“Lack of core” storm: self-help and survival

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Text｜36氪 Yuan Silai Edit｜Qiao Qian Text｜36氪 Yuan Silai Edit｜Qiao Qian When Mo Jun received a call from the supplier at one o’clock in the morning, he hadn’t been able to sleep well for a long time. The female voice in the receiver can’t be heard tired. After a routine apology, she brought an unexpected bad news: the chip was out of stock and the product could not be delivered. Recently, as the person in charge of a certain IoT product, Mo Jun has heard too many such remarks. He just said a few perfunctory words, hung up the phone, and pulled the supplier into the blacklist. Of course, Mo Jun knew how tight the market is now. He wondered if he should find a stronger sales, one that could grab the goods from others, to ease the anxiety in front of him. His colleagues in charge of the supply chain ran to the south very early, squatting at the door of parts manufacturers to “grab food.” Every morning, when I see the person in charge at work, I will come up to inquire: how much can I provide today? When will it arrive? Is it from Japan, Vietnam, South Korea, the Philippines or from Shanghai? Mo Jun and the others had to change the design time and time again to adapt to the current dilemma. Even some products that are about to be mass-produced must be overthrown and replaced with parts that can be delivered. Chips that used to have to be picked are now ready to use and available as soon as they are available. The industry has begun to circulate a variety of stories that evade the life-threatening serial calls of purchasers: suppliers shut down, do not respond to emails, skip orders by drawing pay from the bottom, or simply play and disappear. Out of stock, it is no longer the anxiety of Mo Jun and the others. Mobile phones, computers, IoT, and automotive chips are in short supply across the board. Even the small and medium-capacity memory chips that were previously available in sufficient quantities will also be in short supply in 2021. The big manufacturers are also doomed: Samsung has postponed the new note update, the iPhone is facing a shortage, Ford temporarily closed its SUV factory in Kentucky, and Audi’s 10,000 employees have nothing to do… The big guys are complaining: Lu Weibing, vice president of Xiaomi Group, posted on Weibo: “This year the chip is too short, not a shortage, it is extremely lacking”; Qualcomm CEO said in an interview that he could not sleep all night because of the lack of chips. Just like dominoes, the shortage of small wafers will eventually cast a shadow over the huge global consumer electronics market. How did this “core shortage” storm happen? How do the anxious and helpless people in the industrial chain fight their backs?

In a hurry

The semiconductor industry used to be far away from the public’s vision. This industry is actually equivalent to providing “blood” for the TMT industry. There are three modes of operation: the Fabless (factory-free) mode that is only responsible for design, such as Qualcomm and MediaTek; IDM (Integrated Device Manufacture) model, such as Samsung, Intel and Texas Instruments; and finally Foundry (foundry) such as TSMC, Power Semiconductor Manufacturing Co., and SMIC.

The global shortage of chips this time is stuck in the manufacturing links of Foundry and IDM.

At the corporate briefing at the end of last year, Power Semiconductor’s chairman Huang Chongren gave data that proves that “the supply and demand of the chip industry has been extremely imbalanced”: In the past five years, in addition to TSMC and Samsung actively expanding the production capacity of advanced processes, other crystal The production capacity increase of the mature process of the Yuan foundry factory is very small, and the growth rate is less than 5%. However, the growth rate of global wafer capacity demand from 2020 to 2021 will reach 30-35%.

The chips are cut from wafers of different sizes. The most widely used is 8-inch wafers. 5G radio frequency chips, car control chips, and fingerprint recognition chips are all made from it. But in recent years, manufacturers have begun to favor 12-inch wafers, which can be used on smaller and more advanced chips, and 8-inch wafer fabs have been shut down one after another. The epidemic has intensified the 8-inch wafer production reduction, but the 12-inch wafer has just started and the production capacity is limited, and it is impossible to fill the 8-inch wafer production vacancy.

In fact, the foundry is already working at full capacity. In the first quarter of this year, the total revenue of the world’s top ten wafer foundries increased by as much as 20%. Because it is unable to cope with the influx of orders, Samsung has begun to expand the outsourcing of general-purpose computer chips. Power Semiconductor Manufacturing Co.’s two 8-inch wafer fabs and three 12-inch wafer fabs have reached 100% capacity.

Huang Chongren said that the current capacity of 12-inch wafers is 100,000, and the capacity is so full that even the margin of two or three hundred pieces can not be squeezed out. This will naturally make customers feel “panic”.

Because customers need more full “blood” to meet their rapid growth.

“Including the development of 5G, as well as the large-scale growth of Netcom products brought about by the epidemic: TVs, set-top boxes, panels, including 5G mobile phones. It is not only an increase in quantity, but also the capacity of the memory matched on each product. Or increase.” Zhu Di, director of the product marketing department of Winbond Electronics (Suzhou), told 36Kr.

Especially in the mobile phone industry, after the head company stalled, there was a big gap in the mobile phone market in the second half of last year.

“But one left, three came,” Li Wei, who works for a mobile phone company, told 36Kr. Instead, this industry is full of long-lost passion. Everyone is eager to seize the rare window of opportunity.

Originally, they were used to the material shortage. But on Monday, August 17, 2020, the United States renewed its export management regulations. Huawei not only cannot produce chips by itself, but also cannot buy from third-party manufacturers such as MediaTek and Qualcomm.

The instructions of Li Wei’s bosses came one after another: “Take inventory now, how many things are needed, and write down the requirements.” The employees in charge of the core materials stayed up day and night, calling everywhere for goods with dark circles under their eyes. The occasional relaxing time is to go to a nearby food stall to have a supper.

How many orders have been added by manufacturers is not uniform. Li Wei learned that Xiaomi, OPPO, and vivo have all added more than 10% of their orders, adding tens of millions of mobile phones in a short period of time. But what Mo Jun heard was that Xiaomi directly doubled the amount.

The actual data may be in the middle point. According to a report from “Nikkei Asia”, Xiaomi has convened suppliers to provide mobile phone parts and accessories in 2021. It is expected to purchase up to 240 million mobile phone accessories this year, and Xiaomi’s global shipments in 2020 will be 146 million. According to this statement, Xiaomi Chip orders in 2021 have increased by 70%.

“Now that a huge market is exposed, everyone is robbing it, but it really can’t be taken. What is the equivalent? There are three dogs here, looking at the big bone in the middle, they want to get it. As a result, each dog is tied to a chain. Can’t get it.” An employee of a mobile phone manufacturer described it like this. The words are not good, but vivid.

Chip supply may be the thickest chain. 5G mobile phones not only have a large demand for core chips, but the number of logic devices on them, such as power management chips, driver chips, etc., are more than that of 4G mobile phones.

Mobile phone manufacturers squeeze out factory production capacity, which will indirectly affect their fabless counterparts. If the domino of “capacity” is overturned, storage, power supply, and radio frequency chips will eventually become anxious.

In fact, many people have already heard the sound of falling dominoes.

Lin Fei works as an e-commerce planner in the IoT department of a company. In December last year, the crisis hadn’t really hit our eyes because the business was doing so well in the second half of the year, and the bonuses were so high that colleagues in other departments would be jealous. Of course, in 2021, they will have to do it again. But when the department met, the leaders began to warn everyone: “Next year may be difficult to do, and production capacity will be insufficient.”

The leader, who had always been quiet, began to leak anxieties from time to time. At an inter-departmental horizontal communication meeting with colleagues in the product department at the end of the year, the other party asked if there were any other questions as usual. The leader banged the table three times, half serious and half joking to the department on the other side of the screen. Toutoulian said: “Inventory, inventory, inventory.”

Lin Fei than the leader realized afterwards that the inventory problem is still after the New Year this year. Suddenly, in almost every regular meeting, the leaders repeatedly emphasized the supply problem, and if they were anxious, they would get angry with the regional person in charge: the goods are already insufficient, why do you have to pick it?

Obviously the situation is much more serious than Lin Fei knows. It’s hard for him to see the leader recently. For half of the week, he spends a half of the week in Shenzhen and drinks a lot of alcohol. Sometimes the sound of a meeting in the morning is also exhausted after a hangover: “Everyone must pay attention to the issue of stock outs. The stomach will explode after drinking.”

Resources are skewed to products with higher gross profit and large agents, but the supply is still in short supply. “I thought it was very likely that the epidemic would gradually ease, and then there would be a solution when the time comes, and production capacity may slowly recover, but it turns out that there is really no.” Lin Fei said.

What’s interesting is that Lin Fei’s out-of-stock “arsenic” has become the “honey” for some small semiconductor foundries. Chip shortages have led to a short but golden seller’s market, and opportunities for small factories to enter the supply chain of large customers have emerged.

After the fall, Mo Jun had to use some suppliers that he hadn’t liked before. For the same material, Mo Jun found three suppliers, but one of them always failed to deliver. Later, the opponent of that manufacturer found Mo Jun and pryed at the corner of the other party at the dinner table: This company supplies you less and your friends supply more. If you find us, we can meet your needs.

Mo Jun asked the manufacturer to confront him, and the other party admitted that they had indeed allocated part of the production capacity to a friend because the other party “placed the order earlier”-this argument obviously cannot quell Mo Jun’s dissatisfaction.

The other party did not want to lose Mo Jun, a big customer, and kept apologizing, but also invited dinner to apologize, but the defection in the very period made Mo Jun hard to let go, “This is not enough to support the strength.” This “Mandarin” sounds ordinary, But it is often a prelude to a break between the two sides.

Xia Yunfeng, who works in a PC parts factory, has no such good luck. Their suppliers clearly stood in line and told him very firmly: no more new orders, because we want to keep our original customers.

Xia Yunfeng was kicked from one foundry to another, and even the suppliers he often cooperated with did not dare to promise to place orders. The last unfamiliar manufacturer took over the hot potato, “It’s really sending charcoal in the snow.” He was relieved.

But this tone only relaxed for less than 24 hours.

The next day, the supplier’s workshop suffered a fire and stopped production. The moment he saw the news, his head began to tighten again. There was still a fluke: it was the car chip that caught fire, and it won’t affect us. He didn’t know until the other top executives came over that his own chips were also produced in that factory. Their delivery date was postponed to October. This made Xia Yunfeng’s emotions almost collapsed, “I feel hopeless.”

Xia Yunfeng can only go back to the previous suppliers, or whatever, let them divide the spot, “give as much as you can.” Of course, double the price will do.

Chaos

The first domino fell, and the whole situation was irreversible.

There is a lag in the chip industry. Generally speaking, the foundry will keep inventory for three or even six months. When the inventory is exhausted, it is already half a year later to purchase again. “Ordinary TSMC chips take 13 weeks (almost 3 months). For example, the delivery cycle of automotive chips may take at least 6 months. This will cause problems.” Soitec’s strategic development of high-end wafer substrates in China Director Zhang Wanpeng said to 36 krypton.

The early warning mechanism of the supply chain can easily fail. In this industry, many companies are unable to make a slightly more accurate plan for future demand and supply.

Li Liuqi, the founder of Hard City, remembers that when there is no shortage of chips, the wait for more than 12 weeks will seem too long. Everyone is accustomed to the smooth operation of this chain, and it seems to be a matter of course to deliver on time. Once an emergency occurs, the entire industry will immediately fall into a chain panic.

Like Lin Fei’s leadership, Xia Yunfeng actually noticed that the operation of the chain began to stagnate very early: in June last year, Xia Yunfeng found that the product shipments he was responsible for were increasing exponentially, but the supply-side production capacity did not increase. He has a foreboding that if this continues, chip production capacity will inevitably be tight.

During an internal meeting, he told everyone: We should find a supplier who can guarantee the supply. It doesn’t matter if the price is higher. But my colleagues disagree, and they have not felt out of stock yet. It is more important to get a low price.

“I think the reason for the greater lack of cores is that the entire industry has not done well enough in capacity, or planning and risk control.” Zhang Wanpeng told 36Kr.

The most typical is the automobile industry-the automobile is also the hardest hit area for this lack of core. According to a report by the Bernstein Research Institute, due to chip problems in 2021, global automobile production will be reduced by 2 to 4.5 million vehicles, accounting for approximately 2-5% of annual production.

This shock in the automotive industry is largely due to excessive fear of the global epidemic and misjudgment of market resilience.

The middle level of a star electric car company clearly remembers that there was actually a stock of chips at the beginning of last year. By April, the global epidemic had not improved, and auto companies’ sales expectations for complete vehicles fell to a pessimistic trough. Bosch and China, the world’s largest and second-largest auto parts suppliers, also cut orders, directly leading to chip foundries. Follow up to reduce orders.

With the reduction of production capacity and the basic shutdown in Europe at that time, packaging and testing were not possible, and logistics were basically suspended. For downstream manufacturers, shortage of goods is a high probability event in the next few months.

But manufacturers soon discovered that car sales were not as bad as expected. But it is too late for them to add orders. The restart of the production line will not happen overnight, and the excess wafers have long been used to make mobile phones and other types of chips.

“As soon as the order was cut, the 8-inch wafer line was snatched away and could not be snatched back. Some product cycles take 6 months, and it is useless to use a knife to force it.” The middle-level said.

Even large automobile manufacturers can hardly require chip factories to expand their production capacity in the short term. Winbond said at the corporate briefing that their monthly production capacity has increased from 54,000 pieces last year to 57,000 pieces, although only a few percent increase. Winbond invested NT$13 billion to expand production in Kaohsiung, but it will not be able to start trial production until the first half of 2022, and mass production will have to wait until the second half of 2022.

The industry has fallen into chaos, panic buying has spread, and many customers have doubled or tripled their orders. The bubble is flooding, and the mixed speculators are hyping up, and the price of a material can be tenfold from the factory to the final transaction.

However, major foundries have concerns. TSMC, which has a $100 billion expansion plan, has also shown prudence. Chairman Liu Deyin said in an interview: “28 nanometers seems to be in short supply now, but in fact, global production capacity is still greater than demand.”

A factory has an investment of tens of billions at every turn. Before the demand is squeezed out, even OEM giants dare not rush to make a move. Once the supply and demand cycle is mismatched and the rhythm is chaotic, the huge sunk costs are likely to drag down the entire enterprise.

As for the flow of bubbles and tides, it is often difficult for even superb trendy people to identify them. In the middle of last year, the constraints of production capacity have actually been eased. At that time, many manufacturers began to worry that their chips could not be sold. Mo Jun receives phone calls from manufacturers about dinner appointments. The sincerity of “inviting guests” makes it hard to resist. Even if you eat in the company cafeteria, the salesperson of the other party will sit opposite, “I can’t get rid of it.”

What made Mo Jun uncomfortable was that he ordered the other party’s goods, and it didn’t take long for the manufacturer to tell him: “We are out of stock, I suggest you go find XXX”-that is the opponent’s competitor.

It turned out that this factory had a new abacus when the chip industry was in turmoil. They couldn’t make a big move in the consumer electronics industry and had always wanted to transform. It just so happened that the shortage of automotive chips became clearer. They simply turned all the wafers into cars. Chips, I want to take this opportunity to cut into the car market.

Mo Jun had to accept this result. In business, business, the rules of “business” in extraordinary times are more straightforward: stores bully customers, and customers bully shop.

The second supplier that Xia Yunfeng’s PC parts factory has been cooperating with has been looking for top OEMs for production. As soon as the production capacity is tight, their profits and priorities are not ranked in the other side, and they naturally become the target of squeeze. In the last second supply, we could only find other alternatives, but it failed after three productions.

Xia Yunfeng was desperate, because even the head company personally went off to compete for resources. The top 3 PC manufacturers will directly send people to the site, and they will snatch them when they see the goods, and they will not give the “friends” the slightest opportunity.

Xia Yunfeng’s supply chain director kept meeting with key suppliers for dinner and drinking. Coupled with personal emotional bombardment, the other party finally let go and agreed to give some spot to ease their current crisis.

In this season, how much the company wants to reduce the price of raw materials OKR has long become a blank letter. In private, everyone knows that this year, if there are goods, it is good to be able to deliver on time. There is no way to consider the price.

In January, TSMC and other foundries considered raising the price of automotive chip foundry again. Among them, TSMC holds a large number of shares in the world advanced considering the highest price increase of 15%.

This is called super hot run (SHR, super urgent) in the industry. The foundry will transfer part of the production capacity to deal with the emergency situation of the order, but it will increase the price by about 20%.

“Now when I encounter a chip, even if it has increased by 100 times, I still have to buy it. There is no way.” An executive of a new car maker was also helpless.

response

In extraordinary times, many companies have to enter the zero inventory production model.

Wang Quansheng, who works for a large multinational in-vehicle chip company, told 36Kr that he had never experienced such a lack of resources. Wang Quansheng watched the inventory number change from tens of thousands, little by little to thousands, and finally “0”. A few months ago, they started zero inventory production.

Zero inventory production is actually the future direction of the manufacturing industry in the era of the Internet and big data, which may lead to disruptive changes in manufacturing efficiency and costs.

However, this battle for chips brought the “future” to come early, and many companies were caught off guard.

Wang Quansheng’s production plan must be very meticulous. In weekly meetings, the leaders will predict the timeline of the next batch of goods in advance, which day they will arrive at the headquarters and which day they will be able to arrive in the country.

The chip transportation time is compressed to one-third of the previous one, and the time must be accurate to the hour. In the past, chips were shipped by sea, and it took three days at the earliest to ship to the country. After unloading, it will be sent to the factory where Wang Quansheng is located for inspection, and then sent for PCBA (Printed Circuit Board + Assembly) processing. The entire process takes at least 5 days.

All current chips are transported by air, and the cost is three times that of sea transportation. It costs thousands of dollars at a time. Even if there is only one chip, it can still fly.

The discs made into film rolls are transported to the cargo plane. When they take off from foreign airports, it is usually 2 o’clock in the morning, and it is just dawn when they arrive at the domestic customs. If you are lucky and are not sampled, they will be shipped out of the customs gate in 3 or 4 hours and loaded onto the logistics truck that has already been waiting at the gate. At dusk, the chip will enter the PCBA workshop. The pre-inspection link in the factory is omitted. The chip goes directly to the PCBA production line. The PCBA board is sent to the Wang Quansheng company’s factory in the evening of the next day, and it is made into a finished chip overnight.

In this way, they can guarantee to shorten the delivery time from 5 days to 2 days.

Wang Quansheng is responsible for production allocation, docking sales and supply chain. He was accustomed to foreign companies not working overtime, so he had to start “996”.

This is a new test for Wang Quansheng and his company. Every link of theirs must enter into fine management, and the connection between links is tight to the extreme. Flight delays, customs inspections, and traffic jams during peak periods will affect the entire production process.

The delay of four or five hours can still be remedied. Wang Quansheng will contact logistics. After departing from the customs, a truck is equipped with two drivers, and the truck will not be disconnected. If the chip arrives more than 6 hours late, it is necessary to adjust the production line, arrange to work overtime until late at night, or increase the shift.

Wang Quansheng remembered that the longest delay was a whole day. After 7 o’clock that morning, Wang Quansheng received a call from a colleague: The entire shipment was randomly inspected. Next, they kept calling, asking when they could leave the customs. It was not until the evening that the batch of chips was sampled, and the production line was still suspended because of the long delay. After the finished product left the factory, they arranged two drivers for the truck and drove it for three consecutive days and delivered it to southern customers.

It’s not just transportation delays that have to worry about, but natural and man-made disasters around the world are enough to make them panic.

Renesas, the world’s third-largest automotive chip manufacturer, halted production at the Naka fab in Ibaraki Prefecture in February due to an earthquake for half a month, and in March due to a fire. Renesas’ customers include Honda, Toyota, Nissan, and Nomura. Securities has made an assessment that from April to June, the output of major Japanese automakers may decrease by 1.2 million vehicles. And Blizzard in Texas in the United States led to the closure of five foundries of Samsung, Infineon, NXP and Skorpios, of which three were foundries with 8-inch wafers.

When this intensifying battle for chips will come to an end, there are divergent opinions. Wang Quansheng and his colleagues chatted, thinking that the lack of chips will continue until the end of the year. Xia Yunfeng is not so optimistic. He thinks it will be 2022. He realizes that when uncertainty is flooding the surroundings, it may be more advantageous to hold this view: in the short term, there can be no illusions about the situation getting better.

In fact, the grass-snake gray line of this industry turmoil has long been hidden there. Cyclical fluctuations were originally the norm in every industry. If you can’t take precautions, you may repeat the panic again and again. After the turmoil is over, perhaps more companies can learn to change. Manage supply and demand well, be more foresighted, and predict the future more optimistically.

Specific to the chip industry, “large foundries have begun to work more closely with major customers to promote customized processes and evaluate future production capacity, which can effectively prevent chip supply from becoming unstable.” Zhang Wanpeng said.

Source: 36kr