Susquehanna Financial Group analyst Chris Rolland noted Tuesday that the wait time for all major semiconductor product categories is up considerably—from 16 weeks in March to 17 weeks in April. This represents the longest lead time—the elapsed time between placing an order and receiving products—that the industry has faced since 2017, when the firm began tracking this data.
Rolland said this lengthened lead time puts the industry in a "danger zone," noting further that "elevated lead times often compel bad behavior [from] customers, including inventory accumulation, safety stock building, and double ordering." In other words, major companies seeking
VLSICs don't behave very differently from consumers seeking toilet paper.
These shortages impact nearly all industries to some degree, with the heaviest impact falling on industries with long lead times of their own. In particular, the automotive sector is projecting $110 billion in lost sales this year due to factories sitting idle while waiting for components. Again mimicking last year's pandemic-related toilet paper shortages, hoarding tends to make the gaps worse. As the lead times get longer, buyers become more likely to overorder and make supply chain problems worse.
The shortages are also compounded by conditions in Taiwan, home of Taiwan Semiconductor Manufacturing Company (TSMC). Earlier this week, Taiwan's Centers for Disease Control
raised its epidemic warning level and is strengthening containment measures. Making things even worse, the island is in the midst of a severe
drought, prompting the Taiwan Water Resources Agency to curb delivery to many areas. Hsinchu—the heart of Taiwan's semiconductor industry—is facing water cutoffs two days a week, and water reduction plans are expected to decrease supply to all major manufacturers by as much as 15 percent.
An official at the Water Resources Agency declared that this is "the most serious drought ever," with 360 days since the island's last noticeable rainfall. May is Taiwan's traditional monsoon season, which should ease the drought—but it hasn't arrived yet, and the two large reservoirs supplying TSMC's most advanced foundries are down to 6 percent and 11 percent.
Making matters even worse, the 17-week lead times being discussed are averages; the wait time for certain components is even worse, with power-management chips taking nearly 24 weeks and headphones taking more than a year. Rolland states that lead times have expanded for roughly 70 percent of the companies that Susquehanna Financial Group tracks.
