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Bain Discusses Chip Shortage Recovery Using LevaData’s Insights

June 5, 2023
Keith Hartley

Thanks to the US CHIPS Act, billions of dollars will help diversify wafer production geographically, especially for advanced chips. However, it will be years before these new fabs reach the production stage. In the meantime, the chip shortage we experienced during the pandemic might be getting better, but it isn’t going away anytime soon. 

To understand and show how the chip shortage is changing over time and by chip type, Bain hosted a webinar using LevaData’s lead time insights to support the presentation. As one of the world’s leading management consulting firms, Bain relies on trusted data sources to maintain the highest level of client advocacy in the industry. In the webinar The Next Evolution of the Chip Shortage, Bain Partner Peter Hanbury highlighted three drivers that will eventually resolve the shortage.

Recession May Save the Chip Shortage: Reduced demand provides the opportunity for lead times to fall in most segments:

• Demand downturn expected to spread from PCs and smartphones to other end markets
• Lead times trending down but still elevated
• Utilization falling across the ecosystem
• Normal inventory levels for most segments except legacy chips

Massive Investments to Build Capacity: Dozens of new fabs across geographies means longer-term capacity, lower utilization, and lower risk of shortages in many areas:

• Massive CAPEX mostly targets bleeding edge technologies further out in time
• Wafer equipment players are protected by their backlogs
• Lower utilization of fabs and, therefore, lower risk of shortages

Geopolitical Challenges Will Continue: Geopolitical challenges are probably going to persist for the foreseeable future as the decoupling of theUS and China’s goals in the semiconductor space continues. This may be the largest challenge to the chip shortage longer-term, especially if tensions flare.

• The tech ecosystem is consolidated in China and Taiwan.
• Most 6" and 8" and 30 percent of 12" wafer capacity will be added in China.

Using LevaData insights, Peter shared a detailed graph showing lead time in weeks for a dozen types of chips from 2020 through 2023, showing lead times peaked in January 2022 and have been declining significantly since. However, it is clear from the data that lead times remain three times historical levels.

By reviewing the chart, almost all chips face shortages, but some much more than others. For example, FPGAs and MCUs remain elevated, and optoelectronics, connectors, and switches remain flat.

With AI-powered platforms able to process billions of part data in real time down to the category and manufacturer level, strategic organizations such asBain rely on in-depth analysis to anticipate future results. It makes us wonder why anyone would still want to compete for the future with spreadsheets. 

Today we’re talking about chip shortages, but the next unexpected supply chain shock could happen at any time. Don’t bet on winning against competitors who embrace these AI platforms—they’ll use predictive insights and automation to correct course before you’ve even opened the spreadsheet on your desktop.

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