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Chip Shortages Grow For Mature Nodes

Impact felt across many industries, including appliances, smart phones, cars, and industrial equipment.

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The current wave of chip shortages is expected to last for the foreseeable future, particularly for a growing list of critical devices produced in mature process nodes.

Chips manufactured at mature nodes typically fall under the radar, but they are used in nearly every electronic device, including appliances, cars, computers, displays, industrial equipment, smartphones, and TVs. Many of these chips are hot and in tight supply with long lead times, while others are easy to find. It depends on the chip type, specification, and vendor.

In addition, some leading-edge chips, such as select memories and processors, are also in the same boat. Those chips tend to grab most of the attention, but the ones based on mature nodes are also important. Among the mature-node semiconductors in tight supply are CMOS image sensors, display driver ICs, flash memory controllers, microcontrollers (MCUs), power MOSFETs, and power management ICs (PMICs).

Chip shortages at trailing- and leading-edge nodes already have impacted a number of companies and their ability to ship products. Shortages have hampered shipments of cars, PCs, and smartphones, and the situation won’t improve anytime soon.

“Overall, we think the chip shortages will last at least until mid-next year,” said Samuel Wang, an analyst at Gartner.

It wasn’t always this way. In early-2020, IC vendors experienced a drop in demand amid the COVID-19 pandemic outbreak. By mid-2020, the market rebounded. The work/education-at-home economy drove demand for computers and TVs, which created a surge in demand for chips. Shortages for select chips appeared. That momentum then carried over into the first part of 2021 with some new dynamics at play. Acute chip shortages surfaced in automotive, and the situation has spilled over into smartphones and other products.

There are other reasons why the chip industry is seeing widespread chip shortages. At a high level, the industry is in the midst of a boom cycle, where demand is outstripping supply. And there is not enough chip manufacturing capacity to meet demand.

Leading-edge chips are manufactured in state-of-the-art 300mm fabs using various advanced processes ranging from 16nm/14nm to 5nm. In addition, 300mm fabs also manufacture devices at mature nodes ranging from 65nm to 28nm. Chips also are manufactured in older 200mm fabs using processes ranging from 350nm to 90nm.

For several years, worldwide 200mm fab capacity has been tight. The same is true for 300mm capacity. In fact, Taiwan foundries are sold out of capacity at least until mid-2022, analysts said.

“We are seeing unprecedented demand on many applications and across all nodes,” said Walter Ng, vice present of sales at UMC. “As this cycle continues to run a longer course, our belief is that this will likely be the new norm.”

To meet demand, chipmakers are building new 200mm and 300mm fabs. But it takes time and money to build fabs, meaning the chip shortage issues won’t disappear overnight. Until then, shortages will continue across a number of chip types, including image sensors, display ICs, MCUs, and PMICs.

Boom cycle
Over the years, the industry has seen various boom cycles where demand is greater than supply. It has also seen its share of downturns. The current boom cycle is one of the biggest in recent memory.

“[There is] a strong investment in logic/foundry as well as accelerating investment in memory, driven by the spread of 5G mobile and data center investment,” said Toshiki Kawai, president and CEO of TEL, in a recent presentation. “[In DRAM, supply is] tight due to higher 5G mobile, PC, and data center demand. Steady investment continues for [flash memory].”

In total, the semiconductor market is expected to grow by 17% in 2021, according to Semico Research. That compares to 6.6% growth in 2020, according to Semico. In this cycle, chip demand is outstripping supply, which impacts many products. “The classic economic model during supply shortages usually results in higher prices along with lower unit sales,” said Jim Feldhan, president of Semico.

But demand is easing, at least for some end-user products. “Most of the PC upgrade cycle is over, and the shortage will for the most part abate in the second half of 2021,” Feldhan said. “There are some scenarios we looked at that extend the shortages into 2022. Continued growth is expected in IoT, 5G and its new applications for smart cities, and growing reliance on cloud applications.”

Each application, and the associated chips involved, has a different set of dynamics. “Advanced technology and mature semiconductor products are experiencing different supply situations,” Feldhan said. “Advanced processors for smart phones are experiencing tight supply that is somewhat normal, as phones utilizing the latest generation process technology (5nm) are rolled out. Computing processors for PCs and tablets are experiencing a return to more historical demand levels as upgrades and home schooling needs are fulfilled.”

Chips utilizing mature technologies also are booming. “We see a lot of opportunity in RF, particularly on the 5G rollout,” said Paul Ryan, vice president and general manager of the Semiconductor X-ray Business Unit at Bruker. “The workhorse for many foundries is 40nm and above. They are exploding right now. They are filling a big volume just for the demand of standard components.”

Take automotive, for example. Cars may have some leading-edge chips, but the vast majority of devices are based on mature nodes. “As PC demand increased, auto sales decreased in 2020,” Feldhan said. “It made sense to shift capacity from automotive chips to computing and home entertainment. But many automotive chips are designed and used for specific applications and cannot be used in other applications.”

By early 2021, the automotive business rebounded, but car makers failed to procure enough chips to meet demand. “Auto manufacturers tried to reinstate their orders, but now they are in the back of the manufacturing queue. Fab capacity was already allocated to fulfill the increased sales of notebooks, desktops, tablets, and servers. That collided with the normal rollout of new smart phones in the second half of last year. Unusual weather and transportation issues exacerbated the problem,” Feldhan said.

All told, the industry is engulfed in chip shortages across several segments. As a result, IC vendors need more manufacturing capacity.

But IC vendors with fabs, as well as foundries, face a shortfall of capacity. “We are seeing utilization of 300mm equipment for mature nodes at an all-time high. Device makers in China, North America, Europe, and Japan are especially aggressive with capacity adds,” said Wilbert Odisho, vice president and general manager at KLA. “Utilization of 200mm equipment is at very high levels. Device makers are building new 200mm fabs and expanding capacity at existing ones.”

200mm capacity is especially tight. In some cases, foundries are migrating some chip products from 200mm to 300mm fabs. “However, in many other cases, there are some significant barriers to moving specialty technology production to 300mm,” said David Haynes, managing director of strategic marketing at Lam Research. “First, the economics of shifting device production from depreciated 200mm fabs to 300mm fabs can be challenging. Second, a larger barrier can be the requalification required. In many cases, a non-trivial component of the fab output targets automotive applications, the requalification of which can be time consuming and costly. But that leaves these 200mm fabs needing to deliver continuous improvement in order to increase capacity in existing facilities.”

All of this presents challenges for foundry vendors. “Every foundry has its own criteria to deal with the current shortage,” UMC’s Ng said. “With demand far exceeding our capacity, it has forced us to prioritize our supply capabilities by customer and by specific focused end applications. Our decisions during times such as these, and the criteria upon which we base our decisions, will be critical to our performance in the coming years.”

To meet demand, some 19 new worldwide high-volume fabs already have started construction, or will start by the end of this year, and another 10 are scheduled in 2022, according to SEMI.

But many fab equipment types are also in short supply, especially 200mm tools. “We have seen our customers redeploy mature systems that were previously turned off or in warehouse storage,” KLA’s Odisho said. “KLA has added 200mm capability to newer generation systems, allowing device makers to deploy the latest features and capabilities for their process control needs.”

MCU shortages
Meanwhile, several types of chip products at matures nodes are hot and facing a shortfall, including microcontrollers. MCUs are used in a multitude of systems, such as appliances, cars, communication equipment, and industrial products. Infineon, Microchip, NXP and Renesas, and others supply MCUs. Some have their own fabs. Many outsource parts to the foundries.

Providing the processing functions in systems, MCUs integrate several components, such as the CPU and memory, on the same chip. MCUs come in 4-, 8-, 16-, and 32-bit configurations. The application depends on the configuration. For example, 32-bit MCUs are used in cars, while 4-bit products are found in appliances.

MCUs are processed in fabs at various nodes, such as 28nm, 40nm, 65nm, 90nm and 180nm. Some are developing devices at advanced nodes.

Demand is robust for MCUs. “MCU is an example of a hot application, where the support is needed from mature 200mm technology nodes through mainstream 300mm technologies,” UMC’s Ng said. “MCUs are one of the key applications driving the growth of mainstream 40nm and below technologies.”

MCU suppliers, however, can’t keep up with demand. “Shortages of MCUs continue,” Semico’s Feldhan said. “Demand for MCUs started to increase towards the second half of 2020. Since then, MCU average selling prices (ASPs) have increased each quarter. We expect units to decline 1% in Q2 2021, while ASPs are expected to increase almost 5%. The supply does seem to be tightest for 32-bit MCUs where ASPs have increased over 20% over the last year.”

Even older 4-bit MCUs are in demand. “Unit sales for 4-bit MCUs have increased significantly. Although 4-bit MCUs only make up less than 1% of total units, during the first five months of 2021, 4-bit unit sales increased over 400% compared to 2020,” Feldhan said.

Some MCU suppliers are taking usual steps to meet demand. Microchip, for one, launched a Preferred Supply Program (PSP). It will provide customers with supply priority beginning 6 months after their order in exchange for at least 12 months of non-cancellable orders.

“This gives us a solid foundation to enable us to prudently acquire constrained raw materials, invest in expanding factory capacity, and hire employees to support our factory ramps,” said Ganesh Moorthy, president and CEO of Microchip, in a recent conference call.

PMIC, DDIC shortages
Display driver ICs (DDICs) and power management ICs (PMICs) are also in tight supply. DDICs are used to power up a flat-panel display, while PMICs are geared to manage the power in systems.

“We see applications related to power, such as PMICs and DDICs, in high demand,” UMC’s Ng said. “DDIC and PMIC production spans mature technologies from the 150nm through the 22nm/28nm nodes.”

Used in nearly every system, PMICs are chips that control the flow and direction of electrical power. Dialog, Maxim, Qualcomm, Samsung, STMicroelectronics, and TI sell PMICs. Some vendors build PMICs in their own fabs, while others use foundries.

PMICs are based on a BCD (Bipolar-CMOS-DMOS) process. BCD combines three different process technologies onto a single chip, according to STMicroelectronics. Bipolar is used for analog functions, CMOS for digital, and DMOS for the power and high-voltage elements.

PMICs are critical. In smartphones, PMICs handle most of the power-supply requirements and other functions.

Then, for wearables, hearables, and other compact consumer systems, designers want to develop smaller systems, but they must also find ways to extend the battery life. Designers must reduce heat dissipation and noise.

In response to these demands, Maxim recently rolled out a single inductor, multiple-output PMIC. The device can reduce the system size by half, while extending battery life by 20%.

PMICs, however, are also in short supply, which impacts the shipments of select products. PMICs are used in PCs, servers, and other products. “PC, server, and graphics demand remains healthy amid supply constraints. While demand remains healthy for PC notebooks, 2Q is likely to track below prior expectations due to severe component shortages related to DDICs and PMICs,” said John Vinh, an analyst at KeyBanc.

As a result, unit sales for power management devices declined 0.7%, while prices increased 2.8% in the first quarter of 2021, according to Semico.

DDICs are also in short supply, hampering shipments for select displays. Cars, industrial equipment, PCs, smartphones, TVs, and other products all incorporate flat-panel displays. The majority of TV screens are based on liquid-crystal displays (LCDs). TVs use other display types, such as organic light-emitting diodes (OLEDs) and quantum dots.

Smartphone displays are based on LCDs and OLEDs. Many cars incorporate simple LCDs, while other vehicles utilize more sophisticated displays. “The expansion of automotive displays and the rise in electrification and advanced computer architectures within the auto designs are fueling display driver ICs and improved display technologies as well as 3D sensing and wider MCU applications for ADAS performance improvements,” UMC’s Ng said.

Flat-panel displays are made in giant fabs. Suppliers from China, Korea, and Taiwan dominate the display manufacturing sector.

Prior to the pandemic, the flat-panel display market was gloomy. Oversupply, falling prices and losses were the common themes in the market. By mid-2020, the display market rebounded, and shortages surfaced for the critical chips used in displays, including DDICs, timing controllers (TCONs), and touch and display driver integration (TDDI) chips.

“DDICs provide the functionality to light up the panel,” said Eric Li at Himax, a supplier of display chips and other products.

TCONs are used to control the display driver IC in a display. TTDIs combine a touch control IC and a display driver IC on the same chip. Focaltech, Himax, Ilitech, Magnachip, Novatek, Raydium, and Synaptics supply display chips.

Fig. 1: Timing controller for LCD TV. Source: Himax

Fig. 1: Timing controller for LCD TV. Source: Himax

So far in 2021, demand remains robust for displays, and shortages persist for display chips.

“Display drivers are rumored to be in a shortage situation and that may have been the case in the second half of 2020 when display driver ASPs increased 21%, while unit sales only increased 19%,” Semico’s Feldhan said. “But in Q1 2021, unit sales increased 14.5% while prices decreased 10.4%. This sales to price response is generally an indication that there is some inventory build occurring.”

Several foundry vendors manufacture display chips. DDICs for large-sized LCDs are produced in 200mm fabs using 110nm to 150nm processes. DDICs for small-sized screens are made in 300mm fabs using 90nm to 22nm processes.

DDICs are in short supply for large-screen LCDs, according to TrendForce. These products are made in 200mm fabs, where there is a worldwide shortage of 200mm capacity, according to the research firm.

DDICs for small/medium-sized displays are also tight. Besides the shortages, suppliers of DDICs face other challenges. In some applications, TDDIs are replacing DDICs.

Meanwhile, there are also shortages for AMOLED display chips, which are used in smartphone displays. Foundry capacity is tight for these products, according to TrendForce. These products are manufactured using 40nm and 28nm medium-voltage process technologies, according to TrendForce.

GlobalFoundries, Samsung, TSMC, and UMC are the main foundries for these processes. In addition, HLMC, Nexchip, and SMIC are also developing these processes, according to TrendForce.

Image sensor boom
CMOS image sensors also are in short supply. CMOS image sensors provide the camera functions in various systems, such as cars, industrial/medical systems, security cameras, and smartphones.

A typical smartphone incorporates two or more cameras, each of which is powered by a CMOS image sensor. The sensor converts light into signals, enabling the phone to create photos.

On average, a premium smartphone consists of 1 to 2 front-side cameras, along with 3 to 4 main cameras, according to OmniVision. The cameras incorporate image sensors with anywhere from 2- to 200-megapixel resolutions.

“New camera features for mobile are still imagery and capture,” said Michael Wu, senior vice president of global sales and marketing at OmniVision. “In some cases, customers may explore new imaging applications, such as simultaneous localization and mapping and AR/VR.”

Suppliers of image sensors continue to push the limits of the technology, packing more and smaller pixels on a die. “The market is constantly pursuing improvements to the camera module using higher resolution and smaller pixel sizes in a wider variety of end products,” UMC’s Ng said.

Demand is robust. In total, the image sensor business reached $20.7 billion in 2020, up 7.3% over 2019, according to Yole Développement. The market is expected to hit $21.4 billion in 2021, up 3.2%, according to Yole.

“For mobile, 2020 5G demand was exponential, and now we are experiencing the aftereffects of that. We are seeing low inventory on 4G, while the overall market trend is still moving to 5G,” OmniVision’s Wu said. “For medical, the pandemic has driven aggressive market growth, and we continue to see the growth this year, especially the demand from reusable medical imaging devices to single-use devices. Computing is another market that has grown drastically, and this year the trend is going towards higher resolution, smaller size for thin bezel laptops and notebooks.”

Image sensors are manufactured in 200mm and 300mm fabs using standard CMOS processes. To make an image sensor, a vendor processes two different wafers in a fab. The first wafer consists of a multitude of dies, each of which consists of a pixel array. The second wafer consists of image signal processor (ISP) dies. The wafers are bonded together and the dies are diced, forming image sensors.

Generally, the top pixel array die is based on mature nodes. The ISP die ranges from 65nm, 40nm and 28nm processes.

“The first point to note from a fabrication perspective is that as pixel dimensions shrink below 1µm, manufacturing of sensor pixel wafers is shifting from 90nm technology nodes to 65nm and 45nm technology nodes,” Lam’s Haynes said. “At the same time, the associated image signal processing (ISP) wafer production is shifting to 28nm and below. Finally, it’s not just sensor and ISP wafers that are integrated today. There is a trend to integrate DRAM, as well.”

Some of these processes are in short supply. “The shortages for CMOS image sensors do not only affect the mobile market. It’s a general shortage affecting the entire semiconductor industry,” OmniVision’s Wu said. “We see shortages for both 40nm and 28nm, but it’s also true for some migration from 40nm to 28nm.”

Conclusion
Other chip types, such as analog and RF, are also in short supply. So are passive components like capacitors.

It’s unclear when the shortage situation will end. Hopefully, the industry will handle it better the next time around.

Related
Automotive IC Shortage Drags On
Long lead times expected at least through the end of this year, as chipmakers scramble for solutions.
Demand, Lead Times Soar For 300mm Equipment
Capacity demand at the leading edge is creating a supply shortage for key manufacturing equipment.
200mm Demand Surges
Despite slowdown in some areas, shortages will continue into 2021 due to lack of equipment.
Shortages, Challenges Engulf Packaging Supply Chain
Innovative business models emerge, but so does possibility of consolidation.



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