The Global Semiconductor Shortage

As no doubt you will have heard, there is a global semiconductor shortage currently, and it’s having wide-reaching knock-on effects on a huge number of varied markets down the supply chain, from smartphones and small household appliances to cars.

But how did this problem come about? What are the main challenges semiconductor companies must consider, and what is the solution to this current situation? And how can IntES help? We have recently started working with two leading semiconductor companies from the USA on projects in Southeast Asia for precisely this reason – to help them respond to the global semiconductor shortage.

Why is there a Semiconductor Shortage?

Demand for computer chips has been rising sharply for a number of years now. This fast market growth had meant that increasingly high demand had already been near to outstripping supply – and then the pandemic hit. The COVID-19 pandemic caused the demand for semiconductors to explode even further; around the world employees were required to work from home, and children were to attend school remotely. So many more previously in-person services moved online in the blink of an eye, even many healthcare services. All of this required more at-home tech than ever before, not to mention additional technological entertainment for everyone stuck at home for their leisure time too, all of which requires technology using semiconductors. Recently, the shortage of chips has forced some technology manufacturing companies to cut down production rates or even temporarily suspend production altogether due to lack of microchips, despite chip and wafer factories running at full capacity at the time.

Following this, many of the production facilities making these vital chips then also had to shut down as a result of necessary requirements to limit the spread of COVID-19 imposed by various governments around the world. So demand had never been higher, but production in many cases was significantly hindered for some time – what many are calling a “perfect storm” accelerating the supply problem. To compound the shortage further, distribution channels for semiconductor global supply chains were also impacted, as various ports around the world also had to be closed, causing logistical back-logs and vastly increased shipping prices.

So the global pandemic arrived at just the wrong time to hugely exacerbate a problem already challenging the semiconductor industry. The resultant and ongoing global chip shortage means companies are going to have to find a way to increase their supply and catch up with unprecedented order volumes.

IntES works with leading semiconductor companies from the USA in Southeast Asia

A Semiconductor Supply Solution in Southeast Asia

So what’s the solution? High-tech companies all over the world need to prepare new premises to increase their capacity to respond to the mounting supply needs, and many existing plans for this are being escalated or brought forward. The semiconductor market is growing rapidly in Southeast Asia as global technology giants are relocating or expanding their production facilities in the region, driving double-digit growth and attracting new investments in response to the global situation.

From a global perspective we are seeing an increasing number of hi-tech companies setting up fabrication plants in South East Asia. IntES is currently providing various engineering services for one of the Fortune 500 ranked American semiconductor companies whose main product is world leading microchip production, who are expanding their operations in Vietnam. We were also recently awarded the basic and detail design service for a new greenfield factory in North-Vietnam for another well-known American semiconductor client. In addition, IntES is currently discussing with a number of other semiconductor clients which are planning to enter or expand in Southeast Asia in response to the growing demand.

Aproximately 80% of global semiconductor production capacity currently resides in Asia (The Economist). Southeast Asia is an ideal region for establishing new chip factories for a number of reasons, not least of which is that the region continues to benefit from the shifting global supply chains: The Asia-Pacific area counts for approximately 60% of global semiconductor sales, China alone making up half of that percentage, making it the largest semiconductor market in the world (TechWireAsia). In addition, Southeast Asia makes an attractive investment location for semiconductor companies since their facilities require a highly-trained, specialist workforce to operate. And just such a workforce has been strategically planned for by many Southeast Asian countries for some time with STEM-based education programmes (such as Singapore’s “Skills Framework for Electronics”) in collaboration with education providers and industry associations to fill this anticipated talent-gap opportunity. Add in some of the more obvious cost-saving benefits and it’s not difficult to see why the area has attracted such large and sustained growth over the last decade and why it continues to be a hub for semiconductor investment in response to the global shortage.

How Can IntES Help?

As an EPCM consultant, we at IntES provide semiconductor companies the whole value chain from feasibility studies to engineering, procurement and construction management. We have recently started working with two leading semiconductor companies from the USA, who, like an increasing number of hi-tech companies, are setting up fabrication plants in South East Asia to respond to the unprecedented demand for microchips.

IntES was awarded as the main engineering partner in both on-going projects with two separate large American semiconductor clients due to IntES’ technical understanding of the clients’ needs, market experience and industry knowledge. Sound expertise of local building codes and regulations combined with international quality standards and certified project managers allow clients to steer away from unexpected problems, delays, and budget overruns. The engineering team at IntES has substantial experience designing reliable manufacturing processes for complex fabrication plants.

IntES provides a wide range of services for semiconductor clients globally. For example, our expertise includes clean room design and build clean protocols following the FS209E / ISO 14644 standards. Master planning, hazardous material safety aspects and sustainability matters including design for LEED accreditation are also part of typical IntES services. Optimized people and material flows are reached through facilities integration. We understand the importance of operational readiness and set the plans and objectives accordingly from day one. These include for example thorough project documentation, drawings, training and handover verification among many other activities. For projects managed by the clients themselves, IntES offers various consultancy services to identify and avoid potential problems ahead.

IntES works with leading semiconductor companies from the USA in Southeast Asia

The Semiconductor Shortage: Ongoing Challenges & Opportunities

Increasing capacity, improving efficiency and speeding up production times and supply chain delivery remain the foremost challenges to tackle in response to the current shortage. However, those CAPEX projects which address this, whether a new greenfield site with innovative production techniques or a retrofit of an existing facility, cannot be achieved overnight. As such, many analysts predict it will take around 2 years to achieve a better level of balance. In addition, semiconductor companies also have to address the over-ordering being done by some manufacturing customers as they “stock up” to try to avoid a supply issue in future.

While there are certainly challenges in the market, there are an abundance of opportunities too. Capital equipment investment for semiconductor production increased 56% year on year in April 2021 according to SEMI. SEMI President and CEO, Manocha, has said the industry is expected to grow by $1 trillion in the next 10 years. Innovation in the field is incredibly exciting too, as engineers continue to try and find ways around “Moore’s law” to provide more powerful and ever smaller chips, more affordably. And of course, the increasing digitisation of daily life with new emerging disruptive technologies in this technological revolution we are experiencing means demand for computer chips in the foreseeable future is set only to continue to grow.

Contact IntES

As engineering consultants already working with giants in the semiconductor industry, we are perfectly placed with offices in Southeast Asia, Europe and Africa to deliver your next engineering project in the semiconductor market. Get in touch with us today to find out more about our specialist expertise and experience in this area and to discuss your requirements.