Chip Shortage Enters “Danger Zone” As Lead Times Reach New Record
Semiconductor lead times, the time it takes for a company to order a chip and taking delivery, increased to 17 weeks in April, indicating shortages of these critical components are intensifying, according to Bloomberg.
Companies that use semiconductors in their end products use lead times to gauge the balance between supply and demand. Rising levels suggest customers are racing to secure chips. If leads exponentially jump, as what has been happening since December, some customers will purposely order more chips to avoid future supply shortfalls. Inventory accumulation can also exacerbate chip shortages.
Susquehanna Financial Group reports chip lead times increased to 17 weeks in April, a level that surpasses the all-time high in 2018 and is described as a “danger zone.” The firm began tracking lead times in 2017.
Susquehanna analyst Chris Rolland told clients in a Tuesday note that “all major product categories up considerably,” citing power management and analog chip lead times were up the most. “These were some of the largest increases since we started tracking the data,” he added.
Chip shortages could result in global automakers losing upwards of $110 billion in sales this year. Ford Motor Co., General Motors Co., and other vehicle makers are idling plants as critical tiny chips cause supply chain bottlenecks.
We obtained satellite imagery showing Ford has parked thousands of trucks with missing chips at a Kentucky Speedway. There’s no timeline when the trucks will return to the Ford’s Kentucky Truck Plant in Louisville to have chip components installed.
Besides autos, the chip shortage also affects the farming industry, where farmers cannot source new tractors and machinery. Besides vehicles and equipment, anything from game consoles to refrigerators has also been affected.
“Elevated lead times often compel ‘bad behavior’ at customers, including inventory accumulation, safety stock building and double ordering,” Rolland wrote. “These trends may have spurred a semiconductor industry in the early stages of over-shipment above true customer demand.”
Industry insiders are warning the shortage may last for years.
Intel’s CEO Pat Gelsinger has been the latest in a chorus of voices to warn about the ongoing semiconductor shortage that will last for a “couple of years.”
Gelsinger said U.S. dominance in the chip industry had dropped so much that only 12% of the world’s semiconductor manufacturing is made in the U.S., down from 37% about 25 years ago.
“And anybody who looks at supply chain says, ‘That’s a problem.’ This is a big, critical industry and we want more of it on American soil: the jobs that we want in America, the control of our long-term technology future,” he said.
Chip giant Taiwan Semiconductor Manufacturing Co. is also warning that the shortage will continue throughout this year and maybe extended into 2022.
Whenever there’s a problem in the economy, the Federal Reserve and big Wall Street banks, and especially the corrupt politicians on Capitol Hill, love the quick-fix solutions of bailouts and helicopter money. This time, however, that solution will not work to solve the shortage.
Wed, 05/19/2021 – 19:00