CHIP SHORTAGE NEWS Global chip shortage 2023 - updates in July

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How are companies responding to the chip shortage and what are policymakers commenting? Here we sum up the most important events related to the global shortage of microchips. The article is updated continuously.

Taiwanese chipmaker targets Japanese joint venture to boost production

Taiwanese chipmaker Power Semiconductor Manufacturing (PSM) has said that it aims to set up a new joint venture in Japan that will last between five and seven years. The company is teaming up with Japanese financial firm SBI Holdings on the project which, according to Reuters, aims to attract government subsidies to build a new manufacturing plant.

According to Powerchip, semiconductor manufacturing capacity is low in Japan. The proposed factory will manufacture microcontrollers and power chips, which are used in the power management systems of electric vehicles. The company has asked SBI to begin the planning and fundraising process for the new facility and to lobby the Japanese government for subsidies.

This move by PSM comes in response to recent efforts by Japan to address its need for a more robust chip sector. The country has recently promised 400 billion yen (US$2.8 billion) to help Taiwan Semiconductor Manufacturing Co. (TSMC), to build a plant in Kumamoto prefecture that will supply semiconductors to Sony Group and auto parts maker Denso Corp. It has also offered subsidies to Kioxia, Western Digital, and Micron Technology.

TSMC to expand production in Nanjing

Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chipmaker, has announced its intentions to boost production of its 28nm process chips at its Nanjing plant in East China’s Jiangsu Province.

TSMC's Chairman Liu Deyin revealed the news at the company's recent second-quarter results conference call. Analysts say the increased investment will help TSMC to grow its presence in the Chinese market, which has a high demand for 28nm process chips to make electronic devices including smartphones, tablets, and computers.

The move by TSMC illustrates its commitment to China in the face of pressure from the U.S. for chipmakers to relocate away from the region. The company is also under heavy pressure to reverse falling sales. According to its second-quarter financials, TSMC's revenue fell by 10 per cent year-on-year, the first drop in profit for the company in more than four years.

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Germany prepares to administer €20 Billion in aid to support chip production

German Chancellor Olaf Scholz’s government is reportedly planning to distribute €20 billion in aid to bolster semiconductor manufacturing in Germany as part of a wider push to secure the country’s tech sector and shore up supplies of critical components amid growing geopolitical tensions.

The money will be distributed to German and international companies by 2027 and will be drawn from the Climate and Transformation Fund. According to sources close to the government, the allocation of as much as €180 billion is currently being negotiated within the government and will be published in the coming weeks.

The German government has already agreed to €10 billion in aid for a new Intel plant and is in the process of agreeing to roughly €7 billion more in subsidies to companies including Taiwan Semiconductor Manufacturing Co. (TSMC) and Germany’s Infineon Technologies AG.

Arizona launches ‘Materials-to-Fab Center’

Arizona State University (ASU) and Applied Materials Inc. have launched an alliance, supported by the Arizona Commerce Authority, that will bring together more than US$270 million to create a world-class shared research and development facility at ASU Research Park—the ‘Materials-to-Fab (MTF) Center’.

The MTF Center will be designed to accelerate semiconductor innovations from idea to fab prototype by bringing Applied Materials’ semiconductor manufacturing equipment into a collaborative environment where ASU and Applied Materials can together work with industry partners, start-ups, academic institutions, and government entities.

“Applied Materials and Arizona State University already enjoy a close partnership, and this new alliance around the Materials-to-Fab Center will take things to a new level,” ASU President Michael Crow said. “But what is more important than the partnership is what it will do for the industry and the country. This is the beginning of a reconfiguration of the way to accelerate discovery and translational research outcomes in response to real-world challenges and the development of next-generational processes, materials, equipment, and workforce.”

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US$2bn semiconductor facility launches in Singapore

Semiconductor integration company Silicon Box has announced the launch of its US$2 billion semiconductor manufacturing facility in Singapore.

The 73,000m2 chip factory is located in Tampines and is expected to generate more than 1,000 jobs with the support of the Singapore Economic Development Board (EDB). Silicon Box was set up in 2021 by the founders of US-based chipmaker Marvell – Han Byung Joon, Sehat Sutradja and Weili Dai. The company is focused on the development of chiplets, a single, independent semiconductor component that carries out a particular task or houses a particular technology.

Silicon Box co-founder and CEO Han Byung Joon said: “This new facility is well poised to solve the unique challenges for chiplet adoption, which is critical to meet market demands of emerging technologies.

“Our proprietary interconnection technology will not only shorten the design cycle of chips but also lower new device costs, reduce power consumption and enable faster time-to-market for industry partners like artificial intelligence, data centres, and electronic vehicles.”

China urges Japan not to disrupt the semiconductor industry

China’s government appealed to Japan on Monday, July 23rd, asking the country to not disrupt the semiconductor industry after curbs on exports of Japanese chip-making technology took effect, adding to technology restrictions that the U.S. and its allies have imposed on China on security grounds.

Japanese restrictions took effect on July 22nd, limiting Chinese access to tools for etching microscopic circuits on advanced chips for smartphones, AI, and other applications. The Chinese Communist Party has invested billions in building Chinese chip foundries that are dependent on Western and Japanese technologies to produce advanced chips.

The Netherlands also joined the United States in limiting access to chipmaking tools that Washington says could be used to develop weapons.

“We are deeply dissatisfied and regret the act,” said a foreign ministry spokesperson, Mao Ning. She urged Japan to “prevent relevant measures from interfering with the normal semiconductor industry cooperation between the two countries.”

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India’s Prime Minister to inaugurate ‘Semicon India 2023’

Involving the likes of Micron, Foxconn, AMD, and NXP Semiconductors, the upcoming Semicon India 2023 event will shine a light on India’s rapid advances in fostering a global semiconductor manufacturing and design ecosystem, offering participants a deep insight into cutting-edge technologies and innovations in chipmaking.

"The Ministry of Electronics and Information Technology...is poised to make significant strides in revolutionising the semiconductor landscape in India with the inauguration of 'Semicon India 2023' in Gandhinagar, by...Prime Minister Narendra Modi on 28 July 2023," according to a statement. The event was originally poised to be inaugurated by Gujarat Chief Minister Bhupendra Patel on July 25, 2023.

The inaugural programme will highlight investment opportunities in India's semiconductor sector. "Semicon India, a prestigious national-level event, promises to be a catalyst for the semiconductor industry's progress through invaluable networking, technology demonstrations, and lucrative business prospects,” reads a statement.

China announces export controls on critical semiconductor materials

The Chinese government announced new export controls on gallium and germanium in early July, two refined minerals that are widely used in electronics manufacturing. Gallium in particular is very important for semiconductor manufacturing, and China is a major global exporter of it. While these new controls aren’t an outright ban, they do give the Chinese government a lot more control over who can access these materials.

This is a less-than-ideal situation for chip manufacturers. The chip fabrication process is already a time-sensitive and delicate process, with even world-leading factories struggling to achieve yield rates over 50 %. Manufacturers now have to contend with critical shipments of raw materials potentially being held up by the Chinese authorities.

Although gallium itself isn’t a rare material, China provides 90 % of its exports. This is because the Chinese government made it a matter of national industrial policy to pull gallium from mineral refineries where other countries chose not to, making China the world’s largest supplier. With these new export controls in place, new suppliers are already getting into gallium production. While this will provide a long-term solution, the material will likely become more expensive than manufacturers have become accustomed to.

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U.S. partners with Panama government to boost semiconductor supply

The U.S. Government has announced a new partnership with the government of Panama in a bid to boost and diversify its supply of semiconductors as geopolitical tensions increase the risk of global chip shortages.

As part of the partnership, the U.S. will review Panama’s current semiconductor industry, regulations, and workforce to determine potential future collaboration under the Chips Act, the U.S. State Department announced on Thursday, July 20th.

“The United States views Panama as a partner in ensuring the semiconductor supply chain is diverse and resilient,” says the statement.

The Chips Act, which was approved last year, is designed to bring back U.S. chip manufacturing, which has declined to about 12 % of global production from 37 % in 1990. The law provides the State Department with $500 million over five years to expand production and secure supply chains, according to the statement.

Stellantis commits US$11.2bn to semiconductors up to 2030

Automotive conglomerate Stellantis has said that it is to invest more than US$11 billion in semiconductors through 2030 in a bid to secure supplies of a variety of different chips for its vehicles.

These, according to Stellantis, include Silicon Carbide MOSFETS that are vital to the range of EVs, Microcontroller Units (MCUs), a core component of the computing zones for the firm’s STLA Brain electrical architecture, and System-on-a-Chip (SoC) where performance is needed for a vehicle’s infotainment and autonomous driving assist functions.

To safeguard against the risk of potential future shortages, Stellantis has made deals with Infineon Technologies, NXP Semiconductors, and Qualcomm. The company is also building a semiconductor database known as the ‘Green List’ to reduce chip diversity and gain a greater degree of control over chip supplies.

“An effective semiconductor strategy requires a deep understanding of semiconductors and the semiconductor industry,” chief purchasing and supply chain officer at Stellantis, Maxime Picat, said. “We have hundreds of very different semiconductors in our cars. We have built a comprehensive ecosystem to mitigate the risk that one missing chip can stop our lines.”

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TSMC delays its Arizona chip plant

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, has delayed the start of production at its new Arizona chip plant to 2025, due to a shortage of skilled workers.

This is according to the company’s chairman who revealed that TSMC has been unable to recruit enough skilled workers to install advanced equipment under the original timeline and is instead now planning to send Taiwanese technicians to train U.S. workers. The Arizona factory, which has been under construction since April 2021, was originally scheduled to begin production of 4-nanometre chips in 2024.

TSMC made the announcement during its second-quarter earnings call on Thursday, July 20th. The company’s chairman Mark Liu stated that TSMC was “encountering certain challenges, as there is an insufficient amount of skilled workers with the specialised expertise required for equipment installation in a semiconductor-grade facility” in the US.

TSMC expects bigger revenue plunge

TSMC projected a deeper revenue contraction of 10 % for this year in its earnings call on Thursday, July 20^th.

The company pointed to strong artificial-intelligence (AI)-related chip demand, saying that would be insufficient to cushion soft market demand amid weaker-than-expected global economic growth and high inflationary pressure. TSMC previously estimated in April that its revenue this year would drop by a low to mid-single-digit percentage from last year.

TSMC said it would stick to its revenue target of an annual compound growth rate of between 15 % and 20 % in the next few years, despite this year’s setback. This confidence is based on its belief that it would be one of the major beneficiaries from a semiconductor growth trend driven by 5G, high-performance computing and AI chips, all of which require semiconductors made using advanced technologies.

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S&P Global says automotive semiconductor shortage ‘mostly’ over

S&P Global Mobility estimates that global light vehicle losses related to semiconductor shortages as a result of the coronavirus pandemic have rebounded, falling to roughly 524,000 vehicles compared to 9.5 million in 2021, according to an S&P Global report released on Wednesday, July 12^th.
The report discusses how automakers are ramping up their output in 2023 and have adapted their production schedules to compensate for the semiconductor shortages of 2021 and 2022.

“We are now in a position where the auto industry has adapted to a constrained supply, and as a result is much less likely to be hit by significant disruption,” Mark Fulthorpe, S&P Global Mobility executive director of global light-vehicle production, said in a statement. “With the current semiconductor supply levels, we estimate that 22 million units of global light-vehicle production per quarter could be supported.”

Asian automotive factories cut production in the first week of July

Automotive factories in the Asia-Pacific region cut nearly 36,000 in the first week of July because of microchip shortages, according to estimates from AutoForecast Solutions. The majority of the losses are in China, with 33,631 vehicles being taken out of production. Another 2,362 are expected to be cut in the rest of Asia.

Meanwhile, North American factories are stepping up their short-term output. Meanwhile, North American factories are ramping up short-term production in case of a UAW strike this fall, said Sam Fiorani, vice president of global vehicle forecasting at AutoForecast Solutions.

“This additional production has worked to obscure some of the potential losses from slow supplies of chips. If the strikes do occur, more chip-related losses and general supply chain shortages can be hidden by the reduced output,” he said in an emailed statement.

AFS’ production-loss estimates for full-year 2023 were lowered for North America, South America, and Europe.

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Assembly line cuts continue but overall outlook brightens

AutoForecast Solutions has reported more signs of the semiconductor shortage easing, even as automakers cut more than 82,000 vehicles from production lines in the week commencing July 3rd.

North American factories cut 38,677 vehicles because of a lack of semiconductors in the same week, in addition to 21,700 cut from assembly plants in China and 22,196 removed from production schedules elsewhere in the Asia-Pacific region.

For the second week in a row, AutoForecast Solutions reduced its full-year production-loss estimate for North America. The forecasting company now expects 954,206 vehicles to be cut in the region by year’s end, an improvement from the 1.01 million it anticipated last week.

“Strides continued to be made in securing more semiconductors for automotive production,” said Sam Fiorani, AutoForecast Solutions’ vice president of global vehicle forecasting, in an email. “Transportation issues, especially in North America, are growing as the next big concern, taking some of the focus away from the semiconductor troubles of the last three years.”

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Broadcom announces investment in Spain’s semiconductor industry

American chipmaking giant Broadcom has announced its intention to make a significant investment via Spain’s PERTE support program, an initiative under the EU Chips Act that’s designed to develop the semiconductor industry in Spain. This decision comes as Spain seeks to increase its chip production capacity in response to the ongoing semiconductor shortage.

The Strategic Projects for Economic Recovery and Transformation (PERTE) is a new public-private collaboration instrument set up by Spain, which is expected to mobilize public investment of more than €30 billion. Spain also unveiled plans to spend €12.25 billion (about US$13 billion) on the semiconductor sector by 2027.

According to Broadcom, the project will include the construction of a large-scale back-end semiconductors facility, according to reports although Spanish politicians have indicated a desire to get involved in front-end chip manufacturing, specifically 5nm chip manufacturing.

Foxconn withdraws from US$19.5bn chipmaking plant in India

Taiwan's Foxconn has withdrawn from a $19.5 billion semiconductor joint venture with Indian metals-to-oil conglomerate Vedanta, it said on Monday, July 10th.

Foxconn, the world’s largest contract electronics maker, signed an agreement with Vedanta last year, to set up semiconductor and display production plants in Gujarat. “Foxconn has determined it will not move forward on the joint venture with Vedanta,” a Foxconn statement said, without elaborating on the reasons.

The company said that although it had worked for more than a year to bring the idea to life, the two companies had mutually agreed to end the joint venture. Vedanta said it is fully committed to its semiconductor project and had “lined up other partners to set up India’s first foundry”. “Vedanta has redoubled its efforts” to fulfill Mr. Modi's vision, it added in a statement.

Intel to invest more in Vietnam chip production

Intel Corporation has said that it will continue to invest in Vietnam. This is according to the company’s VP for Manufacturing, Supply Chain, and Operations, and General Manager of Intel Products Vietnam (IPV), Kim Huat, who says that IPV is now the largest of the four factories in terms of assembly and testing.

Currently, the Vietnamese factory is manufacturing the 13th generation processor Raptor Lake and the next generation Meteor Lake which accounts for more than 50 % of global production for assembly and testing, Kim said, adding that this is a very significant figure.

To attract more investors, it will be necessary for the Vietnamese government to review existing business support programmes, says Huat, elaborating that other countries such as the Philippines, Malaysia and Indonesia are making similar moves.

Jaguar Land Rover reports sales jump in first-quarter results

British automaker Jaguar Land Rover (JLR), a subsidiary of the Mumbai-headquartered Tata Motors, has reported a 30 % year-on-year increase in wholesale volumes and a 29 % growth in retail sales in the first quarter of the financial year 2023-2024 (Q1FY24).

JLR’s wholesale volumes, excluding those from its China joint venture, stood at 93,253 units in Q1, while its retail sales surged to 101,994 units, the company said on Friday. JLR may post free cash flow of about $510 million (about Rs 4,200 crore) for the first quarter, it said.

“The order book remained strong with over 185,000 client orders at quarter end, reducing from 200,000 on 31 March 2023 in line with expectations, as chip and other supply constraints continue to improve. Range Rover, Range Rover Sport, and Defender demand remain particularly strong, representing 76 % of the order book,” reads a press release published by JLR.

JLR accounts for nearly 60 % of Tata Motors’ revenue from operations.

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MEPs adopt legislation to boost the EU chips industry

New plans to secure the EU’s supply of chips by boosting production and establishing emergency measures against shortages were adopted by the European Parliament on Tuesday, July 11th. The new law aims to create a favorable environment for chip investments in Europe by fast-tracking permitting procedures and recognizing their critical importance via a so-called "highest national significance statute".

The new legislation will also support projects that boost the EU’s supply security by attracting investment and building production capacity. During talks, MEPs secured €3.3 billion for research and innovation related to chips. The legislation was adopted with 587 votes to 10, with 38 abstentions. It now needs to be endorsed by the Council of Ministers in order to become law.Ministers

Toyota global output achieves new May record

Toyota Motor Corp. said on Thursday, June 29, that its global output of vehicles for May rose by 33.4 % compared to a year earlier, to 847,000 units. This marks a record high for the month of May, helped by an easing of semiconductor shortages that arose during the coronavirus pandemic.

Output in Japan surged 72.2 % to 248,287 units, while overseas production grew 22.0 % to 598,713 units, also a high for May, according to figures from the automaker. Meanwhile, production in China declined amid requirements to comply with stricter vehicle emissions standards. Global sales increased 10.1 percent in May to 838,478 units, up for the fourth month in a row.

Exports gained 46.7 percent to 141,774 units, with demand high from countries such as Indonesia and the Philippines, where economic conditions were strong. Major car models also sold well in India, according to the Japanese automaker.

The company plans to manufacture and sell over 10 million units globally for the first time in the year through next March.

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TSMC is reportedly planning a second chipmaking facility in Kumamoto

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, is reportedly planning to build a second wafer fab in Japan's Kumamoto Prefecture, with construction scheduled to start in April 2024, according to Japanese news outlet Nikkan Kogyo Shimbun.

TSMC declined to comment on the report, saying it has entered a 10-day silent period ahead of an investor conference slated for July 20. The report in the Nikkan Kogyo Shimbun, also known as the Daily Industrial News, said on Tuesday, July 11th, that the second TSMC fab in Kumamoto is scheduled to mass produce chips starting in 2026 using the chipmaker's mature 12-nanometer process.

TSMC’s first wafer fab in the Kumamoto Prefecture has already broken ground. Commercial production using the 12nm, 16nm, and 22nm IC production process is scheduled to begin in 2024.

U.S. new vehicle sales on the rise

New vehicle sales in the United States for top global automakers are on the rise following strong second-quarter results, signalling that growing interest rates have not yet had a meaningful impact on purchases.

Vehicle production took a hit after the pandemic disrupted supply of semiconductor chips and other raw materials, hurting automakers' ability to meet the upsurge for personal transport. Companies are now understandably looking to make up for lost production as supply chain bottlenecks gradually ease.

"The jobs market has remained healthy, and consumers have found a way to buy new wheels," said Cox Automotive's Chief Economist Jonathan Smoke. Toyota Motors North America reported a 7.13 % rise in U.S. sales to 568,962 units for the second quarter of 2022, while General Motors reported a near 19 % rise for a total of 691,978 units.

In early July, FCA US, a unit of Stellantis and Korean peer Hyundai Motor's U.S. unit reported a 6 % and 14 % increase, respectively, in total auto sales.

You have missed some chip shortage news? This is what happened before:

• Global chip shortage 2023 - updates in June - click here for reading!

• Global chip shortage 2023 - updates in May - click here for reading!

• Global chip shortage 2023 - updates in April - click here for reading!

• Global chip shortage 2023 - updates in March - click here for reading!

• Global chip shortage 2023 - updates in February - click here for reading!

• Global chip shortage 2023 - updates in January - click here for reading!

• Global chip shortage - outlook for 2023 - click here for reading!

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