Semiengineering: The global 'core shortage' began to end, and the signs of overcapacity gradually emerged
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The current wave of semiconductor and IC package shortages is expected to continue into 2022, but there are also signs that supply may finally catch up with demand.
The same is true for capacity, materials and equipment in the semiconductor and packaging sectors. After a period of shortages in all segments, the current view is that while some product shortages, such as automotive chips, are likely to persist through 2022, most chip supply is likely to return to relative normality by mid-2022. But that depends on several economic factors, so all of this could change overnight. The semiconductor industry has gone through a period of turmoil. At the beginning of 2020, business looked bright, but the market fell after the COVID-19 outbreak. Throughout 2020, countries took various measures to mitigate the epidemic, such as stay-at-home orders and business closures. Economic turmoil soon followed. By mid-2020, the IC market was rebounding as the stay-at-home economy drove demand for computers, TVS and other consumer electronics. Consumer chips and advanced IC packages are in short supply. Then, in the first half of 2021, demand for cars, smartphones and other products surged, leading to chip shortages in those areas. Today, many types of chips are in tight supply and have long lead times, while others are easier to get. It depends on the chip and the supplier. Global chip-making capacity is also tight, especially at 8-inch fabs with more mature processes. Eight-inch fabs have been sold out for some time, and that's not expected to change anytime soon. Now, many OEM customers are bracing for another round of across-the-board price increases. At the same time, on the packaging side, some packaging types will continue to be in short supply, with tight capacity in many areas. Lead times for advanced equipment are long. The semiconductor shortage story is not all doom and gloom. 'With the exception of some products, the supply-demand situation is expected to be largely resolved in the first or second half of 2022,' IBS CEO Handel Jones said in a new report. 'Many factors are contributing to the strong demand for semiconductors. However, some of the drivers of past demand growth are weakening because of market saturation. Consumers will have less purchasing power due to the reduction of stimulus measures and the impact of high inflation.' There are also some ominous signs on the supplier front. According to IBS, excess capacity could occur sometime in the second half of 2022 or 2023, depending on the product.
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It is impossible to account for every semiconductor product or package; each product has its own supply and demand context. But there are a few key products that can provide some insight into the situation. These include application processors, MCU, PMIC and WiFi chips, and various packaging technologies.
The IC industry has had its ups and downs over the years. The current recovery is one of the largest on record. Overall, the semiconductor market is expected to reach $542.55 billion in 2021, up 21.62 percent from 2020, according to IBS. The market is expected to grow 7.13% in 2022, IBS predicts. The wafer manufacturing equipment (WFE) market is expected to grow by 40% in 2021, according to TEL. 'The WFE market is expected to expand significantly due to the sharp rise in demand for leading-edge logic chips and memory,' Toshiki Kawai, President and CEO of TEL, said in a presentation. Nevertheless, the semiconductor industry designs and manufactures a large number of different chips, such as analog chips, Gpus, MCUS, memory, microprocessors, and power semiconductors. Gpus, processors, and other advanced logic chips are produced in 12-inch fabs using a variety of process technologies from 16nm/14nm to 5nm nodes. From 16nm/14nm to 5nm, chip makers rely on finFET. 'Compared to previous flat transistors, the fin contacts the gate on three sides, allowing better control of the channels formed within the fin,' said Nerissa Draeger, project director at Lam Research University. The 12-inch fabs also produce chips with mature process nodes from 65nm to 28nm. Meanwhile, other chips are made in older 8-inch fabs using processes from 350nm to 90nm. Many chips are also manufactured in fabs in smaller wafer sizes, such as 6 , 4 , etc. Mature process nodes at 8 - and 12-inch fabs are currently tight even if they are not sold out. 'Over the past few years, demand has exploded for a variety of chips manufactured on 8-inch and mature CMOS technology nodes ≥28nm, whether in conventional CMOS, bipolar CMOS DMOS or RF-SOI-based process platforms. These devices include MCU, PMIC, digital Display driver IC (DDIC), RF IC, and image signal processing (ISP) wafers needed to manufacture backlight CMOS image sensors. This demand is also underpinned by technology trends in multiple market segments, 'said David Haynes, managing director of strategic marketing at Lam Research. 'Supply issues with automotive semiconductors are well documented, but at the same time there is increasing demand for consumer products, new devices that support 5G and display applications,' Haynes said. 'The situation is further complicated by the fact that many of the IDMs and foundries that make these chips produce not one product but multiple products. Historically, they have been able to rebalance fab capacity to meet growing demand for a certain product type, but when demand surges for so many products at once, it is difficult or impossible to adjust production in this way. While there has been an increase in global capacity for some device types, such as display drives, recent reports suggest that the industry as a whole has yet to reach supply-demand balance.' In short, contract production capacity is tight. Jason Wang, UmC's co-president, said, 'Looking ahead to the fourth quarter, we expect wafer shipments and ASP trends to remain firm. Capacity utilization will continue to be at full capacity at the 8 - and 12-inch facilities.' At both mature and leading-edge nodes, fab capacity is expected to be tight for the foreseeable future. It depends on the production process and the supplier. 'While we do not rule out the possibility of inventory adjustments, we expect TSMC's capacity to remain very tight in 2021 and throughout 2022,' TSMC CEO Victor Wei said in a recent conference call. Summing up the situation, Gartner analyst Samuel Wang said: 'Foundries are mostly booked for the first half of 2022, and some have long term agreements of three to four years with fabless customers. Gartner's assumption is that chip inventories will normalize in the second quarter of 2022. Shortages of various components from smaller suppliers could last longer.'Application processor problem Wireless, meanwhile, is the largest segment in semiconductors, accounting for 40 percent of the business, according to IBS. In wireless, 5G smartphones and related infrastructure are the main drivers of many chips. Overall, 5G smartphone shipments are expected to reach 578 million units in 2021, up from 225 million units in 2020, IBS said. While 5G is growing in many regions, China's smartphone market is slowing. 5G smartphones consist of a variety of chips, including application processors, CMOS image sensors, memory, PMIC and RF. Application processors are cutting-edge devices that integrate CPU, graphics, and AI functions on the same chip. Apple's new iPhone 13 uses the A15 application processor, which is based on TSMC's 5nm process of 15 billion transistors. Many other phones are powered by Qualcomm's Snapdragon 888, which is a 5nm SoC. These chips are made by contract manufacturers. Today, TSMC and Samsung are the only contract manufacturers capable of making 7nm and 5nm chips, and both are working on 3nm. Intel, which recently re-entered the contract manufacturing business, is increasing production of 10nm and 7nm and developing 4nm. Demand for processors and chipsets for cutting-edge applications based on 5G has been strong for some time. But foundry capacity for these chips appears to be slightly short. 'Wafer capacity shortages are likely to persist until the fourth quarter of 2021 or the first quarter of 2022,' IBS's Jones said. How long the shortage will last depends on several factors. 'The latest designs like Apple's A15 and Qualcomm's Snapdragon 888 are 5nm, with plans to migrate to 3nm in 2022,' Jones said. 'If 3nm smartphone chipsets are launched in the second half of 2022, then 5nm and 7nm capacity could be in surplus by Q3 2022 or Q4 2022.' That could change. Apple's iPhone 14, due in 2022, should have used TSMC's 3nm process as an application processor, analysts said. However, the iPhone 14 is now expected to use 4nm. Analysts say apple's iPhone 15, due in 2023, will have a 3nm application processor. In other words, TSMC's 3nm revenue growth is delayed until 2023. All in all, the amount of 3nm production on all sides is a moving target. 'There are indications that both TSMC and Samsung are delaying the increase in 3nm wafer production,' Jones said. That's not the only problem for Apple and other smartphone vendors. In its most recent quarter, Apple had a $6 billion shortfall in sales because of chip and manufacturing capacity shortages. The problem is not a lack of access to cutting-edge nodes, but a shortage of mature process chips. Apple's sales have been hurt by shortages in several areas, including OLED touchscreen controllers, according to KeyBanc. The touch screen controller used to control the display is manufactured using a mature process. Chips for other mature nodes are in short supply, including Wi-Fi 6 chips. Wi-fi and some rf chips are manufactured at 28nm, 22nm and 16nm. According to IBS, the shortage of Wi-Fi and other RF chips could last until the second quarter of 2022, and possibly even the third quarter of 2022. Pmics for smartphones and other products have also been in short supply. PMIC is designed to control the flow and direction of power and is manufactured in a 180 nm to 40nm process. According to IBS, PMIC shortages are expected to continue until the second or third quarter of 2022.
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