Executive Perspectives, Fusion Worldwide

Current industry trends—what’s happening?

There are many opportunities for growth in global supply chains this year created by the rollout of 5G and IoT, the return of the automotive industry, and growing demand in the data mining and gaming industries. Though rising demand should result in booming industries, numerous shortages are stunting growth and leaving manufacturers scrambling over resources.

How's business?

It’s very robust.  Our role in this space is to bridge gaps caused by the ever-shifting supply/demand semiconductor landscape. The current supply problems are well-documented, and our customer base is screaming for relief as a result. The shortages are widespread and affecting many business verticals, so this is keeping us very busy. Our expertise in solving supply chain shocks is perfectly suited for the current market conditions.

What are the key challenges, and how are distributors addressing them?

A key challenge going into 2021 is the shortage of various raw materials, which is leading to tight supply, extended lead times and increased pricing for many manufacturers and on a variety of components. Currently, there is no end date in sight, and it is expected to worsen throughout the year.

The ABF substrate shortage, silicon wafer shortage and glass substrate shortages are examples of how one material can affect production for a wide scope of components. As a result of demand growth outpacing capacity expansion by 20% in 2020, rising prices have left customers scrambling to fulfill their production needs—especially for CPUs, GPUs, high-end ICs and peripheral products.

To combat this, companies and governments have been reaching out to manufacturers for support. The Japanese and German governments, for instance, have asked Taiwanese officials for aid in convincing TSMC to re-prioritize its capacity and focus on automotive-grade parts. The European Union has also approached Taipei for support.

In response, TSMC announced its plan to reallocate its wafer capacity to pump out auto-related products as it works toward increasing production capacity altogether. Though this may alleviate shortages for the automotive industry, this may only exaggerate shortages for others.

What new opportunities, markets, customer segments, etc. do you see emerging?

There are numerous market segments that will experience growth throughout the year, including the rollout of 5G, the rebound of the automotive sector, an increased need for datacenters, and increasing reliance on AI and IoT by companies. The automotive industry, which we expected to have a big turnaround this year, is being hindered by the various shortages. With a forecast of strong growth in the second half of this year, competition over limited products will be further strained.

The rollout of 5G is also anticipated to have a huge impact on the semiconductor industry as companies prioritize capacity allocation to 5G production. With the 5G network set as the catalyst to multiple technological revolutions, new devices containing higher performing components will be essential requirements. In relation to this, growing demand for both autonomous vehicles, smart cities and 5G will ultimately result in a bigger push for IoT this year.

What’s the outlook for the next few months?

As 2021 progresses, more shortages are on the horizon as demand in numerous industries continues to grow without supply growing in tandem. With foundries at 100% capacity utilization, some manufacturers are looking to expand production, but time and resources will be required to achieve that.

The constraint on supply will worsen as companies struggle to keep up with overwhelming demand. Because COVID led to missed forecasts, global supply chains are working to bounce back, creating a general sense of urgency only worsened by growing shortages.