To understand why the $ 450 billion semiconductor industry is in crisis, We have to start with a small piece called a display controller which is priced at $ 1.
The global silicon industry is made up of hundreds of different types of chips, among the most striking are those of Qualcomm Inc. e Intel Corp. ranging from $ 100 to over $ 1,000 each. These chips power powerful computers or the shiny smartphone in your pocket. By contrast, a display driver is mundane, its sole purpose is to convey basic instructions to illuminate the screen of your phone, monitor or navigation system.
The problem for the chip industry, and increasingly for companies beyond technology, such as automakers, is that there are not enough display drivers for everyone. The companies that make them can’t keep up with the growing demand, so that prices have skyrocketed.
That is contributing to the supply shortage and to rising costs of liquid crystal display panels, components that are essential for the manufacture of televisions and laptops, as well as high-end automobiles, airplanes and refrigerators.
“There is no way. If you have everything else, but don’t have a display driver, then you will not be able to build your product “, He said Stacy Rasgon, who covers the semiconductor industry for Sanford C. Bernstein.
Actually, the crisis into a handful of seemingly insignificant parts (for example power management chips) has spread through the global economy. Automobile manufacturers like Ford Motor Co., Nissan Motor Co. y Volkswagen AG have already reduced their production, leading to estimates of more than $ 60 billion in lost revenue for the industry this year.
The situation is likely to get worse before it gets better. The rare winter storm in Texas wiped out swaths of US production. A fire in a key factory in Japan will close the facilities for a month. Samsung Electronics Co. warned of a “Serious imbalance” in the industry, while Taiwan Semiconductor Manufacturing Co. said it cannot keep up with demand despite having its plants at more than 100% capacity.
“I have never seen anything like this in the last 20 years since our company was founded”, said Jordan Wu, co-founder and CEO of Himax Technologies Co., a leading provider of display drivers.
The chip crisis was born out of an understandable miscalculation when the coronavirus pandemic struck last year. As COVID-19 began to spread from China to the rest of the world, many companies anticipated that people would cut costs as times get tough.
“I cut all my projections. I used the financial crisis as a model “Rasgon says. “However, the demand was really tough.”
People who were trapped at home started buying technology, and kept buying. Bought best computers and bigger screens to be able to work remotely. They gave their children new laptops for distance learning. They acquired 4K TVs, game consoles, milk frothers, deep fryers and immersion blenders to make life in quarantine more enjoyable. The pandemic turned into a widespread Black Friday.
Automakers were caught off guard by the problem. During the lockdowns, they closed their plants while demand collapsed because no one could approach the points of sale. At the same time, they told suppliers to stop shipping components, including chips that are increasingly essential for cars.
Later, at the end of last year, demand began to pick up. People wanted to go out and did not want to use public transport. Automakers reopened factories and got down to business with chipmakers like TSMC and Samsung. Your answer? Behind the line. They couldn’t make chips fast enough to meet the needs of their customers.
Jordan Wu of Himax stands amidst the storm of the tech industry. On a recent morning in March, the 61-year-old man with glasses agreed to meet in his Taipei office to discuss the shortage and why it is so difficult to solve. Wu was eager enough to speak since the interview was scheduled the same morning that Bloomberg News He requested it, with two members of his staff who joined in person and two others who did so via telephone.
In 2001, Wu founded Himax with his brother Biing-seng, now president of the company. They started out making controller ICs (for ICs), as they are known in the industry, for laptops and monitors. In 2006, they went public and grew with the computer industry, expanding to smartphones, tablets, and touchscreens. Its chips are now used in dozens of products, from telephones and televisions to automobiles.
The bottleneck is that these mature chip making lines are running out. Wu says that pandemic generated such strong demand that manufacturing partners cannot make enough display drivers to go around the panels that go to computers, televisions, and game consoles, plus all the new products companies are putting displays on, like refrigerators, smart thermometers, and car entertainment systems.
Wu explained that Himax can’t make more display drivers putting more pressure on its workforce. The company designs display controllers and then makes them in a foundry like TSMC or United Microelectronics Corp. Its chips are made with what’s called “mature node” technology, equipment at least a couple of generations behind cutting edge processes. . These machines etch lines in silicon that are 16 nanometers or more wide, compared to 5 nanometers in high-end chips.
There has been a particular restriction on driver ICs for automotive systems because are generally made on 8-inch silicon wafers, instead of more advanced 12-inch wafers. Sumco Corp., a leading wafer manufacturer, reported that production capacity for 8-inch equipment lines was approximately 5,000 wafers per month in 2020, less than in 2017.
All of this has been a boon for the Himax business. Sales are increasing and its share price has tripled since November.
Nevertheless, the CEO is not celebrating. His business is all about giving customers what they want, so his inability to satisfy their requests at such a critical time is frustrating for him. He does not expect the crisis, especially for automotive components, to end anytime soon.
“We have not yet reached a position where we can see the light at the end of the tunnel.”Wu said.
© 2021 Bloomberg L.P.