Why is There a Semiconductor Shortage and How We Work Around It

It’s increasingly common that the electronic devices consumers want are unavailable for purchase. For example, over the holidays, there was a high demand for the Playstation 5, and only a minority could obtain the coveted gift. Online retailers were sold out minutes after restocks, and resellers auctioned the systems on eBay for thousands of dollars. Although there can be many reasons for missing products, this time it is due to one major problem. The electronics industry is facing a shortage of semiconductors used in the manufacturing of printed circuit board components.

This shortage has become a hot topic lately, especially for design engineers creating new electronic equipment, and two critical questions are being raised. Why is there a semiconductor shortage, and how can we work around it? We’re going to look at this problem in greater detail and give you some suggestions on preparing for it, so your next PCB design doesn’t come up short on parts.

Electronics Industry Problems Created by the COVID Pandemic

It’s convenient to blame the COVID-19 pandemic as the source of the semiconductor industry’s problems, and people aren’t wrong to do so. Consider these industry changes and difficulties due to the pandemic:

• Changing needs and requirements: With personal and professional habits changing due to the pandemic, consumer spending was drastically impacted. This change in spending forced businesses to alter the products they produced. The automobile industry is a prime example. Carmakers reduced the number of new vehicles they produced in response to people driving less, which cut back on the number of electronics they required for production. Without electronic components to build for cars, the semiconductor industry switched to producing parts for other electronic devices.

• The market demand for new electronics: Sales of new electronics accelerated as people were sheltered in their homes for work and study. The semiconductor industry had to ramp up production to supply components for the following:
• • Computers, networking, and display equipment for the home office
  • Laptops, tablets, and educational systems for virtual classrooms at home
  • Cell phones and communication systems for connecting homes together
  • Television and gaming systems for home entertainment
  • Cameras and other smart home devices for home security

• The pandemic’s industry impact: While the semiconductor industry was scrambling to change its production model to accommodate all of these business changes, they were also impacted by the pandemic. They had labor shortages as workers got sick or took time off to care for ill family members, and their raw material supply chain was also affected. In some cases, chip manufacturing sites were shut down due to these different problems.

Now that we are hopefully heading out of the pandemic, the challenges experienced by the semiconductor industry should be fading away. Unfortunately, they are not, and in fact, the semiconductor shortage seems to be accelerating.

Why is There a Semiconductor Shortage?

Thankfully, medical breakthroughs developed over the past year have produced vaccinations needed to combat this pandemic. The semiconductor industry, along with others, is recovering by recalling its workers and re-opening factories that closed or were running at reduced rates. But the demand for electronics has not only changed; it is even greater now than expected:

• The work-from-home movement that began during the pandemic continues to grow. Stay-at-home workers are buying more electronics to build out their home offices.
• The recovery is beating financial expectations, and people are buying more general electronics than was projected.
• The automobile industry rebounded much faster than expected, and carmakers are struggling to get enough electronics to build their products.

Part of the problem in the semiconductor industry is attributed to how components are built. For years the standard parts used in automobiles and other general electronics were built on 8-inch silicon wafers, even though that is an older format. These parts were no longer needed due to reduced automobile production, so many chip foundries updated their lines to the larger wafers to build parts for newer electronics. Shortly after, carmakers needed components again, and the semiconductor manufacturers found themselves in a difficult position. Not only did they have to switch back to the older production lines, but they had to continue to supply new growing demands. Many chipmakers invested in new production methods and facilities, but this all takes time while still recovering from the pandemic’s effects themselves.

We know now the pandemic didn’t create the supply chain problems—it exacerbated what was already developing. Eventually, this growing need for new electronics would cause a ripple effect throughout the supply chain. Still, the pandemic forced it to happen very quickly with the following results:

• While the technology is ramping up, the semiconductor makers do not see an equal ramp up in the raw materials they need for production.
• Larger OEMs will sometimes buy all available stock of specialty parts to ensure their products can be built.
• Chipmakers will phase out similar parts to focus on building common parts that cover all of the functionality. While this helps their manufacturing, it creates problems for OEMs who may face design changes and recertification of their products.

So now the question is, how can we work around this problem? Here are some ideas that should help.

Finding Solutions to the Semiconductor Supply Chain Problem

The best way to work around the semiconductor shortage is to partner with someone who has a lot of experience working with the component supply chain. The component engineers and procurement specialists at a PCB contract manufacturer have the necessary skill set for this job. They can bring the following assets to the table when the time comes to purchase parts for your next PCB build:

• Knowledgeable component engineering resources
• Purchasing agents experienced working in the component supply chain
• A vast network of component manufacturers, distributors, and brokers
• Software tools for advanced alerts of component life-cycle changes
• Extensive training to spot and avoid counterfeit parts and vendors

At VSE, we have the component experts that you need to navigate the ever-evolving semiconductor shortages. Our team can help you work around the component shortages by finding the best part choices for price and delivery to keep your PCB assembly on schedule. If a component has been discontinued, our engineers will work together with you to find the correct replacement parts that are form, fit, and functionally compatible.