TEMPLE, TX — It's easy to miss if you're not in the market for a new vehicle, but if you drive down the street and take a look towards the lots of car dealerships in Central Texas, you'll see the empty spaces. And the vehicles you see available for purchase are being sold at higher prices due to low supply, all stemming from a global semiconductor shortage that chip industry participants expect will be with for at least another two to three years..
President and CEO of Vision Semiconductor Solutions in Temple, TX, Clifford Blevins saw the impact the industry would have on consumers a mile away. Blevins has close to 30 years of experience in the semiconductor industry, initially beginning in chip production with Motorola. The Texas chip maker was eventually bought and goes by a different name today.
Blevins is in the secondary market, which involves buying and selling legacy equipment used for microchip production. In March, Blevins highlighted how chip production factories we're burning through to equipment to meet demand, admitting that while the trend has been positive for his company, consumers would also likely see an uptick in prices ranging from electronics to automobiles.
Blevins also pointed out that even with additional efforts by the federal government to help ramp chip production capacity in the U.S., he wasn't confident any sustainable short-term fix was on the horizon.
"The issue with capacity also, is it takes so much capital outlay to build a factory, we're talking eight to 10 billion dollars," Blevins said.
Fast forward to today and Blevins says the reality the industry is facing largely reminiscent of what he highlighted back in March.
"Basically the same thing times two," Blevins explained. "Business is still great and we're probably on our longest growth trend since I've been business."
And there's also been a few changes since last speaking with Blevins. Taiwan Semiconductor Manufacturing (TSMC), the worlds largest manufacturer of semiconductors, has began construction in Arizona, where the company plans to build a $12 billion chip factory In March, Intel also announced its plans to spend $20 billion to construct two new chip factories in Arizona.
As the Biden Administration continues its push to ramp up semiconductor manufacturing in the U.S., the billion-dollar moves by chip companies, and amid the reality of today's global chip shortage growing increasingly competitive between both companies and countries. Japan most recently announcing its intentions to spark growth in its chip industry.
"China has relaxed a lot of tariffs on chip making equipment coming in to China because they realize that their capacity has been strained," Blevins said. "They relaxed a lot of materials from the U.S. for equipment, supporting parts, and things like that. In the past two half, maybe three months, our business in China has more than doubled."
Blevins remarked the demand isn't solely derived to support automobile production, or to ensure there's an adequate supply of gaming systems for consumers.
"There's some legitimate national security implications if we don't bring technology in, or don't control this kind of critical technology."
And the heat is on just as much, if not more in the U.S., on major chip makers racing to ramp up capacity.
"They're putting so much into expanding their capacity, they can't expand it fast enough," Blevins remarked. "Again, you got TSMC, which is the largest contract manufacturer in the world, foundry in the world, and they can't expand fast enough."
Simultaneously, Blevins said there's a conflux between developing production and advanced technologies.
"But then all the while, you have this complex, right. They can't just do what they're doing right now.
They're expanding their factories and they're also expanding more in their advanced technologies getting down to two to three nanometer line-widths on a wafer."
Whether consumers or industry partners should take these moves as a sign, our current microchip woes could soon be waning?
"No, the exact opposite, because you're saying at least three years with these announcements," Blevins explained. "You're talking permits, and you're talking all the licenses and things like that before they break ground. And even when they start building, they will still have to stop and qualify the product, so you're really talking three maybe three and half years before there's a wafer that moves out of those factories."
A similar point expressed by Intel Corp’s CEO Pat Gelsinger earlier this week during a virtual session of the Computex trade show in Taipei. In that session, Gelsinger said while the industry is acting to address near-term constraints on the global semiconductor market, it could take a couple of years before the ecosystem can address foundry capacity.
In agreement with the opinion of there being several years needed before a turnaround in chip supply is Dr. Wilson Wamani.
"I joined the semiconductor industry in 1997, originally with Applied Materials which is one of the OEMs (Original Equipment Manufacturer)," Dr. Wamani said. "I was their process and quality engineer for chambers, gas panel, and integration."
Applied Materials is the world's largest producer of manufacturing equipment related to semiconductors production. Dr. Wamani's expertise in the semiconductor industry ultimately took him to the position of Director of Quality Assurance and Business Process Improvements with GREX or the Georgetown Rail Equipment Company. Dr. Wamani said he's also recently taking up the job of a Waco farmer.
"As I grow you know," Dr. Wamani said smiling. "In the U.S. you can be anything."
However, his experience as a doctor, engineer, and scientist is abundantly clear as he inspects the chip-making machinery at Visions Semiconductor Solutions. In summary, he knows how every piece of machinery and tool operates in the chip-making process, giving detailed descriptions from pallet to pallet of equipment before giving his opinion on the state and future of the semiconductor industry.
"It kind of surprised me," Dr. Wamani explained. "But I would approximate at least three years, and not less than three years before a quick turn around of things."
Dr. Wamani explained it's important to recognize the requirements placed on companies within the industry during a time like this, especially considering the industry is also constantly focused on innovation as much as production.
"Applied Material sells to Intel, and therefor Applied Material has to respond very fast, and then Intel has to respond when there's the new discoveries of technology. Because everyday new things are coming."
What does all this mean for a consumer in Central Texas? Blevins anticipates the impact strained chip supply is having on consumers will grow.
"It's going to get worse," he explained. I'm not trying to play Debbie Downer, but it's only a matter of time before we see that trickle down.
And according to Blevins, we should all prepare for more impacts on prices relative to automobiles or electronics until the industry levels out.
"We don't see this tapering off anytime soon," Blevins said. "For one, companies wouldn't be investing hundreds of billions of dollars into new capacity if they're not looking next year or in two years. They're looking ten to 15 years to get a return on demand for building a new fab."
As for the industry, which has seen cycles of growth in years before a steady tapering off, Blevins said what we're seeing is definitive growth.
"We would traditionally have, like a two and a half years of a kind of run, or somewhere around there before tapering off." he explained. "Because there's such a diverse the need for chips across multiple industries, like the crypto mining space and things like that."
"Quite possibly, This is going to be our largest run in the industry ever."