In February, we were informed that the contract manufacturer TSMC had ordered several water trucks to prepare for the “worst”. In Taiwan, for example, there was a period of drought, as the water level dropped below 20 percent. However, TSMC needs a lot of resources to manufacture the chips, including water. Even after a month, the situation did not calm down. There is also a global semiconductor shortage amid the Covid-19 pandemic. As Bloomberg reported, citing manufacturer sources, manufacturers are now complaining WLAN routers have very long delivery times for purchased components. Network chips in particular are likely to be very poorly available so fixed-line routers will soon become scarce and thus the price is very likely to rise.
Why are there global chip shortage problems?
Network chip manufacturers like Broadcom only design their chips and then manufacture them by contract manufacturers like TSMC & Co. At the lowest possible cost of wages. However, TSMC and some other contract manufacturers currently prefer to produce orders with the highest possible margins, such as Apple’s iPhones. As a result, Broadcom & Co. Waiting longer for their network chips to be manufactured, which in turn affects the routers’ output.
“Since Chinese factories restarted, chips have become a global bottleneck due to the shortage of parts like silicon chips and the mismatch between supply and demand. Other system components such as memory and power management are also affected. It is the Snowball effect we are putting on and the situation has gotten worse and worse since then. I’m talking to some of the chip sellers, some of them tell me they have something like an overbooking at 300 percent of their power. ” – Karsten Gewecke, Head of European Business at Zyxel Communications Corp. , Which is a Taiwan router manufacturer for internet providers.
In addition to reduced production capacities due to local regulations on infection protection, the amount of chips produced last year was reduced because many companies had fewer orders from TSMC & Co. However, the demand for products with chips has increased in light of the pandemic, as more laptops and tablets are sold, and there is also a high demand for graphics cards, processors, game consoles and partners because people want to keep themselves busy at home in lockdown mode. . Production is now starting again, but problems such as too little water are now affecting the plant. In addition, the devices produced must share space on ships containing medical goods, so that fewer devices are transported than under normal conditions. After all, a large amount of medicinal materials are needed in a pandemic, such as face masks or vaccines. In some cases, transportation costs increase tenfold.
Would transferring production be the solution?
It is difficult to transfer production facilities to other countries. Less than ten percent of the present value Chips are produced in EuropeOn the other hand, most of the production is located in North America, especially in Asia. The challenge is that it takes some time before the semiconductor plant and the necessary clean rooms go into operation. Stricter environmental regulations and exorbitant electricity prices are other factors opposing chip production in Europe.
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Collect the scarcity of network slices:
- Many network chip manufacturers, such as B. Broadcom, only produce their chips by contract manufacturers, such as TSMC.
- As Bloomberg reports, citing manufacturer sources, contract manufacturers currently prefer to build high-margin devices rather than network chips.
- So there is a shortage of network chips, so that ultimately fewer routers can be built and internet routers will soon be significantly more expensive.
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