just signed such an agreement with Wolfspeed. In this, the chip manufacturer undertakes to provide a certain amount. GM pays a deposit for this, which is deducted upon delivery. The arrangement allows Wolfspeed to invest more.
4. Not every chip is created equal
To give the all-clear, however, would be premature. The auto industry in particular needs patience. Evercore analyst Chris McNally sees global auto production bottoming out in the third quarter of 2021, after which he expects double-digit increases every quarter. From the second half of 2022, he believes that annualized car production will be 90 million vehicles – significantly higher than the current 70 million.
“We expect the situation to ease by the end of the first half of 2022,” says Frank Klein, President of the automotive supplier Magna Steyr.
Infineon boss Reinhard Ploss complains that there is a lack of capacity for simpler chips. Infineon is the world’s largest supplier of car chips and depends on contract manufacturers such as TSMC or Samsung. In the past they preferred to invest in the latest processes.
So it happens that the output of highly integrated chips will increase in the next few months, because new plants for this were already being planned before the pandemic. The semiconductors, which are not quite as sophisticated, will remain in short supply. Infineon has therefore decided to expand its own production in this field.
In the long term, the industry fears overcapacities. States and corporations have been outbidding each other with expansion plans for the chip industry for months. In 2022, the industry will not grow as strongly as this year for a long time. The industry association WSTS predicts a ten percent increase in sales – ten percentage points less than in 2021.
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