How is Chipageddon affecting you?

[TimFox]

01/2021 Volkswagen was going to sue Continental and Bosch over the chip shortages. I haven't heard anything since.
Fear of lawsuits would explain semiconductor manufacturers catering exclusively to the automotive top customers, but they're high volume, low margin though.
You can sell higher quantity at lower price, or lower quantity at a higher price, and either way have the same money flow. But in a shortage situation it's best to sell fewer at higher prices. Why would you not sell to distributors (at all) to get that higher margin?

I still smell a rat. It still doesn't explain the semiconductor manufacturer's record profits when supposedly they don't have much and are catering to their lowest margin customers.

A subcontractor to Chrysler (part of Stellantis) tried this in 2021.  Didn't work.  The judge ruled that NXP had no chips to ship.  However, the evidence of a binding contract was iffy.
https://www.reuters.com/business/autos-transportation/stellantis-supplier-seeks-court-order-compel-chip-supply-jeep-plant-2021-04-16/

[tom66]

I think the more likely outcome is the automotive customers said "ok, we'll pay $3 per chip instead of $1 per chip, interested?"

And that was enough to get the orders they need.  There is still a long lead time for cars, last I heard for ID.3 it was e.g. 9 months.

[floobydust]

I can see politics commanding to keep the auto industry rollin', supposedly because of the impact on the economy with plant shutdowns.
But why completely forsake the distributors? Are not Mouser and Digi-Key's etc. orders/stock important to the world?
Those chip sales are with much higher margins, small and medium business will gladly pay $6 to stay in business, never mind the auto industry's miserly $3 for the old $1 part. And those small/med businesses are more important than the auto industry, really.

I recently got my settlement for the lithium-ion battery class action lawsuit. Price fixing from 2000-2012 by Samsung, Sony, Panasonic and others.
Then I remembered the class action suits for capacitors, DRAM- surprised they are still happening, still in progress.

So racketeering, anti-competitive and price-fixing actions I would not rule out from happening today in the semiconductor industry.

[julian1]

I suspect large purchasers that deal directly are paying one or two orders of magnitude more in price, negotiated privately and in-confidence, and where the relative expense for the buyer is low versus the received revenue on a shipped product (eg a vehicle, weapon etc).

Distributors (like mouser,digikey) cannot follow those prices up, even in an economy where the general price level is rising, without accusations of price gouging/profiteering etc . So distributors only get token quantities of parts, on an infrequent delivery schedule, just enough not to completely burn the relationship.

This would explain why manufacturers won't publicly acknowledge the supply crisis, because from one perspective it doesn't exist - production is already ramped up, and they can sell all they produce (evidenced by revenue reporting).

[SilverSolder]

Can't help thinking a lot of these shortages are engineered.

Time will tell...

[floobydust]

I suspect large purchasers that deal directly are paying one or two orders of magnitude more in price, negotiated privately and in-confidence, and where the relative expense for the buyer is low versus the received revenue on a shipped product (eg a vehicle, weapon etc).

Distributors (like mouser,digikey) cannot follow those prices up, even in an economy where the general price level is rising, without accusations of price gouging/profiteering etc . So distributors only get token quantities of parts, on an infrequent delivery schedule, just enough not to completely burn the relationship.

This would explain why manufacturers won't publicly acknowledge the supply crisis, because from one perspective it doesn't exist - production is already ramped up, and they can sell all they produce (evidenced by revenue reporting).

Where's my ability to out-bid the high bidders? That's a fair market instead of selling to gangsters.

Digi-Key is useless not providing numbers for what they have on order, if any, and expected delivery dates. You'd think they have some pull like a car maker.
Imagine having zero visibility on part availability or when they are coming in and you're a business doing product manufacturing/development. Digi-Key's not earning their markup at all. MBA's using the ostrich head-in-sand approach.
If you were at war and wanted to sink the electronics industry, a long drought like this will do it. After the US sanctions against huawei I would expect retaliation from china and still see no shortages of their semi's aside from the (new) shanghai lockdown consequences.

[tom66]

How does Digi-Key manage its sales and financing?

If TI ships 100k chips to Digi-Key, does Digi-Key pay upfront for those, or only on sale of the goods?

The difference maybe e.g. $300k immediately for those chips or $300k (minus DigiKey's cut, which is probably significant) over 1 month of sales.

[AndyC_772]

Obviously there's no way to know what the contractual agreement is between any two specific companies, but normally the way it would work is that the distributor buys product from the manufacturer and gets, say, 60 days credit.

If they sell most of those parts within that 60 days, then they've taken in enough to cover the original purchase cost, and can settle their account with the manufacturer without having a cash flow problem. If, however, those parts don't sell, they still have to pay the manufacturer for them. This then means the distributor is tying up a lot of their own capital in inventory, which is undesirable.

The exact details may vary, but it has to work something along these lines. Imagine, for example, that a distributor places a large order for some relatively obscure component, with payment terms along the lines of "you [manufacturer] get paid after we do". The parts are manufactured, shipped to the distributor's warehouse, where they sit on a shelf indefinitely. The manufacturer is out of pocket, may never get paid, and there's nothing they can do about it.

[cortex_m0]

Where's my ability to out-bid the high bidders? That's a fair market instead of selling to gangsters.

Wait, do we like brokers or not? I thought we hated brokers auctioning components last week

Digi-Key is useless not providing numbers for what they have on order, if any, and expected delivery dates.

What are you talking about? DigiKey, Mouser, Farnell and others all provide estimated delivery dates when they exist. They don't exist for every product.

You'd think they have some pull like a car maker.

The reason big customers like automakers or consumer electronics manufacturers like Samsung have pull is because they buy millions of a specific part per year, so the semiconductor manufacturers can plan their factory runs around those orders.

DigiKey and their peers do a lot of business, but it is in tens of thousands of SKUs, and any one order for one SKU from DigiKey is unlikely to be significant enough to the manufacturer to build the production schedule around.

[T3sl4co1l]

Where's my ability to out-bid the high bidders? That's a fair market instead of selling to gangsters.

Wait, do we like brokers or not? I thought we hated brokers auctioning components last week

Strange, isn't it; I was shouted down last time when I observed that they also serve an inventory-holding function.

Well, fortunately for me, on the design side I've been relatively isolated from this whole mess; those mired deep in it have no end of frustrations however. And so, anyone who buys up precious parts, that isn't themselves, is an automatic villain.  (Not to dismiss those frustrations, mind; the frustration is real, and lashing out at anything is an understandable response.  And lashing out at resellers in particular probably isn't that unjustified of a response on the whole, at that!)

Also, something something blah blah free market, but also we don't actually operate in a free market because that would require openness and regulation, something a lot of "blah blah free market" types seem to miss; but also we do, it's just that you don't have the $10M in cash to play the game; but also ......and so on and so on.  It's complicated, probably more complicated than you think; and, unless you have the kind of money to change it, it simply is what it is.  (And if you did have that money, the system would be working in your favor anyway.)

I guess I wonder what a futures market would look like for semis, but presumably this isn't going to last long enough for that to matter.  And it's not like you'd be trading contracts on a dozen components at a time, again, these would be whole orders, pallets of goods.  Hmm, probably part of that is, there are only so many (dozens?) of buyers in such quantities -- major mfgs and distributors -- whereas the commodities that are traded this way, have thousands of sources and buyers across the country, or globe.

Tim

[tom66]

The problem with the shortages is they are self-reinforcing;  if a load of STM32F4's is to drop on Digi-Key tomorrow, are you going to buy one month's supply, or are you going to buy one year's supply?

If you don't buy the year's supply, then someone else will, so the rational self-interested action to take is to buy everything you can afford (and possibly more, if you get a loan from the bank.)   Semiconductor suppliers probably love this market, as much as they'd like to look like they care, they're too busy laughing in their piles of money from parts that sell themselves as soon as they get taped onto a reel.  Wall Street thinks in quarters, so this is great for the executives too, even if the long term reputation of TI is dragged through the mud.

This situation will only resolve itself as inventories at manufacturers fill up, but unlike e.g. grain or oil, semiconductors don't take up much volume per $ value, so  I suspect there is a lot of room to hoard this stock. Some manufacturers may well insist on having a year or two of inventory, plus there will be further downstream hoarding of their components, e.g. Bosch producing an ECU, I bet that some of their downstream automakers will have ditched JIT and those will be piling up in a warehouse somewhere just in case Bosch screws up.

The situation is *slowly* getting better as the inventories do fill up, but it's still going to be years until there's a return to normality.

I've said it before and will say it again but the rational thing in such a shortage is for the cost of parts to go up,  instead of $7 STM32F4's on Digi-Key, they should be $50 or whatever the going rate is.  That sucks but then they won't just get snapped up by brokers and sold on for $50 a piece as well.  I'd rather genuine parts for market rate than no parts at all.

You almost want an auction-style system with the time-to-delivery being reflected in the price:  if you want parts tomorrow its $50 but if you can wait 6 months then its $15.

[PlainName]

How does Digi-Key manage its sales and financing?

If TI ships 100k chips to Digi-Key, does Digi-Key pay upfront for those, or only on sale of the goods?

Don't know about electronics disties but if Digi-Key was a supermarket TI would be paying them for space on their shelves.

That kind of deal would make sense here: a distie isn't going to want to tie up lots of funds in slow-moving and expensive niche products, so even if they don't pay up front there is still the storage costs and everything. For a manufacturer, being able to have a part delivered next day could be the difference between a big order and the designer going for something he can get his hands on now.

[fourfathom]

Don't know about electronics disties but if Digi-Key was a supermarket TI would be paying them for space on their shelves.

That kind of deal would make sense here: a distie isn't going to want to tie up lots of funds in slow-moving and expensive niche products, so even if they don't pay up front there is still the storage costs and everything. For a manufacturer, being able to have a part delivered next day could be the difference between a big order and the designer going for something he can get his hands on now.

I needed a few 74LVC parts for a test circuit and went to DigiKey.  Claimed to be in stock, but it turned out they were in "marketplace stock", backordered, delivery in 2023.  TI, OnSemi, Nexperia, all out of stock at DigiKey and Mouser.  So, even though it made me feel like a Bad American, I went to LCSC where the parts were in stock and much cheaper (when using one of the slower delivery options).  Depressing.

[floobydust]

Electronics distributor value-adds are having stock and if not, providing some idea when delivery is expected.
Outside simple multi-sourced semi's like that 2N7002, I don't see any expected delivery dates from Digi-Key for 1-2 years now, Mouser past month has been deleting them and "TBD" for deliveries past late 2023. One needs to know if it's a few weeks or 100 weeks FFS, if 1K or 50K pcs are on order. Last Digi-Key delivery date I have says "2099" lol.

If they're too scared to stick their necks out, then at least give the date they last had stock. RPI Locator does this. At least you can see the part is active and how you missed out lol. Better than a "request stock notification" email that the scalpers got before you and scooped it all up, you so slow.
The brokers kick you in the nuts twice - they outbid you or otherwise scoop up the parts, then they mark up prices by 3-5X and sell to you.

Manufacturer forums scold you for asking about shipments, delivery dates- not allowed.  As if the fabs are running cowboy-style "yeeehaa some neon and helium came in, let's go build us some chiparoos".

P.S. - Are Amazon abusing sample ordering from TI ? This would explain why samples are locked down.

[rsjsouza]

How does Digi-Key manage its sales and financing?

If TI ships 100k chips to Digi-Key, does Digi-Key pay upfront for those, or only on sale of the goods?

Don't know about electronics disties but if Digi-Key was a supermarket TI would be paying them for space on their shelves.

That kind of deal would make sense here: a distie isn't going to want to tie up lots of funds in slow-moving and expensive niche products, so even if they don't pay up front there is still the storage costs and everything. For a manufacturer, being able to have a part delivered next day could be the difference between a big order and the designer going for something he can get his hands on now.

In these days of shortage I don't think anyone is doing consignment - i.e., pay only for sold stock. 

However, there might be some sort of contract that allows one (or more) distributors hold stock in one (or more) of its warehouses around the world for advantageous payment conditions. Despite logistics are quite advanced these days, they still carry some risk and delays that increase cost if a part needs to be shipped across the ocean.

Was that a bad planning solely from the semiconductor manufacturers or also from the distributors, which did not place orders in enough quantity to cover for the excess demand? Or was it sparked by the auto manufacturers, which relied entirely on their "technological terror" of JIT, got burned and bought parts from the same distributors that sell in lower quantities, derailing everyone else in the process? I feel this discussion is coming around, especially when the feelings towards brokers/disties/mfgs are flip flopping...

The problem with the shortages is they are self-reinforcing;  if a load of STM32F4's is to drop on Digi-Key tomorrow, are you going to buy one month's supply, or are you going to buy one year's supply?

Exactly. Toiletpapergate.

[PlainName]

P.S. - Are Amazon abusing sample ordering from TI ? This would explain why samples are locked down.

Amazon actually make stuff and don't just resell, so could be an Amazon developer looking into the next Alexa or AWS rack or something.

[SilverSolder]

Looks like Chipageddon might get even worse....

Last week, Russia restricted the export of noble gases used by semiconductor manufacturers.  This may affect Chinese manufacturers less than other countries, as China produces their own noble gases for domestic consumption.

Why can't we just get along....

[Karel]

Why can't we just get along....

I could answer that but it would be a very long reply and for sure it would derail the thread 

[tom66]

As I understand it, the reason noble gases are produced in significant quantities in Ukraine and Russia is due to the low cost of labour.  There is nothing particularly special about the process (merely fractionation of atmospheric air), and no doubt there are other facilities across Europe that are capable of this production, and possibly they could even be scaled up with extra shifts.

[rsjsouza]

As I understand it, the reason <some products> are produced in significant quantities in <some countries> is due to the low cost of labour.  There is nothing particularly special about the process (merely <some known process>), and no doubt there are other facilities across <the world> that are capable of this production, and possibly they could even be scaled up with extra shifts.

FTFY... (sorry, couldn't resist)

(provided that technology and resources are accessible, of course).

[tszaboo]

Where's my ability to out-bid the high bidders? That's a fair market instead of selling to gangsters.

Wait, do we like brokers or not? I thought we hated brokers auctioning components last week

Brokers yes. Scalpels not.
All these companies are doing is buying up stock, mark it up and sell for 30x the price. When you buy something they turn around and buy 30 extra components, someone might need those. They seem to have engineering support, and seem to have the ability to buy the high end parts.
All of them Chinese, and they are just hoarding. It is a systematic attack on us. And they started hoarding food, grain, maze, wheat, others.

[coppice]

As I understand it, the reason noble gases are produced in significant quantities in Ukraine and Russia is due to the low cost of labour.  There is nothing particularly special about the process (merely fractionation of atmospheric air), and no doubt there are other facilities across Europe that are capable of this production, and possibly they could even be scaled up with extra shifts.

Gas production plants use very little labour. Plants that produce oxygen, nitrogen and argon are spread across the west, because of the economics of transporting these large scale products. If those plants have abandoned the separation of the rarer gases, I assume the demand is so low that the market has narrowed to a few niche players who specialise in meeting that demand.

[electrodacus]

I ordered STM32F373 microcontroller's from Mouser in February 2021 and on website before ordering estimated delivery was 52 weeks but after ordering there was no date just "Will advise*"
Then in December 2021 they asked if I'm OK with a price increase from $4.07 to $4.61  (Canadian dollars). But there was still no delivery date estimate.
Then in April 2022 they again asked me to accept a price increase now form $4.61 to $5.25 still no delivery estimate.
I guess this will not be the last price increase and not sure I will ever get them so I will need to find them on the black market at multiple time the cost and with good chances to get fake parts. I say this I already got a batch where about 60% of the microcontrollers where fake (some other components with same footprint and laser etched the part number I ordered). I build a set of boards and then needed to manually desolder the fake microcontrollers and solder the non-fake ones. After I knew there were fake parts combined with good but old parts I was able to visually identify the fake parts and remove.
There are many other parts that I ordered and will be delivered at end of year and next year but at least there is a date tho in two cases the date was pushed back a few times so not better than the microcontroller (some Toshiba mosfets).
And is not just semiconductors even things like connectors (2.5mm pin pitch Phoenix) are not in stock with delivery estimates around the end of the year.

I do not think there will be improvements anytime soon and things may get even worse.
I know when checking the stocks for mosfets (power mosfets) there was some alternative stock even if limited so I could have changed my design last year but looking now at both Mouser and Digikey there is basically zero stock even for alternative's.
And I can not get alternatives for some parts like the Microcontroller as that will mean likely many months of hardware and software changes.

My understanding is that demand of semiconductor's is much higher than supply but not quite sure why that happened so sudden.   

[Kasper]

The bait and switch is really annoying.  I just had that with a range hood (ventilation fan over stove).  A button stuck in and needed to be pried out to turn it off.  I've been trying to get a warranty replacement for about a year.  After much pestering, the store finally gave me 1 option for a replacement that was in stock.  Supposedly everything else that would fit is out of stock.  The replacement is newer model, more expensive so I'd have to pay the difference.

While discussing lead times, it supposedly went out of stock but they can get another and install it in a week.

It took a couple hours of back and forth in email to ask if I could pay after it is installed and make other cleanup to his quote.  He demanded payment up front and promised it'd get installed next week.  After I paid he says, sorry we took too long and I lost the install appointment, we can do it in 1 month.

I said nevermind, I'll take full refund, and buy and install one myself.  He said no.

I don't think I'll ever buy a new house again.  It seems labourageddon is a bad as chipaggedon.

[SilverSolder]

[...]
My understanding is that demand of semiconductor's is much higher than supply but not quite sure why that happened so sudden.

During times of high inflation, it makes sense to invest your money in goods...   that can be sold later, in exchange for a larger amount of less valuable currency.

During this cycle, a lot of clever people have been buying things up for resale later.

All of the stuff we can't get now, will magically reappear at a higher price later,  just wait and see.