The semiconductor crisis is bigger than expected

At the beginning of the pandemic, the IT community actively predicted revenue growth for the industry giants, both in terms of software service and in terms of quite tangible hardware. By the end of 2020, when we were faced with a shortage of video cards and game consoles of a new generation, we were talking about disrupted supply and production chains, they say, this is all a coronavirus and if not for it, everything would be fine.

But if you look at the whole situation on the electronics market, you can see that we have reached the point of obfuscation, where we simply cannot find the ends, where and when everything went wrong. But let’s try. So, the semiconductor crisis, as is already clear, hits all areas at once, both fast-growing and those that sit quietly in the corner and do not touch anyone. The initial meta-cause was, of course, the coronavirus, but in fact, very, very many stars converged in order for us to find ourselves in this pit.

Over the past six months, scattered information has begun to appear on the network that manufacturers and consumers are faced with a shortage of chips and PCB. It all started with the well-known shortage of new generation consoles and video cards, and as a result, it resulted in problems on all fronts, including with very penny old motherboards based on ancient technical processes.

In fact, the biggest problems are brewing in the area of ​​industrial electronics. The pandemic coincided with another cycle of changing technological processes, which only exacerbated the situation. Who does not know: most electrical products use technologies of the past or the generation before last, and many vital things are based entirely on the developments of the early 00s, for example, fire system controller boards are often produced on the basis of ARM Cortex M3 babies.

Arduino due r3 with Cortex M3 chip. The retail price of the board is 300-550 RUB on the well-known Chinese website

The most noticeable crisis of the “old PCB” in such a conservative area as the automotive industry. So, carmakers, in principle, are not very willing to introduce new standards, preferring to squeeze all the juices out of existing production lines to the limit. However, in recent years, classic car configurations have begun to look simply ridiculous against the backdrop of the capabilities of smartphones and products of the same Tesla, whose cars are stuffed with modern electronics to the eyeballs.

“Ford had to cut production volumes,” “Nissan suspended its production in Mexico and the United States,” “General Motors, in turn, predicts a loss of about $ 2 billion in revenue” – this is the main news from the world of automakers of the last month. All of them are associated with a shortage of semiconductor components, which, in turn, cannot be manufactured due to the physical absence of semiconductor products and chips.

Prices for retail with small wholesale have also skyrocketed. So, on the same Ali, the price of the controller for the Arduino STM32F103C8T6 ARM 32 Cortex-M3 jumped from $ 1.90 to $ 2.88 in one day – March 8. The situation on the wholesale market for “penny” semiconductors of old technological processes is even worse. For example, the popular and cheap RISCs STM32F103RCT6 and STM32F071VBT6 have risen in price by ~ 10-15 times when bought directly from Chinese manufacturers and practically disappeared from retail.

Retail value track chip STM32F103RCT6 on Ali. Before the new year, the price was $ 0.90, at the time of this writing, it shot up to $ 7.63, and for some sellers – up to $ 9-10

Everything is sad in the memory market. Back in November last year, TrendForce recorded a rise in the cost of DDR2 and DDR3 memory within 1-3% per month. Initially, this figure does not look threatening, but it is the memory of previous generations that is actively used in the production of household appliances, including “smart” ones, in controllers and other cheap PCB, which we are used to.

At the same time, the production capacity of DDR1-DDR3 memory is now extremely small, at the level of 3-5% of the total amount of solid-state memory on the market. However, it is important to understand that with the overclocking of the semiconductor deficit, the numbers are corrected. In February 2021, the cost of DDR3 memory increased another 6.8%… The same TrendForce predict growth in the cost of DRAM of all types by 13-18% only in the second quarter of 2021. The most alarming situation is in the low-density memory market, which is involved in the production of cheap controllers and RISC. There, the dynamics of price growth, with the overall small production volumes, is even higher, which is not yet felt too much due to the cheapness of these products in absolute terms. How much more expensive memory of all types will rise by the end of the year is anyone’s guess.

The situation with RAM may also worsen due to the desire of SK Hynix, the world’s largest manufacturer of RAM, to quickly fully master the technical process and launch the release of DDR5 memory at least in the server segment.

First samples of DDR5 memory cards from SK Hynix

The Koreans have to cope with the releases of the next generations of AMD and Intel processors, for which DDR5 support has already been announced. Recall that the first DDR5 modules were presented to the public in the fall of 2020. At the same time, SK Hynix announced that all the specifications were accepted and agreed by the manufacturer community and in general, the market is more or less ready to start the transition to the new standard. The upgrade will start from the server segment. DDR5 memory is extremely important for the further development of the IT sector, since the base frequency of these modules is 4000-4800 MHz, which is the threshold maximum value for the vast majority of DDR4 modules, and in the future, DDR5 modules will reach the fantastic 6000-8000 MHz “from the factory” …

There is a reasonable question: why are they not building new plants?

There is a very simple answer to it: manufacturers are afraid to invest in large lines, so that later they will face the fact that there is no one to sell the produced additional products. After all, now only assembly plants and consumers are affected, and semiconductor manufacturers themselves feel extremely comfortable in an overheated market. An excellent example of how companies can now receive inadequate super-profits is the release by Nvidia of a “miner” card based on a graphics chip and, in general, GTX 1660 Super logic. Everything is the same there, even the final computing power in terms of hash rates. The only difference is the lack of video outputs in the “miner” version. So, in conditions of shortage, the video card manufacturer sells a stripped-down version of the old GTX 1660, the release price of which in 2019 was $ 220-270 in retail for the stock / Super model, for $ 720, which was impossible six months ago. The net difference in selling value “then” and “now” is 260%, and the profit could have increased tenfold.

For this reason, in the near future, prices for all goods that use microchips, RAM or even the simplest controllers will rise. In one case, the growth will be imperceptible, in the other – in the situation with RISC on STM32F103RCT6 and STM32F071VBT6 chips – prices can jump 10 times.

The question is how quickly manufacturers will realize that the market cannot be stable amid such overheating and will begin to deploy additional production facilities. Intel was already the first to move: the company announced the expansion of production and the creation of a business unit Intel Foundry Services (IFS). It will specialize in contract manufacturing of semiconductor products. Intel is allocating $ 20 billion for this business, which will be spent on the construction of two new factories in the United States.

The question is how quickly TSMC and Samsung will react – in the range from 4 to 22 nm, these two companies account for 40 to 60% of all production capacities in the world.

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