Semiconductors: The Supply and Demand Fluctuations

Semiconductors: The Supply and Demand Fluctuations

Semiconductors have long been the building blocks and, ultimately, the brains behind electronics as we know them today. Often referred to as chips, semiconductors are used in thousands of different electronic products ranging from gaming consoles and appliances to smartphones and computers.

COVID-19’s impact on the semiconductor industry is still being felt today. In the beginning of the pandemic, demand was far outpacing production as more people were working from home and requiring more electronic devices. This led to a 12% decrease in revenue for these semiconductor companies globally. While there are thousands of electronics that use these chips, one of the most notable industries that got hit was the automotive industry.

When semiconductors were seeing an increase in demand, cars sales began to fall. The automotive industry scaled back production, cancelling orders for chips, only to see demand rebound towards the end of 2020. At that point, semiconductor fabricators had already pivoted to instead serve the main electronics needed for consumer electronic products and could not meet the demand of the auto industry. Many production sites have since funneled allocations to the automotive industry for a 30% increase compared to 2020. This further cut down on the supply of new chips in other market segments.

When semiconductors were seeing an increase in demand, cars sales began to fall.
This supply and demand mismatch situation created an unpredictable price spike on active components.

This supply and demand mismatch situation created an unpredictable price spike on active components. For instance, we’ve seen a 20-fold, sometimes up to 200-fold, increase on some TI, ST, Infineon, and NXP parts in the past 12 months. As demand continues to rise, and supply attempts to catch up, these price increases may be the new normal for the foreseeable future. John Neuffer, President and CEO of the Semiconductor Industry Association (SIA), said “Demand for semiconductor production is projected to rise significantly in the years ahead, as chips become even more heavily embedded in the essential technologies of now and the future.”

Overall, the industry is seeing improvements in offsetting the high demand amid global supply challenges, ramping up production to a record high of 1.15 trillion units shipped in 2021. Worldwide, IC makers generated $555.9 billion last year, a 26.2% increase from the previous year with the US alone seeing a 27.4% increase in sales. Other regions, such as China and Europe, had 27.1% and 27.3% increases, respectively, and the worldwide market is projected to grow by 5.1% in 2023.

At Suntsu, we help tech companies secure hard-to-find and EOL parts using our skilled global sourcing team. Our networks are in multiple channels, especially with OEM excess inventories and oversea open markets 

Additionally, we have a system of qualifying any sources and have an extensive system of trusted suppliers with a long history of sales. All shortage parts undergo a combination of SAE AS6081 certification and MIL-STD-883 testing. Standard testing methods include solvent testing, x-ray, die verification, and/or electrical testing to verify authenticity at a thirdparty laboratory prior to shipping to our customers. 

Need help sourcing components? Reach out to us and talk to one of our specialists. We’re happy to help you source EOL components and set up inventory management programs.

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