Climate change has slowed food production

Bloomberg

How a $ 1 Chip Shortage Caused a Global Crisis

(Bloomberg) – To understand why the $ 450 billion semiconductor industry is in crisis, we have to start with a small piece called a display controller that is priced at $ 1. The global silicon industry is made up of hundreds of different types of chips, among the most striking are those of Qualcomm Inc. and Intel Corp. ranging from US $ 100 to more than US $ 1,000 each. These chips power powerful computers or the shiny smartphone in your pocket. In contrast, a display controller is mundane, its sole purpose is to convey basic instructions to illuminate the screen of your phone, monitor, or navigation system.The problem for the chip industry, and increasingly for companies beyond technology, like car manufacturers, is that there are not enough display drivers for everyone. The companies that make them can’t keep up with rising demand, so prices have skyrocketed, contributing to tight supplies and rising costs for liquid crystal display panels, components that become essential for the manufacture of televisions and laptops, as well as high-end automobiles, airplanes and refrigerators. “There is no way. If you have everything else, but you don’t have a display controller, then you won’t be able to build your product, “said Stacy Rasgon, who covers the semiconductor industry for Sanford C. Bernstein. Currently, the crisis in a handful of parts apparently insignificant (for example power management chips) has spread through the global economy. Automakers such as Ford Motor Co., Nissan Motor Co. and Volkswagen AG have already cut production, leading to estimates of more than $ 60 billion in lost revenue for the industry this year. The situation is likely to worsen before to get better. The rare winter storm in Texas wiped out swaths of US production. A fire at a key factory in Japan will shut down the facility for a month. Samsung Electronics Co. warned of a “serious imbalance” in the industry, while Taiwan Semiconductor Manufacturing Co. said it cannot keep up with demand despite having its plants at more than 100% capacity. Crisis in a handful of such seemingly insignificant pieces – power management chips are also in short supply, for example – is cascading through the global economy. Automakers like Ford Motor Co., Nissan Motor Co. and Volkswagen AG have already cut production, leading to estimates of more than $ 60 billion in lost revenue for the industry this year. seen something like this in the last 20 years since our company was founded, ”said Jordan Wu, co-founder and CEO of Himax Technologies Co., a leading provider of display drivers. The chip crisis was born out of an understandable miscalculation when the coronavirus pandemic struck last year. As COVID-19 began to spread from China to the rest of the world, many companies anticipated that people would cut costs as times get tough. “I cut all my projections. I used the financial crisis as a model, ”says Rasgon. “However, the demand was really resilient.” People who were trapped at home started buying technology, and kept buying. They bought better computers and bigger screens so they could work remotely. They gave their children new laptops for distance learning. They acquired 4K televisions, game consoles, milk frothers, deep fryers, and immersion blenders to make life in quarantine more enjoyable. The pandemic turned into a widespread Black Friday, and automakers were caught off guard by the problem. During the lockdowns, they closed their plants while demand collapsed because no one could approach the points of sale. At the same time, they told suppliers to stop shipping components, including chips that are increasingly essential for cars. Later, late last year, demand began to pick up. People wanted to go out and did not want to use public transport. Automakers reopened factories and went to work with chipmakers like TSMC and Samsung. Your answer? Behind the line. They couldn’t make chips fast enough to meet the needs of their customers. Himax’s Jordan Wu is in the midst of the tech industry storm. On a recent morning in March, the 61-year-old with glasses agreed to meet in his Taipei office to discuss the shortage and why it is so difficult to solve. Wu was eager enough to speak as the interview was scheduled the same morning Bloomberg News requested it, with two members of his staff joining in person and two others joining by phone. Jordan Wu of Himax is in the middle. from the storm of the technology industry. On a recent morning in March, the 61-year-old with glasses agreed to meet in his Taipei office to discuss the shortage and why it is so difficult to solve. Wu was eager enough to speak as the interview was scheduled the same morning Bloomberg News requested it, with two members of his staff joining in person and two others joining by phone. In 2001, Wu founded Himax with his brother Biing-seng, now the president of the company. They started out making controller ICs (for ICs), as they are known in the industry, for laptops and monitors. In 2006, they went public and grew with the computer industry, expanding to smartphones, tablets, and touchscreens. Its chips are now used in dozens of products, from telephones and televisions to automobiles. The bottleneck is that these mature chip-making lines are running out. Wu says the pandemic created such strong demand that manufacturing partners are unable to make enough display drivers for all the panels that go to computers, televisions and game consoles, plus all the new products that companies are putting on. displays, such as refrigerators, smart thermometers and car entertainment systems.Wu explained that Himax cannot make more display controllers by putting more pressure on its workforce. The company designs display controllers and then makes them in a foundry like TSMC or United Microelectronics Corp. Its chips are made with what’s called “mature node” technology, equipment at least a couple of generations behind cutting-edge processes. . These machines engrave lines in silicon that are 16 nanometers or more wide, compared to 5 nanometers in high-end chips.There has been a particular restriction on driver ICs for automotive systems because they are typically made on wafers of silicon. 8-inch, rather than more advanced 12-inch wafers. Sumco Corp., a leading wafer manufacturer, reported that production capacity for 8-inch equipment lines was approximately 5,000 wafers per month in 2020, down from 2017. All of this has been a boon to the business of Himax. Sales are on the rise and his share price has tripled since November, yet the CEO isn’t celebrating. His business is all about giving customers what they want, so his inability to satisfy their requests at such a critical time is frustrating for him. He does not expect the crisis, especially for automotive components, to be over anytime soon. “We have not yet reached a position where we can see the light at the end of the tunnel,” Wu said. Original Note: Why Shortages of a $ 1 Chip Sparked Crisis in the Global EconomyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source. © 2021 Bloomberg LP