Originally Posted by TexasVine
I think the issue is not necessarily the "freeze or Covid" but more like poor management decisions. Our dependency on other countries for goods is not healthy for our nation. This "chip" situation is absurd. As far as the freeze, not sure why manufacturing plants don't take this sort of thing in consideration when building a plant.
The chip shortage is (in one respect) pretty simple:
Back a bit over a year ago all of the major auto manufacturers canceled all their orders for chips. Ford moved first. The rest followed. Somebody got a nice big bonus for "excellent inventory management". That bonus came in quarter by quarter over the next 12 months. Somebody went out and bought a half dozen new houses .... (yes, it's *that* kind of bonus).
Oddly enough things like computers and tablets went insane demand wise over the same period. Autos make up something like 3% of the chip demand so when the computer guys double their orders .... hmmm .... all the factories are running at capacity.
Along comes last March and the auto guys decide they need some chips. Like anything else (you or me ordering an AS right now) new orders go to the back of the line. Normal lead time on most chips is 16 to 24 weeks. ( start to finish ). You can double or triple that when shortages hit.
Yes, at the same time some of the custom outfits had issues. Not enough folks on site, maintenance gets sloppy, fire burns down the north half of the plant.
Root cause is still canceling all those orders ....
Could you build some more state of the art semiconductor fabs? Sure you could. Pass the hat and come up with >10 billion dollars (yes that's a b). Order up the right gear. Build it and get it running. Probably takes 2 years to do. (TSMC paid $9.3 B for a fab not that long ago. Costs go up generation to generation)
Now run all that gear really really hard. It will not be state of the art after 2 years. It will be outdated in 4 years and obsolete in 8. If you scrimped or saved on this or that, it may be outdated on the day you open the doors. The only way to pay off the investment is to run 24/7/365. (and make very few mistakes) Run out of orders and there's no way to pay off the loan....
Keep in mind that all you have at this point is a factory. You still need to set up a company and hire a whole bunch of *very* smart folks. Stupid is not a good way to go in semiconductors.....that has been proven a whole bunch of times over the last few decades.
Ok, so you have a company. It's only got one fab? Nonsense. That's like Ford only having one plant that makes everything. You need *several* fabs ...
And on and on it goes .....
The net result is that semiconductors are and always have been a very cyclical industry. It's boom for a couple years and then you have a bust for a while. Folks get into the business and later go broke. One thing that has changed over the years: a lot of outfits now have somebody else fab the chips for them rather than doing it themselves. They simply can't come up with the capital to stay in that race ....