According to a briefing issued by Bain Capital, the chip shortage problem that has spread for nearly two years is beginning to show signs of easing. This core shortage crisis began in the automotive industry, began to appear in the second half of 2020, and then spread to other ap

According to a newsletter released by Bain Capital , the shortage of chips that has spread for nearly two years is beginning to show signs of easing.

This core shortage crisis began in the automotive industry, began to appear in the second half of 2020, and then spread to other application fields such as new energy, industry, and communications. Insufficient supply of chips has caused chip procurement costs in these industries to surge, with prices increasing several to dozens of times. Even so, industry customers cannot obtain the number of chips required for their production, resulting in insufficient production and reduced output.

However, different industries or terminal applications have different needs for various semiconductor segments. Take high-end laptops and high-end personal computers as an example. For example, their core components CPU and GPU must not only utilize cutting-edge processes and advanced processes for semiconductor manufacturing capacity , but also require the support of high-performance ABF carrier boards. The latter is used to meet the requirements of thin lines and thin line widths required in the manufacturing process, and has become the standard configuration of high-performance FC-BGA packaging ( flip chip ball grid array).

Different industries have different demands for chip manufacturing processes (Source: Roland Berger )

However, the automotive industry has different demands for chips. The front-end processes used in automotive chips are still dominated by mature processes above 40 nanometers and traditional processes. These two account for 95% of automotive chips used in fuel vehicles, including various microprocessors, power chips, data link chips and interface chips used in automotive distributed electronic architecture. The emergence of smart electric vehicles has greatly increased the use of chips with advanced and cutting-edge processes, accounting for nearly 50% of the total use of semiconductors. However, considering the current market share of smart electric vehicles, the automotive industry's demand for chips is still dominated by mature processes and traditional processes.

Therefore, the chip shortage problem in different industries and terminal applications will not be alleviated at the same time. Bain Capital said in a report that the automobile and industry, which were severely hit by the crisis, will recover first. This is why 12-inch advanced process chips, which account for a considerable part of its semiconductor demand, will gradually be supplemented by new production capacity in the second half of 2022.

The shortage of other chips used in automotive and industrial applications, such as power devices and analog ICs, will ease in early 2023. This part of the chip mainly uses mature processes or traditional processes, and is produced using 6-inch or 8-inch wafer production lines. For example, this is the case for silicon carbide power devices, which are the core components of electric vehicles. According to the trends of industry leading companies such as Wolfspeed and ON Semiconductor, their new 8-inch or 6-inch production lines will be completed before the first half of 2023, when production capacity will increase 10 times compared with the current level.

Consumer electronics, including smartphones and tablets, will also climb out of the chip production capacity quagmire within a similar period of time. There is no structural shortage of memory and cutting-edge process system-on-chip (SOC) required for these applications. The supply of chips such as power ICs and signal chain ICs, which it mainly lacks, will gradually narrow the gap with demand from the end of 2022 to the beginning of 2023.

Forecast of the relief timetable for chip shortages in different terminal applications (Source: Bain Capital)

However, for some advanced microprocessor chips that use cutting-edge processes and use ABF carrier boards, spring may come later. Bain Capital expects the shortage of these chips to continue beyond 2024. The reason is not only the production capacity of cutting-edge processes, but also the ABF carrier boards necessary for advanced processing such as CPU/GPU/DPU/FPGA.

According to data from market research organization Omida, the market size of advanced chips using ABF carrier boards has reached US$66.3 billion in 2020. However, as a monopoly supplier of ABF materials, Japan's Ajinomoto has a very conservative expansion plan, with a compound growth rate of only 14% in output by 2025. At the same time, according to analysis by Citigroup and other institutions, the compound growth rate of ABF carrier boards in the next three years will be 18%-19%, and the demand gap will reach 33% in 2022 alone.

In addition, the number of companies in the world that can mass-produce ABF carrier boards is small, which also limits the release of production capacity. The certification cycle for chip manufacturers for IC substrates such as ABF is as long as 24 months, which leads to a slowdown in production capacity from new manufacturers in the supply chain.

The supply gap of ABF carrier boards requires the construction of more factories to meet (Source: AT&S)

Therefore, Bloomberg believes that ABF carrier boards will still be in a shortage stage by 2023. Xinxing Electronics , the world's largest supplier of IC carrier boards, revealed that its ABF carrier board production capacity has been booked for the next five years. From this point of view, it may take longer to fully meet the needs of gamers for PS5 or XBOX.