Anybody have inside info?  It’s killing my ability to build networks. 3-4 months on optics alone. Supply chain all fucked up.

Just in time manufacturing is great, until it isn’t.

Fuck china.

First I've heard of it.

Lol really?  It’s been fucking shit up for months now. Almost like it started January 20. Hmm, what happened that day?

Um, Japan is not China.
Japanese factory burned months ago.

So explain. I’m not in the semi business. But it’s fucking shit up big time.

My friends company builds the 10 speed transmission‘s for Ford.  Output has been cut by 2/3 because of one single electronica component.

And no you cannot install the transmission and then later install the electronic components.  He says mid 2022 before it eases.

Fuck.

SME in this area.

Utterly insane demand combined with supply chain problems created by COVID.

Normally one section of the industry will go up while others go down (e.g. phones up, PCs down), right now everything is growing, and at rates considered very unlikely a few years ago.

Manufacturing capacity comes in very, very expensive large chunks. Fabs are $10-$20billion, 5 years investments now, so you can't just flip a switch and get a new one.

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So you’re saying it’s a demand thing?  Which means it will only get worse.

There has to be money to be made on the supply side.

A quarter ago if you asked everyone was saying it would be over by the end of 2021.

This quarter when you ask it's end of 2022... maybe.

Intel's CEO came out on Monday and said a couple years... that's 2023.

Demand is up across the board, completely separate from the supply chain problems.

The problem is that is creating more supply chain problems. You have someone like an Intel/AMD able to afford to pay nearly anything to build processors at any cost, which is fine, except then you have also have someone like Texas Instruments that makes 10-cent chips that can't buy their way into access to manufacturing capacity.

And... guess what, those $800 laptop PCs with a $125 Intel/AMD processor are built with a dozen of those 10 cent TI chips, and if the PC manufacturer can't get them, no PC and no processor sale. Same shit is happening with phones, cars, pretty much everything.

Just as an example, current lead times on tiny parts like TI voltage regulators or Microchip AVR microcontrollers are over a year, if they will even give you a date.

Money is definitely being made on the supply side -- for now -- but the wrong parts go short and boom, no one can build the shit they want to.

Several months ago people asked "what should you buy" here on GD and my answer was electronics. Everyone in the industry saw this coming but there's not a lot that can be done quickly -- again it takes multiple years to add capacity.

Just modelled a Fab shutdown.

Assuming;
- My theoretical Fab has the capability to overproduce by 10% above regular production rates.
- Fab production dropped to zero for six months due to Covid
- Demand ramps to 150% for one year post Covid, then returned to 100% thereafter

A Fab running at 110% after the 6 month shutdown would take 12 years to catch up and overall demand = overall supply.

The issue is that fabs are built and optimized to deliver a certain demand, and can't easily ramp too much beyond that. The shutdown created a big backlog. The increase in consumption created more backlog.

It's a deep hole that they can only dig out of very slowly.

Same modelling applies to lots of industries that are configured to meet a certain demand, can't scale quickly above that, and had a production interruption followed by higher than usual demand.

Great analysis

Few different issues:

1. General supply chain issues due to Fauci's Folly.

2. Most automakers decided to cut back their chip purchases, and because of that lost their fab slots. So the fabs shifted production to higher value chips leaving the car people high and dry.

3. New GPU generation at the same time as a crypto surge was happening. If you think gun owners complaining about market prices is bad try listening to the screaming from gamers.

The big fabs are in Taiwan.

Initially early covid shutdowns China and some other places caused a hiccup. Most non-China customers reconsidered their outlooks for the future, some went cautious and cutback on future orders, others started doubling orders to stockpile inventory.
Also remember, 2018-2019 was already a rollercoaster due to tariffs and restrictions on China.

China got rolling again pretty quickly, and orders picked back up while the West went into lockdowns.
Shipping delays become rolling delays. Air travel greatly reduced, expedited shipments that typically took a few days were taking a week or more and drastically increase in price.
Cargo shipments that typically took a couple of weeks jumped to a month or more, dependent on loading/unloading and customs.

When auto-manufacturers let their future capacity go, most fabs were already easily hitting >95% capacity due to increased demand in medical, telecom(5G) and general consumer electronics.
Auto manufacturers wanted their capacity back and more when they realized things jump started in 2H 2020. Except minimum lead times for orders are typically 3-6months and can take 3-6months from wafer start to being sold/shipped in the final "consumer" product.

General increase in demand-
Auto manufacturers are expected to use 3-4x the number of semiconductor chips when they switch to full EV.
Telecom(5G) infrastructure is also supposedly using an increased number of chips, I've heard anywhere from 2-4x.
General consumer electronics saw a huge boom due to WFH and stimulus checks.

Semiconductor developement-
Only 3 companies are able to continue R&D on cutting edge new process nodes, while there are dozens of high volume customers that need it. And hundreds of others who want it once it reaches a certain maturation point (yields/cost).
Semiconductor industry has been using the same wafer size(12in/300mm), area of usable silicon, since the early 2000's. Wafer size was seeing ~2x increase in area every 10 years or so, the industry should have moved to 18"/450mm wafers at least in 2015/2016 when EUV was being developed(new photo-lithography technology).
Cutting edge semiconductor fabs delayed switching to 18" because the cost to build new fabs would go up significantly due to switching from older 12" tools to 18" tools and they had already seen cost per transistor trend reverse and started increasing due to already ballooning R&D costs and other tool costs.
ASML is really the only company that can deliver the new photolithography technology and they can only crank out so many tools per year. ASML doubled their EUV tool shipments from ~20 in 2018 to ~40 in 2020.
Videos on how crazy the ASML EUV tools are- Video 1   Video 2    Video 3

So basically there are at least a couple dozen factors involved and no easy fix.

Breakdown in the just-in-time delivery system.  Why should Chyna make sh*t for us when we paid them with federal reserve notes that devalue regularly?

"build networks"
"Optics"


What exactly are you doing that is so hard?

I just ordered 10 SFP modules and some OM3....no issues.

Not to mention a Cisco stack card/DACs

Just had $10k of memory delivered as well that only took a week from disty

You should be building networks in VMware anyways...physical cables are for losers

and since it takes a couple years to spool up a new factory, no one is willing to invest when supply will very possibly be oversaturated in 2 years.
Think about graphics cards.  Over the next year, most everyone will have a new one.  Then what?

TSMC is building a bunch of fabs in Arizona.

Bruh, you can network on LinkedIn.

just saved you tons of monay and time.

Great point, the backlog being developed right now is insane as well.

We're to the point where in some industries we're basically adding a quarter of backlog for every quarter shipping.

Capacity planning becomes a nightmare then because you want to serve the demand but you know half of it will go away once it's satisfied, and no one wants to suck it up and build everything just to idle 50% of it a couple years later.

TSMC, Intel, and Samsung are all bringing factories online in AZ in 3-5 years (groundbreaking to full output) and of course others are building as well elsewhere. My guess is we see a capacity boom hit around 2025 that turns into a glut shortly thereafter and hard times all around.

Assuming nothing else crazy like aliens providing fabs or WW3 leveling Taiwan. Not sure those are safe assumptions anymore.

Most auto companies aren't using off the shelf processor chips, they use ASIC's made only for them, and is all they are setup to use in their vehicles. So when they gave up their production slots at TSMC etc they have nowhere else to go to get the chips so have to just wait until it's their turn again for a production slot.
New problem is companies are starting to try to stockpile their chips, so are over-ordering when it is their turn to get produced, delaying the switch-over to the next chip to be produced for someone else.
It was a carefully balanced system that was totally thrown out of balance and it will be years before the oscillations of demand and supply die out.

I'm not aware of a single fab shutting down due to Covid.
Edit- And I shouldn't say just fab, but no probe/test, no assembly facilities either. There have been some other issues throughout the industry but those were unrelated to covid.
The semiconductor industry has been running full-tilt since late 1H 2020.

Lots of folks have made good points...but there's just too many factors to wrap it all up and put a bow on it.

Any optimism you hear about 2022 being better, is just that, optimism.  It's not grounded in anything factual.  If you get a leadtime, and it's longer than 3 months, they actually don't know when they will get it and they are just scared to tell you.

We regularly deal with very large orders for Servers, storage, networking, etc  and many times it's for the military, and many times they are DPAS rated orders (basically, if you accept the order, you are bound by law to provide the equipment to the order ASAP regardless of if the components were already intended for some poor schmuck who has been waiting months).  We actually had a large supplier decline to accept the rating.  First time in 20+ years.  I don't blame them.

I saw it briefly mentioned above, but once the container ships arrive off shore, they are waiting between 4-6 weeks before being unloaded.  So as much as things have ramped back up across the pond, they are dragging their feet at the ports in CA.

There is also a drought going on in Taiwan right now, and the semi-conductor production needs that.

Lots of our manufacturing partners are in Taiwan...and they say between China doing donuts around the island with their Navy and sending drones overhead, the drought, substantially increased demand, and an absolute shit show when it comes to COVID and Vaccines, its a mess.  Just got this email about 30min ago:



Expect to see more things abruptly end of lifed/discontinued...

Companies gave up their spot in line on semiconducter chips when the pandemic started thinking the market would drop. They lost their spot and people bought shit left and right with stimulus money, same thing happend with vehicles. Now they are starting over at the end of the line. Throw in a huge amount of desktop computers, laptops, chromebooks that were purchased for people to work from home. Then double on top of that  data centers had to beef up to support all the traffic of people working from home. Also just in time logistics biting a lot of people in the ass.

Also Taiwan is dealing with a drought and semicondter production uses a lot of water. It all adds up.

I don't have inside info but it isn't just semiconductors.   I added a 2 pin SMT header to a board and the best lead time for production quantities is 89 days.  For a 2 pin header.

Yeah, I don't remember fabs shutting down, but one of Intel's main production facilities for their NUC line is in Wuhan, and that thing was shutdown for awhile, and then they slowly allowed small numbers of workers back in over time.  Lots of factories like that around China got shutdown.  

Everybody shut down for covid.  Global supply chain totally fucked.  Lots of people now want to reorder as if there is a stock supply, when in reality production takes months and there are not reserves.

OP is feeling the Chinese squeeze. Our brilliant politicians opened up a Rare Earth mine last year. Problem solved? Not really. The ore has to go to China to be processed. Now China needs to take Taiwan intact and they control the computer chips supply around the world. This is why we will go to war over Taiwan.

100 gig optics and routers and switches to run them. N9k 40/100 switches and a bunch of ACI shit/spine modules.  Build to order gear, not stuff a distributor has laying around.

Your ESX hosts have to plug in somewhere.