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Global Commodity Intelligence
Q2 2025 | APRIL - JUNE
Global Commodity Intelligence
Q2 2025 | APRIL - JUNE
Maintain Realistic Expectations amid Improving Semiconductor Shortage News
Rudi Palmans, Director, Supplier Relationship Management
More and more press releases are indicating that there is light at the end of the tunnel for semiconductor shortages. But what does it mean?
Over the past couple of days, some semiconductor companies have reported quarterly and annual earnings. There seems to be an end to quarter-on-quarter growth and although the reported numbers still look very nice, most projections for next quarter are typically down between 5-10%. This will not lead to the end of the semiconductor crisis in general, and here is why.
Revenue for semiconductor companies has always been running into somewhat seasonal waves, with a typically lower Q1 (Jan-Mar) following a strong Q4. Nothing is different if the Q1 forecast is a little lower. Semiconductor companies run a massive number of process variables for the product portfolio they serve. This stretches from features in raw wafer (EPI layers and pre-processing), lithography (nm), packaging, and test. Depending on the requirements of the chips they are producing, some companies end up with several hundred or even thousands of process variables.
Each variable has its installed capacity. In some cases, there are still significant issues that prevent them from ramping to higher production output. For example, there are still big issues in Power MOSFETs and Silicon Carbide products across the supply base, both in frontend processing and backend. For these products used in secular growth applications, suppliers are reporting a gap of 40% of capacity against the existing demand. This gap will persist for a longer term in Automotive, which is a mega-demand driver due to ACE (Autonomous, Connectivity, Electrification) initiatives.
The ability in semiconductor manufacturing to switch between technologies is very limited. Even if consumer products are slowing down, the consequence is not that these lines can simply support Automotive or Industrial products and serve that market better. We should always be cautious of where capacity expansion is happening. This is typical in newer technologies, while expansion in older technologies is slow or not happening at all. A good example is the lack of capacity expansion for legacy products for SoCs and MCUs being built at 65nm or above.
With the above in mind, frontend and backend capacity expansion has been planned, but will still take several quarters to alleviate the current critical situation. Equipment for this still has very long lead times and needs to be installed and validated, wafer processing needs to get qualified, and even after this is finalized, the processing of semiconductor products will still take 14-20 weeks or more, depending on the complexity of the part. Eventually, that will only deliver products in nearly two quarters.
Conclusion
Things are progressing in a good direction with additional capacity being installed at a low pace, combined with softer demand in certain markets. However, we should be cautious to generalize this sentiment and not make this look more positive than it is. We will still be facing critical component issues in the coming quarters, particularly in Power related products and legacy high-end semiconductors.
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