The dynamics of supply and demand in action
Looks like we are returning to a period of oscillation as we has 20 years ago.
Prices and lead times will rise and fall in a fairly rollercoaster manner over the next few years.
TSMC this week warned the ongoing global shortage of semiconductor supplies will probably continue throughout this year and next. CEO C.C Wei confirmed to analysts on the chip manufacturing giant's financial earnings call that it will invest $100bn in building more manufacturing plants and hiring thousands of engineers to step …
If it takes 2 years and billions to build a new fab then you want to be sure that when it comes on line the demand still outstrips the supply.
Or be prepared to run at a massive loss until demand picks up or another supplier goes bust.
Given the eye watering 50% and above profit margins I assume the established players are keeping a wary eye out for new entrants and have a lot of scope for cost cutting which could undermine many a business case.
When you have companies that are selling devices at almost no margin and trashing global pricing, the money suddenly goes out of the business and profits start to go south. So what do you do? Cut back on high capital investments. Investors need to see a return on their investments - if they don't you don't have cash to run your business.
Couple that with the commodification of even microcontrollers and aggressive PICOS supplier antics and you end up with where we are today.
Said companies leadtimes go out to over 12 months and then suddenly you start having conversations with their disgruntled clients to help them design your stuff in. And the stupid thing is that when we come out of this partly client generated clusterf**k they will switch back to their previous slightly cheaper suppliers because beancounters told engineering to do so.
Problem is that when the next dip comes along (as it will) there will be a lot more pain after such a large amount of investment in capital and the cuts will likely be deeper.
Biting the hand that feeds IT © 1998–2021