A2 Global Electronics’ CEO, Frank Cavallaro, explains to purchasing professionals how constraints and complications within the semiconductor supply chain will ripple throughout 2024.
Infrastructure costs, geopolitical events, natural disasters, natural resource shortages and skills shortages are all contributing to an unsteady supply chain and likely sourcing challenges for select node sizes in coming months. Widespread adoption of AI, plus global shifts towards EVs will impact sourcing for certain components in 2024.
Chip capacity constraints
Semiconductor insiders are beginning to see a normalization of the chip supply chain and anticipate full normalization mid- 2024. However, buyers should remain cautious. This new ‘normal’ will evolve into rolling periods of constraint environments for certain node sizes. After chip inventory rebalances this year, wafer supply across most semiconductor manufacturing node sizes is expected to be outpaced by demand through 2026.
Buyers remain concerned about long-term supply. To protect against future disruptions, companies are turning to inventory prepayments to secure required components. Micron received $600 million in customer prepayments during its last fiscal year to secure supply for leading- edge memory products.
EV charging forecasts
In recent months, EV sales have slowed. Some manufacturers are cutting investments in new models and factories as buyers become more cautious.
Current supply for mature nodes—greater than 28nm— most automotive semiconductors require, can meet demand. However, EV charging infrastructure also relies on mature nodes. As global initiatives expand and EV charging infrastructure developments ramp up, it will prompt unforecasted demand for required chips, upsetting this balance and causing shortages.
New fab delays and priorities
Many fabrication plants that started construction in 2021/2022 have been delayed due to decreasing demand, geopolitical events and development/equipment costs. TSMC recently announced another delay to its $40 billion site in Arizona. The company is still waiting on US government grants and is projecting the fab will not be up until 2028.
New fabs will continue to prioritize next-generation chip investments as AI and high-end cloud computing markets grow. This will make it difficult for OEMs to source legacy parts through manufacturers and traditional distribution networks despite global CHIPS Acts.
Mitigate supply chain risk in 2024
The following are three strategies OEMs can employ to mitigate risks in 2024.
Building a supplier network:
Supply chains have become more interconnected. Building a network of resilient suppliers, globally and locally, gives OEMs options when shortages arise and lowers risk if an unexpected event occurs where most of their components are produced.
Be proactive:
Recognizing supply chain disruptions and adapting quickly, rather than waiting for problems, is critical to resilience.
Leveraging advanced analytics:
Consulting with partners, suppliers, customers, even competitors, helps OEMs approach situations from an informed perspective. Choosing reliable, up-to- date sources for market forecast information is key.
We’re sure 2024 will throw us more curve balls before it’s done. Keeping a finger on the pulse of shifting industry trends and developing strong sourcing strategies will help OEMs navigate fluctuations.