Global Semiconductor Shortage
The Complexity of Semiconductor Production
Machines like those from ASML cost approximately 120 million euros, are as big as a bus and have to be delivered by three cargo planes – without them, the highest level of semiconductor production is not possible. Photo: ASML
It Takes at Least a Year and a Half from the Planning of the Factory to the First Chip Produced
Chip Production Requires Global Value Chains and Specialized Know-How
The semiconductor industry is consolidated, so that only a few companies worldwide can still operate at the highest level in the value chain. The three largest semiconductor manufacturers, Samsung, Intel and TSMC, come from South Korea, the USA and Taiwan. TSMC is the largest foundry in the world with a market share of over 55 % in contract manufacturing.
Highly complex semiconductor production machines come from ASML in the Netherlands. Their delivery can take over nine months and costs about 120 million euros each. Without these machines, 80 % of the world's chip manufacturers, who are ASML's customers, would not be able to produce. For its part, ASML is also dependent on suppliers.
German companies Zeiss, Trumpf and Jenoptik, for example, work in collaboration with ASML. Trumpf supplies the carbon dioxide lasers for the EUV scanners in ASML's machines. The value chain for semiconductors only works internationally. No region in the world has even come close to independent, autonomous manufacturing. Both production plants and suppliers for highly specialized components are spread all over the world.
Production Sites in the Global Supply Chain Dependent on Global Trade
Manufacturer dependencies do not only arise due to the geographical distribution of technology centers. The semiconductor industry requires smoothly functioning supply chains between locations. Noticeable disruptions were triggered by events such as the volcanic eruption in Iceland, which affected air traffic, the transverse ship in the Suez Canal, as well as the reactor disaster in Fukushima and the Corona pandemic.
Failure to manufacture or deliver the highly specialized components, which in turn depend on site-specific raw materials, lead to severe supply bottlenecks in all subsequent production steps as well as in industries dependent on semiconductor production.
Commissioning of New Production Capacities Planned for Mid-2022
New production lines for semiconductors were already being planned at the beginning of 2021 and are scheduled to start in mid- 2022. Long waiting times are caused by high requirements in the production of complex technology and machines. Clean room conditions must be established for production; the smallest impurities would render the semiconductors unusable. The semiconductors are manufactured in up to 1200 separate production steps over a period of up to six months.
The machines required, such as those from ASML, are the size of a bus and have to be transported by three cargo planes. A double-digit billion sum must be raised for the entire construction and implementation of a new production line to increase capacity. The increases in capacity are only profitable if a utilization rate of at least 85 percent is achieved in the long term.
The semiconductor industry is globally networked and highly sensitive – disruptions to the transport, and the value and supply chains, such as the "Ever Given" that ran aground in the Suez Canal, jeopardize the tightly scheduled operations.