Can the electronics industry ever match supply and demand?
1 min read
Semiconductor manufacturing encompasses two wildly differing approaches. At one extreme, there is the need for absolute precision when building devices with feature sizes of 40nm and smaller. At the other extreme is the wild imprecision of building manufacturing capacity – balancing supply and demand.
Historically, this imprecision has been a problem for the so called integrated device manufacturer, or IDM. Because they tended to respond to demand, rather than be ahead of the game, IDMs often brought capacity online as demand fell.
Because these fabs were dedicated to particular products, the market was oversupplied, prices fell and the industry as a whole went into decline, only for the whole process to start again.
Foundries, the thinking goes, shouldn't be affected by this problem. Because they build products to order, they should know how much capacity they need. But even foundries seem to be rushing to build capacity that isn't needed at the moment, according to market researcher Gartner.
GlobalFoundries will be doubling its capital expenditure to $5.4billion; TSMC is planning to spend close to $7.5bn. Part of that investment is getting ready for the next process nodes: TSMC is, for example, readying itself for manufacturing 20nm devices on 450mm wafers and that is not going to be cheap. Capacity isn't available in small amounts, so when a leading edge fab comes online, it won't be fully loaded.
But the figures that have been discussed suggest that fabs will have much more capacity than they need for the next couple of years. Will the industry be turning down by then? Who knows? One thing we can state with certainty is that supply and demand have never been in balance in the electronics industry. Perhaps the industry is such that they never will.
