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ECONOMY

Chip backlogs stretch to 2 years, vexing Sony and electronics makers

  • February 13, 2022
  • , Nikkei Asia , 5:40 a.m.
  • English Press

RYOSUKE EGUCHI, Nikkei staff writer

 

TOKYO — Delays in the delivery of semiconductors are forcing electronics manufacturers like Sony to scramble, with lead times for orders reaching as long as nearly two years.

 

Lead times for chip orders in February grew five to 15 weeks longer than in October, according to U.S. electronic component distributor Sourcengine. Based on these calculations, general-purpose products’ lead times averaged 44 weeks for 16-bit processors, up 15 weeks from October, and 37 weeks for power chips, up nine weeks. The longest lead time reached 99 weeks for certain processors.

 

In addition to demand growing faster than supply, chipmakers have prioritized addressing the shortage of cutting-edge chips over commodity products, which are generic chips that are interchangeable between suppliers. Prices are also on the rise, with the average for processors and other chips rising 15% or more in a year, according to U.S. market researcher Gartner.

 

The disruption in chip supplies has dampened production in Japan. Output of air conditioners for the October-December quarter of 2021 totaled 730,000 units, down 26% from the same period two years earlier, government data shows. Digital camera output declined 25%, with passenger vehicles down 16%. 

 

Sony Group stopped taking orders for six mirrorless camera models and halted production three times in the last two months of 2021 because of a shortage of semiconductors used for liquid crystal displays. The resulting shortfall in output cut into Sony’s opportunity to sell the cameras, with segment sales for the October-December quarter falling 4%.

 

Manufacturers are looking to bolster chip inventories to avoid such production cuts, stoking demand.

 

“Some products are expected to be in short supply in the first half of fiscal 2022 as well, so we will build up inventory,” said Hiroki Totoki, CFO and executive deputy president at Sony.

 

Chipmakers are responding to boost supplies, with wafer shipments increasing 14% in 2021. An American trade group estimates factory utilization rates of at least 90% in 2020-2021.

 

But with priority placed on supplies of cutting-edge chips, capacity increases for commodity products have taken a back seat. Production capacity for chips using 40 nanometer and older technology — commonly used for commodity products — grew 4% in 2021, according to U.S. consulting company McKinsey & Co. Meanwhile, capacity for 28 nm and new tech rose 13%.

 

The buildup in chip inventory by manufacturers may, in part, eat into future demand. A sales slump in the products that use the chips would result in a supply gut, underscoring the fragility of the current dynamics.

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