Quote:
Originally Posted by nextcar
So... I work for a semiconductor manufacturer...
The basics are that factories or "fabs" as we call them take about $5 billion dollars to build (plus about 2 years), and we try to run them at over 90% capacity (the exact number is a secret) to maintain desired operating margins.
This is a bit of a perfect storm: the Covid lockdown and work from home situation drove a huge spike in consumer electronics... (laptops, notepads, TVs, game consoles, etc) and the manufacturing base was running near capacity. The result of supply shortage was completely predictable. During supply shortage the highest volume/price customers win out (hint: it isn't automotive; check quarterly earning reports if you want to figure out who really drove the volume)
Unfortunately, no one wants to commit billions of dollars to react to a spike, and in truth it would not come on line for a couple years anyway. It is a bit of a game of chicken... trying to get commitments to justify huge investments, but if you build too much capacity then prices crater due to oversupply.
The supply/demand ratio needs to equalize (e.g. the spike and pipeline bubbles need to play out).
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Exactly right here, and to echo nextcar's POV from a OEM standpoint this is the same reality from SMT to Final Assembly for parts. Run-in rate for manufacturing has to achieve a threshold for ideal operations (equipment efficiency for the metric) to meet the daily production requirements to support the costs for part sourcing, labor, and manufacturing time. Most of last 5 months, OEM's are requiring high demands to meet their weekly supply goals knowing that Suppliers are being stringent with how many parts they can supply.
Just as a heads-up, there is a lot of demand for CPU's, high voltage controllers, Capacitors, and custom parts that OEM's require the Supplier to use from their collection of authorized inventory. If you are needing Repair parts or have a car in the shop waiting for a part, that is the reason why parts are limited and becoming more expensive. Production Contracts right now are a hot commodity to achieve goals for OEM's.