Unexpected events in 2021 have worsened the supply of already short raw materials like silicon and glass substrate, wafers and plastic. As a result, production for a variety of components has been impacted, causing shortages of ICs, CPUs and memory.

As we move through Q2, we will see impacts of these unpredictable disruptions unfold as we deal with additional raw material shortages on the horizon.


The Wafer Shortage

The production of semiconductors is continuing to be hindered by the 8-inch wafer shortage, which has snowballed since originally reported in 2019. Because of capacity restraints and unpredictability of the COVID-19 pandemic, manufacturers shifted production lines to focus on industries that were seeing demand, such as the consumer electronics industry. Recently, there was a big push for chipmakers like TSMC to shift its focus in support of the automotive industry.

The 8-inch wafer is needed for CMOS sensors, power supply controller, MCU, RF component, MEMS, etc., which is why numerous industries are competing for this resource. As TSMC moves to focus its production on automotive chips, the production of other industries will suffer as a result, especially since production has been further impacted in recent months.

The Texas winter storm, for instance, caused widespread power shortages and blackouts. Because Texas is a US hub for chip manufacturing and electronic production, major chip manufacturers were impacted including Samsung, NXP and Infineon. We won’t know the extent of the disruption until further in Q2.


The Silicon Shortage

The ABF substrate shortage has been the biggest contributor to the CPU, GPU and IC shortages, and is currently predicted to last until 2023 due to substrate foundry capacity being reached. This was aggravated by the Nittobo and Renesas factory fires that occurred at the end of 2020 and beginning of 2021. Production for a variety of components has been impacted as a result, such as with memory products.

Because ABF manufacturing equipment has a lead time of 12 months, ABF makers are focusing on increasing yield rather than capacity. With no supply relief in sight, prices will continue to rise over the next 6 months, leaving customers to pay the price. There are dim prospects for recovery as the substrate shortage continues.

The continued drought in Taiwan will only exacerbate the effects of these shortages, especially since Taiwanese plants and foundries produce approximately 53% of global semiconductors. Because water is key in processing silicon and chip production, shortages through May could be a major blow to semiconductor production.


The Precious Metal Shortage

As predicted in 2020, other raw material shortages are starting to appear, such as precious metals. Palladium, used in electronics and a key component in vehicle pollution-control devices, is experiencing rising prices as usage grows. Price increases currently paid by automakers may be passed on to customers if output falls short of demand as predicted.

Germanium, a natural semiconductor used in transistors, is another raw material that is starting to face shortages. This is because Germanium is an alternative to silicon, leading manufacturers to focus on its use in the wake of the global silicon chip shortage. As demand continues to be unmet, this metal may also be exhausted in 2021.


The Plastic Shortage

Chemicals used in the production of plastics are seeing constraints as well. Plastics are used in all types of products, from packaging to appliances, smartphones and cars. Certain plastics are also heavily relied upon for the production of semiconductors, such as circuit boards, electrical insulators, ultrapure water systems and wet benches, to name a few.

The plastic supply constraints has contributed to factory shutdowns, sharp price increases and production delays among numerous industries. Because automakers rely heavily on plastics, it is one reason manufacturers were made to idle plants and cut production. If plastics continue to remain short, many semiconductors will be prevented from being produced.


The Takeaway

Raw material shortages continue to intensify, and, unfortunately, it doesn’t appear to be ending any time soon.


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