Learning to live with supply chain stress

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By Nick Flaherty

The chip shortage is not going away any time soon, say industry observers on the even of World Supply Chain Day.

While there have been billions of dollars announced for new chip-making fabs, these will not become available for at least a couple of years. And the problems are not at the leading edge of technology, but on older process technologies.

This is highlighting the complex nature of the electronics supply chain, from the chips themselves to testing and the distribution channels. Engineers are having to come to terms with these shortages being long term, and finding alternatives.

“There are no easy solutions, only hard ones and even hard ones,” says Shiv Tasker, Global Semiconductor and Electronics Industry lead for Capgemini’s Engineering and R&D business.

He points to hundreds of billions of dollars being committed to chip making capacity, but this won’t come on-stream for a couple of years for the leading edge process technologies. But it is in the mature technologies making devices such as power management ICs and LED drivers that are holding up the production of boards and cars around the world.

This is a structural problem that existed before the effects of the pandemic. He points to data from the US department of Commerce that identified a 15% gap between supply and demand that continues to deteriorate, driving the supply chain issues through 2023 and even 2024, says Tasker

He also points to other risks such as the lack of chemicals for fabs or for packaging and assembly. Commoditisation of materials leads to consolidation to achieve economies of scale and hits the ability to invest in capacity. When problems hit the supply chain, such as the war in Ukraine which has reduced the production of neon, there is less resilience in the system.


This means being aware of the details of the supply chain and mitigating the risks. TSMC, the world’s largest foundry, highlights the risks on its materials.

“TSMC operates a well-established enterprise risk management system to identify and access all relevant risk and proactively implement risk mitigation strategies,” said CC Wei, CEO of TSMC this week. “In terms of material supply, TSMC’s strategy is to continuously develop multi-source supply solutions to build a well-diversified global supplier base and to improve the local supply chain. For specialty chemicals and gases, including neon, we source from multiple suppliers in different regions, and we have prepared a certain level of inventory stock on hand. We are also working closely with our suppliers to further strengthen the resilience and the sustainability of our supply chain. Thus, we do not expect any impact on our operations from materials supply,” he told the recent analyst briefing.

The demand for more mature process nodes is not lost on TSMC, which is investing in its joint venture fab in Japan which are 28 and 16 FinFET technology and expanding its capacity in China with 16 FinFET and 28. “Also, we’re building in Taiwan for 28 nanometres more capacity,” said Wei.


The pressures of the supply chain also drove distributor Fusion Worldwide to but a test house in Singapore.

“The list of product that people aren’t looking for is the shorter one,” said Tobey Gonnerman, president of Fusion Worldwide. “The amount of requests and requirements is staggering. It is at least 50x what it was a year ago, and it’s across the board, all the major manufacturers, on active semiconductors, not as much on the passive and electromechanical, and there are spot shortages on the system level side such as CPUs, memories and storage.”

Having its own test capability with Prosemi allows more control over the supply chain to deliver parts quicker to customers. 

The continuing shortages will require engineers to change the way they design systems with a view to mitigating the risks, says Tasker at Capgemini. For example, he has one project for a customer replacing a PLD with a larger, more expensive one to avoid supply issues.

A more important trend is that of de-integration, replacing highly integrated devices with discrete elements. Another project at Capgemini is to replace an automotive seat management chip with separate chips for the heating, controller and memory to avoid shortages.

This is reflected in recent tips from UK design house Bytesnap.

“Supply chain is the lifeblood of the electronics design industry. If you can’t build your products, no matter how perfectly developed, you don’t have a business,” said Dunstan Power at Bytesnap. “Global supply chains are complex, depending on what you need and how you’re sourcing it. By working with a reliable electronics manufacturer that already has a trusted supply chain in place you can ensure that you are not let down, which is paramount for success and to stay ahead of competitors.”;;;

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