Chipmakers are increasing production, but it won’t be enough to reduce lead times until the fourth quarter at the earliest
Semiconductor manufacturers are adding more capacity of metal oxide semiconductor field emitting transistors (MOSFETs), but supply will likely remain tight and prices will rise until the end of the year.
The addition of more capacity likely won’t be felt for several more months because of continuing strong demand across a wide range of customer segments, especially automotive and industrial.
“Demand for MOSFETs in 2018 is pretty strong across all segments, but it’s the highest in automotive, industrial, and communications systems,” said Rob Lineback, senior market research analyst for IC Insights, based in Scottsdale, Ariz. He added MOSFET demand is weakest from computer manufacturers while “military/government and consumer apps are in the middle,” he said. MOSFETs are used to switch and amplify electronic signals in electronics equipment. They provide a very high input impedance and are able to be used in very low current circuits. They are widely used in switch mode power supplies, variable frequency drives, lighting intensity controls, motor controls, and home and automobile sound systems among other applications.
Strong demand and limited capacity for MOSFETs means that prices are increasing and lead times have stretched to 30-40 weeks depending on the product and the manufacturer. Dave Valletta, executive vice president worldwide sales for Vishay Intertechnology, based in Malvern, Penn., said Vishay’s average lead times for MOSFETs were about 35 weeks in July. He said MOSFET supply began tightening in the second half of last year. Vishay and other chipmakers are adding capacity, but so far demand continues to outpace supply.
“We added capacity and expected that in Q2 (2018) we would be back to normal, but it did not happen,” said Valletta.
Lineback said Vishay and several other companies “are working to increase capacity because they don’t want MOSFET business and revenue to move to someone else.” He said MOSFETs are commodity products and there are second sources.
One reason supply remains tight is because MOSFETs are built on 150mm and 200mm wafer production lines. Other chips, such as display drivers, microcontrollers and mixed-signal semiconductors, are also built on 150mm and 200mm wafer production lines and there’s not enough capacity to go around, said Lineback.
“Some companies that might have had some capacity earmarked for MOSFETs” but decided to use some of that capacity for other products such as display drivers or mixed signal chips, he said.
Move to 300mm
At least one manufacturer—Infineon—is producing MOSFETs on 300mm wafers instead of 200mm or 150mm wafers. The company has been making chips on 300m wafers for several years at its facility in Dresden, Germany and plans to start construction of a new 300mm facility in 2019 in Austria. However, production won’t begin until 2021, according to the chipmaker.
With larger size wafers chipmakers can produce more chips per wafer effectively increasing supply. Over the next five years, other chipmakers will likely follow suit and also produce MOSFETs on 300mm wafers, said Lineback.
However, in the short term MOSFET makers are depending on 200mm wafer production for MOSFETs. The problem is chipmakers are having trouble ramping up additional production capacity because lead times for wafer fab equipment are long.
“Some lead times for new equipment are out past one year, ” said Valletta. “It makes it harder to get capacity on line. Supply is even tight for used fab equipment,” he said. As a result, it will be a while before lead times return to normal, which is about 12 weeks.
In the meantime, Valletta said Vishay is “trying to protect customers that have long-term agreements with Vishay and who are providing us forecasts.” For customers who are trying to make spot buys, lead times are about 35 weeks, he said.
Supply may start to loosen in the fourth quarter, but it “won’t be a dramatic turn because demand is increasing across all geographies markets,” said Lineback.
Demand is strong across the board especially with automotive and telecommunications. Valletta said that demand will stay healthy for a long time because there are growing and emerging applications for MOSFETs.
“I think we are in for a long-term period of growth,” said Valletta. “Automotive has been the biggest driver in the past year or so.” MOSFET demand from automotive will continue to grow because more automotive systems are electronic and more electric vehicles (EVs) are shipping. EVs typically have a higher semiconductor content than gasoline-powered cars and many of those chips are MOSFETs.
In addition, 5G networks are starting to be built which will require a variety of semiconductors including MOSFETs. Emerging applications involving artificial intelligence, augmented reality and graphics processing are emerging which will further drive demand for MOSFETs, said Lineback.
Tags, revenue increase
As a result, industry analysts are bullish about MOSFET growth. The global power MOSFET market will rise about 14 per cent to $8.8 billion in 2018, according to IC Insights. MOSFET revenue will increase at compound annual growth rate of 4.4 per cent until 2022 when the global MOSFET market will reach $9.6 billion.
Strong demand and limited capacity have resulted in higher average selling prices and overall higher revenue for MOSFET manufacturers. Prices, which have increased the last two years, will end 2018 increasing by about 5 per cent to 17.1 cents.
Strong economic growth in many regions is helping drive demand for electronics equipment and semiconductors, including MOSFETs. “The global economy controls so much of what goes on in the semiconductor industry these days, especially in commodity type products such as MOSFETs,” said Lineback. “We see the economy as being the biggest factor in semiconductor growth.”
The global economy will continue to grow in 2019, but at a slower pace and MOSFET revenue will slow as well. For instance, gross domestic product (GDP) in the United States increased 4.1 per cent in the second quarter and is expected to grow 2.9 per cent for the year and decline to 2.7 per cent in 2019, according to International Monetary Fund (IMF). GDP in Europe in 2019 is forecast to fall to 1.9 percent from 2.2 per cent in 2018 and economic growth in China will fall from 6.6 per cent in 2018 to 6.4 per cent in 2019, the IMF said.
MOSFET growth will slow
Less economic growth will mean less growth for semiconductors including MOSFETs, said Lineback. MOSFET revenue will rise 2 percent in 2019 and then decline 1 per cent in 2020 before increasing 3 percent in 2021 and 5 per cent in 2022 when the market will total $9.6 billion. Unit shipments will rise 5 per cent in 2019 but drop 2 per cent in 2020 before climbing 4 per cent in 2021 and 5 per cent in 2022, the researcher said.
The good news for semiconductor buyers is that while the average price for MOSFETs will grow 5 per cent in 2018, tags will drop 3 per cent in 2019 and 2 per cent in 2020. From 2017 to 2022, the average price of a MOSFET will rise only .2 per cent. However, for 2018, higher prices are welcome news for MOSFET manufacturers.
“MOSFET suppliers are having good sales this year because of higher average selling prices (ASPs), resulting from robust demand and tight supply. However, there is concern that once more capacity is added, demand will slow down.
“That’s what typically happens in our industry,” said Valletta. “We add capacity then all of a sudden demand goes away. We want capacity in be in balance with demand without overshooting it,” he said.