The global chips shortage will persist through 2021, and likely won’t recover to “normal levels” until Q2 2022, reported Gartner Wednesday. The shortage will continue to “constrain” production of many “electronic equipment types,” said analyst Kanishka Chauhan. “Foundries are increasing wafer prices, and in turn, chip companies are increasing device prices.” The shortage started mainly with power management devices, display drivers and microcontrollers and extended to substrates, wire bonding, passives, materials and testing, said Gartner.

Demand for Microchip Technology’s microcontrollers and other components is outpacing “the capacity improvements we were able to implement, resulting in lead times continuing to extend out,” CEO Ganesh Moorthy on a fiscal Q4 Thursday call for the quarter ended March 31. “In my 40 years in the semiconductor industry, I cannot recall a time where the imbalance between the supply and demand has been more acute.” Microchip launched a Preferred Supply Program to cope with the global semiconductor shortage that offers customers “supply priority” beginning six months after their order in exchange for at least 12 months of non-cancellable orders, he said. “Customer response to the program has exceeded our expectations,” with about 44% the company’s backlog “now in the PSP category,” he said. That equals nearly “100% of our backlog in some of the most constrained capacity corridors,” he said. Additional PSP backlog “continues to come in every week,” said Moorthy. “This gives us a solid foundation to enable us to prudently acquire constrained raw materials, invest in expanding factory capacity and hire employees to support our factory ramps. With the strong demand, we're experiencing constraints in all of our internal and external factories and their related manufacturing supply chains.” Microchip began ramping up its internal factories in September, plus investing in “capital additions to expand our internal capacity,” he said. “We are making incremental capacity decisions for our internal factories where possible, based on the strength of our backlog, especially our non-cancellable PSP backlog.” Through the combination of “internal and external capacity actions we've taken, we expect our overall capacity will continue to grow every quarter in calendar year 2021,” he said. Though capacity “will continue to grow every quarter,” wafer fab, assembly and test constraints “will persist through 2021 and quite likely into 2022,” he said. Microchip has no “line of sight for when things get to be normal,” said Moorthy. “The gap between demand and supply grew in the March quarter and continues to be quite large.”

IBM developed the world's first 2-nanometer semiconductor “breakthrough” technology, promising 45% higher performance and 75% lower energy consumption the 7-nm-node solutions, said the company Thursday. Quadrupling smartphone battery life and “drastically” speeding up laptop functionality are among “possible benefits,” said IBM. "We expect that the earliest devices based on this 2-nm technology could enter the market around 2024," said a spokesperson. "This timeline depends on a manufacturer’s road map." The 2-nm node is "a foundational advanced logic technology," which IBM Research built in its semiconductor lab in Albany, New York, she said. "We jointly developed the 2-nm technology with partners in our semiconductor innovation ecosystem. We'll work with our ecosystem partners for manufacturing options." Taiwan Semiconductor Manufacturing Co., for context, is the world’s largest foundry, and is in the second year of volume production of 5-nm-node wafers. It expects to achieve 3-nm-node production at scale in 2022's second half, said top executives last month. TSMC hasn’t publicly discussed a 2-nm-node road map. TSMC representatives couldn't be reached by our deadline.

Global semiconductor revenue grew 10.8% last year to $464 billion, and is expected to rise 12.5% in 2021 to $522 billion, despite shortages, reported IDC Thursday. “Supply constraints will continue through 2021,” said IDC, echoing virtually all top chipmakers (see 2104230002). “While shortages initially occurred in automotive semiconductors, the impact is being felt across the board in semiconductors manufactured at older technology nodes.” IDC compared this with the “ripple effect” of a traffic jam. “A disruption on the semiconductor supply chain operating close to capacity will impact across the supply chain,” and industry “will continue to struggle to rebalance across different industry segments,” it said.

Lattice Semiconductor’s decision to build inventory in the last three quarters of 2020 is helping the chipmaker weather the industry’s supply chain constraints, said CEO Jim Anderson on a Q1 call Tuesday. “We did that proactively and strategically to make sure that we were in a good inventory position because we were anticipating some supply chain tightness,” he said. “We're really glad that we did that.” Lattice ended Q1 with “more inventory than we were carrying, say, a year ago, and so we're in a very good inventory position,” he said. It’s also managing the chips shortage by “working very carefully and closely with our customers,” especially the “big strategic” accounts, to be sure “that we've got a demand picture for the coming quarters,” he said.

Semiconductor supply constraints prevented Pixelworks in Q1 from “meeting 100% of our demand across all our product lines,” said CEO Todd DeBonis on a Tuesday call. The supplier of video processing chips to smartphone OEMs “made significant progress with the help of our supply chain partners in closing those gaps to meet approximately 90% of our Q2 demand,” he said. “Similar to other semiconductor companies, we expect these constraints to remain a headwind throughout 2021.” The company’s 91% mobile revenue sequential increase was its third straight quarter of 50%-plus sequential growth in the smartphone sector, said DeBonis. “The mobile market is primed for growth in 2021 as the industry and end market demand recovers.” Global 5G adoption “will continue to be an important trend this year, as it enables the efficient delivery of higher quality video and gaming content to mobile devices,” he said. Analysts predict 5G-enabled devices will comprise at least a third of total smartphone unit shipments in 2021, he said. The stock closed 10.6% higher Wednesday at $3.24.

MediaTek grew its share of the smart speaker and smart display app processor market by 6 percentage points last year, accounting for half of the 151 million devices sold worldwide, said Strategy Analytics Tuesday. MediaTek has built up a “strong presence across a diverse set of industry verticals including in the smart home” said analyst Chirag Upadhyay, citing the chipmaker’s scale and “deep ties” with Taiwanese foundries. During challenging times for the semiconductor supply chain, companies with longstanding partnerships with back-end vendors and fabrication plants are better able to navigate supply chain challenges than smaller rivals, said analyst David Watkins. That should benefit MediaTek smart speaker customers such as Amazon, Alibaba and Baidu. The top five apps processor vendors supplied the processor chipsets for 87% of all smart speakers sold in 2020. Synaptics was the second largest player in 2020 followed by Allwinner and Amlogic, said SA.

“Steep acceleration” in demand for chips in “end markets” across the board in hampering On Semiconductor’s ability “to supply certain products, especially those manufactured by our foundry partners, and in certain pockets, products manufactured internally,” said CEO Hassane El-Khoury on a Q1 call Monday. “We’re working diligently with our manufacturing partners to assure timely supply of our products to our customers.” It took steps “to ensure continued supply to our strategic customers by building inventory on our balance sheet and reducing inventory in the distribution channel,” he said. “By having better control over inventory, we are able to quickly respond to the needs of our strategic customers.” El-Khoury expects the higher “velocity” of increased demand will begin to “subside” in 2021's second half, “but will remain at a very healthy level,” he said. “We expect supply and demand to get back in balance when demand stabilizes later this year.” He conceded Q1 revenue of $1.48 billion “could have been higher if we didn’t have constraints in a perfect world.”

Advanced Micro Devices upgraded its 2021 revenue guidance by 13 points, despite semiconductor industry supply constraints, because it started the year “very strong” and sees that “carrying through to the second half,” said CEO Lisa Su on a Q1 call Tuesday. AMD now expects 50% revenue growth for the year to $14.6 billion, compared with 37% growth to $13.4 billion in its Jan. 26 forecast. AMD emerged from Q1 with “very strong visibility from our customers on what they need throughout the year,” said Su. Adoption of its Ryzen 5000 series processors for notebook PCs is ramping up 50% faster than that of the previous generation, she said: “We see good customer ordering patterns and strong backlog.” Though the supply chain “has been tight overall for the semiconductor industry,” AMD is working very closely with its supply chain partners to gain “good visibility to additional supply as we go throughout the year,” she said. Amid the “tightness overall in the supply chain,” AMD customers are “wanting to be clearer and more transparent about their needs,” said Su. “That’s very helpful for us in a tight environment. It gives us the ability to plan several quarters out.” That gives AMD “confidence that we have the right signals in place,” she said.

The “current expectation” at NXP Semiconductors is for the “tight supply environment” in the chips industry to persist “for at least the remainder of 2021,” said CEO Kurt Sievers on a Q1 earnings call Tuesday. As many of NXP’s customers began resuming full production during Q3 of 2020, “we were faced with the challenge to balance a very accelerated rate of customer orders versus a very tight, if not sold-out, wafer supply situation,” he said. Though NXP’s foundry suppliers “have attempted to address our needs, it really has not been enough, and we were supply constrained in quarter one,” he said. “This supply trend will continue through quarter two.” Amid continuing strong Q2 demand, including expected mobile revenue growth in “the mid-30% range” and 80% growth in automotive compared with the 2020 quarter, “we continue to have low channel and low on-hand inventory, which we do not anticipate rebuilding this year,” said Sievers. “Our customers are responding by placing long-dated, non-cancelable and non-returnable order requests, and we are making long-term strategic supply commitments to our partners in order to assure future supply.” Compounding the challenging supply environment were the storms that disrupted Texas in mid-February, he said. “I am today pleased to share that our two wafer facilities in Austin are now fully back online,” he said. NXP is working “very, very diligently” with its tier one automotive OEM customers “on very prudently understanding the future demand patterns,” said Sievers. “One of the biggest learnings out of this current situation is to build much more transparency” into the supply chain, “knowing that we have a manufacturing cycle time of one to two quarters,” he said. “That work is underway, and I can certainly say we do this with all of the top 10 car OEMs in the world.” The industry’s semiconductor shortages are “really a long-term story,” he said.