Reaction to Semiconductor Supply Chains Trouble Could Bring Future Glut

[Wayde Robson]

While researching the semiconductor shortages, I heard a theory that the COVID-19 pandemic wasn't really the root cause. This idea suggests that the pandemic only exposed inherent weaknesses in our supply chains. Similar to how an iceberg exposed flawed design in the Titanic. One explanation for how these weaknesses were introduced turned out to be a fascinating story involving Toyota's history.

Meanwhile, I happened to be reading a book about the creation of America's Army Air Force and a particular strategy it developed. According to the book, a flood in Pittsburg in 1936 wiped out a certain factory that made a certain spring for propellers used in airplanes. For want of a little spring, airplane manufacturing took a nosedive for years. This gave the officers developing air tactics at Maxwell Field an idea which became "Industrial Choke Point Theory". They believed it could win future wars with limited ground combat. I couldn't help but see the parallels between the 2021 chip crisis and the new (old) USAA strategy. When the new theory was tested on the Germans in WWII, it didn't get the result they were looking for because supply chains in the 1940s were so much more robust than todays.

Now in 2021, America and other industrialized countries around the world are thinking differently about supply chains and their potential effect on national security. But this leads to the question... What unintended consequences can we expect from this new reality of government intervention into the chip business?

This article is my effort to tell this story. Full disclosure, I'm no expert in supply chains or the semiconductor business. But in researching and writing the facts as I understood them, I found the string of connections from history to today's situation fascinating and I hope other's will too.

From 2021 Semiconductor Shortages to Global Chip Glut

 

[MaxInValrico]

While researching the semiconductor shortages, I heard a theory that the COVID-19 pandemic wasn't really the root cause. This idea suggests that the pandemic only exposed inherent weaknesses in our supply chains. Similar to how an iceberg exposed flawed design in the Titanic. One explanation for how these weaknesses were introduced turned out to be a fascinating story involving Toyota's history.

Meanwhile, I happened to be reading a book about the creation of America's Army Air Force and a particular strategy it developed. According to the book, a flood in Pittsburg in 1936 wiped out a certain factory that made a certain spring for propellers used in airplanes. For want of a little spring, airplane manufacturing took a nosedive for years. This gave the officers developing air tactics at Maxwell Field an idea which became "Industrial Choke Point Theory". They believed it could win future wars with limited ground combat. I couldn't help but see the parallels between the 2021 chip crisis and the new (old) USAA strategy. When the new theory was tested on the Germans in WWII, it didn't get the result they were looking for because supply chains in the 1940s were so much more robust than todays.

Now in 2021, America and other industrialized countries around the world are thinking differently about supply chains and their potential effect on national security. But this leads to the question... What unintended consequences can we expect from this new reality of government intervention into the chip business?

This article is my effort to tell this story. Full disclosure, I'm no expert in supply chains or the semiconductor business. But in researching and writing the facts as I understood them, I found the string of connections from history to today's situation fascinating and I hope other's will too.

From 2021 Semiconductor Shortages to Global Chip Glut
View attachment 50456

I can tell you this, we just order $8M in Cisco gear and are being told to expect 6-8 months delivery time from the date the PO is issued.

 

[Wayde Robson]

I can tell you this, we just order $8M in Cisco gear and are being told to expect 6-8 months delivery time from the date the PO is issued.

Funny thing is when I started working on the article I wanted to just get into how the shortages affected the AV industry specifically. But it accidentally took me in different directions. The shortages are so widespread across so many industries, even foodservice, anything from ketchup packets to tapioca for certain teas. I tried to order a pair of headphones and was told there would be several months wait, and these were analog headphones with no chips. I can imagine it would hit a company like Cisco pretty hard.

 

[BoredSysAdmin]

re: IDC analysis, I'd just repost my comment from a relevant ExtremeTech article:
Since IDC completely ignored GPUs shortages and digital currency mining's effect on semiconductor manufacturing - it throws Texas-sized shade on their report. Consumer electronics will slow down once somewhat saturated in 2022-23, but Auto manufacturers who learned from their mistake will be forced to stockpiling cars' chips. BEV car production is ramping up across many makers, and I expect BEV cars would require more chips, not less than the traditional ICE cars. To add to Rich's comment above, I agree Intel is the least danger of having unused capacity. TSMC's risk is a bit higher but still reasonably safe. Samsung, GF, UMC, and a few other 2nd tier semi-producers might be at most risk.

TL;DR: No way in heck we'll see Semi overproduction as soon as 2023. What we might see is the beginning of semiconductor consumption/production normalization.

P.S.S:
Not far from my house is a major Subaru dealer and then I drive on the back roads behind it, between their back lots - they are nearly empty. All the 10 or so Subaru cars they still have in stock, were all brought up to the front of the dealership and none of them is highly popular Ascent.

 

[Pogre]

Interesting article, and hopeful too. I'm glad to see were working on lessening our dependancy on foreign markets. Looks like there's gonna be a lot going on out here in Arizona!

 

[Eppie]

Well written article, thanks. Some of these issues apply to the food chain as well. Bananas, for example, come mostly from Ecuador and they are all of the same variety. Biodiversity helps protect the global supply but if some disease ravaged the plantations in Ecuador we could loose over 1/4 of the global supply in a short matter of time. These are issues that need to be considered well in advance as the supply chain can be impacted in months but counter measures take years to implement.

 

[Hetfield]

Well written article, thanks. Some of these issues apply to the food chain as well. Bananas, for example, come mostly from Ecuador and they are all of the same variety. Biodiversity helps protect the global supply but if some disease ravaged the plantations in Ecuador we could loose over 1/4 of the global supply in a short matter of time. These are issues that need to be considered well in advance as the supply chain can be impacted in months but counter measures take years to implement.

And I eat at the very least 2 bananas a day so nothing better get in the way of that.

Sent from my Pixel 4 XL using Tapatalk

 

[Pogre]

I love peanut butter and sliced bananas on warm toast. So good, and not an unhealthy snack. You can sprinkle some Chia seeds on top for some added texture.

 

[MaxInValrico]

I love peanut butter and sliced bananas on warm toast. So good, and not an unhealthy snack. You can sprinkle some Chia seeds on top for some added texture.

OMG that was my dad's afternoon snack (no chia seeds though)
His morning snack was an apple with peanut butter.

 

[Eppie]

Me too, but at least my comment was related to the original article.

 

[Hetfield]

I love peanut butter and sliced bananas on warm toast. So good, and not an unhealthy snack. You can sprinkle some Chia seeds on top for some added texture.

Heck no, peanut butter is not unhealthy, it's high in calories but also in healthy fats. I lost 75+ pounds about 4 years ago and peanut was always a part of losing that weight. Now I eat organic peanut butter from NJ or the Wellsley farms brand of BJs wholesale. Peanut butter and banana is phenomenal! That was my desert last night after dinner.

Sent from my Pixel 4 XL using Tapatalk

 

[Wayde Robson]

TL;DR: No way in heck we'll see Semi overproduction as soon as 2023. What we might see is the beginning of semiconductor consumption/production normalization.

Exactly what I thought when the IDC story came out. I mean, at least the proposed new facilities are not going to be contributing to it. I believe they take years to build. But in the IDC article they talked about expanding existing plants capacity, which I don't know... seems suspicious, not that I'd know. But if there was any room to expand capacity, why would they not have already done it?

Although, the glut would seem inevitable maybe five or six years. Apparently, one just occurred in 2019.

 

[Wayde Robson]

Heck no, peanut butter is not unhealthy, it's high in calories but also in healthy fats. I lost 75+ pounds about 4 years ago and peanut was always a part of losing that weight. Now I eat organic peanut butter from NJ or the Wellsley farms brand of BJs wholesale. Peanut butter and banana is phenomenal! That was my desert last night after dinner.

Love me some PB! Everyday for lunch I slice up an apple use the slices to mop up a plate load of PB. PB/apple is a surprisingly good combo. I only like the natural stuff though, not the stuff with icing sugar in it. I get accustomed to stirring the oil and storing the jar upside down.

 

[Danzilla31]

While researching the semiconductor shortages, I heard a theory that the COVID-19 pandemic wasn't really the root cause. This idea suggests that the pandemic only exposed inherent weaknesses in our supply chains. Similar to how an iceberg exposed flawed design in the Titanic. One explanation for how these weaknesses were introduced turned out to be a fascinating story involving Toyota's history.

Meanwhile, I happened to be reading a book about the creation of America's Army Air Force and a particular strategy it developed. According to the book, a flood in Pittsburg in 1936 wiped out a certain factory that made a certain spring for propellers used in airplanes. For want of a little spring, airplane manufacturing took a nosedive for years. This gave the officers developing air tactics at Maxwell Field an idea which became "Industrial Choke Point Theory". They believed it could win future wars with limited ground combat. I couldn't help but see the parallels between the 2021 chip crisis and the new (old) USAA strategy. When the new theory was tested on the Germans in WWII, it didn't get the result they were looking for because supply chains in the 1940s were so much more robust than todays.

Now in 2021, America and other industrialized countries around the world are thinking differently about supply chains and their potential effect on national security. But this leads to the question... What unintended consequences can we expect from this new reality of government intervention into the chip business?

This article is my effort to tell this story. Full disclosure, I'm no expert in supply chains or the semiconductor business. But in researching and writing the facts as I understood them, I found the string of connections from history to today's situation fascinating and I hope other's will too.

From 2021 Semiconductor Shortages to Global Chip Glut
View attachment 50456

This was a very well written article. I think everyone has been impacted by shortages in one form or another so the insights you give were interesting and I really enjoyed it

 

[gene]

This is a followup article written by industry Veteran Steve Feinstein:

Chip Shortages and Pricing Considerations in the AV Industry

The IC chip shortage is wreaking havoc on many electronics products, but does this chip shortage threaten the health and viability of the specialty audio and home theater market? Read on to find out.

www.audioholics.com

The non-availability of goods is the real danger of the chip shortage, not the price increases.

 

[corey]

Steve wrote: "However….virtually no one in their right mind considers their next mid-range $700 home theater receiver to be “essential.”"

Perhaps not, but I do consider at least a modest receiver to be essential.

 

[Danzilla31]

That followup article was so good on so many levels. Very well done a very good read. I think this will cause some people to wander off for a while but audio has been around for so long now in one form or another. Once things clear up people will eventually wander back to it. Now what companies are left or what new companies are formed that's what I feel we shall have to wait and see

 

[Eppie]

This is a followup article written by industry Veteran Steve Feinstein:

Chip Shortages and Pricing Considerations in the AV Industry

The IC chip shortage is wreaking havoc on many electronics products, but does this chip shortage threaten the health and viability of the specialty audio and home theater market? Read on to find out.

www.audioholics.com

The "invisible gift" aspect was interesting. Who would have thought that a simple component upgrade could lead to such a large increase in retail pricing to maintain the same sales margins. Good article.

 

[Eppie]

Steve wrote: "However….virtually no one in their right mind considers their next mid-range $700 home theater receiver to be “essential.”"

Perhaps not, but I do consider at least a modest receiver to be essential.

Maybe to the members of this forum, but you only have to look at the volume of sound bar sales to see how that applies to the rest of consumers.

 

[adk highlander]

I love peanut butter and sliced bananas on warm toast. So good, and not an unhealthy snack. You can sprinkle some Chia seeds on top for some added texture.

My doggo gets an "Elvis" every day at lunch. A banana cut in half and filled with peanut butter and an occasional slice of bacon.