With component shortages still widespread across the industry and lead times extending out 50 plus weeks for many devices, it’s a welcome relief to learn that semiconductor manufacturers are stepping up production. Even with the best intentions, however, that extra capacity may be slow to materialize. Here’s why.

Just like OEMs across the electronics manufacturing sector, chip equipment making manufacturers are facing their own complicated supply chain problems. A recent Nikkei Asia1 report reveals that all sorts of parts shortages are now pushing lead times for key semiconductor manufacturing equipment out to a year and a half, or more.

Parts on the ‘hard to source’ list include lenses, valves, pumps, engineering plastics and, of course, microcontrollers (did we mention there’s a global shortage of electronic components), which means equipment manufacturers such as Applied Materials, KLAC and Lam Research are finding it hard to meet demand.

Combine this with plans from the likes of TSMC, Intel and Samsung to ramp up chip production and it becomes apparent that semiconductor equipment lead times could impact component availability for quite some time to come.

Looking ahead, there’s an impressive attempt to increase chip supply via fab construction. In 2021, the global semiconductor industry announced plans to construct 39 new fabs with more than a dozen of these projects already underway2.

Clearly, semiconductor manufacturers are taking extraordinary measures to address the shortage; capital expenditure is at an all-time high. As an example, Deloitte3 reports that the three largest players have announced cumulative annual capital expenditure of more than US$60 billion for 2021, with more predicted for 2022.

As these plans come online, however, expect the surge on demand for chip production equipment to exacerbate an already fragile situation. Demand for chip production equipment is already soaring and as logistics delays mount in the supply chain, producers of chip manufacturing equipment are feeling every bit as squeezed as the electronic component consuming OEM purchasing manager looking at lengthening chip delivery times.

Long-term, it’s interesting to note that not all new fab capacity is in the Far East. Intel, for example, is planning two new fabs in Arizona4, with the European Union and China also committing to growing their region’s fab capacity.

This trend towards localization should help to guard against future shortages. Not only will it curb the current disruption caused by cumulative supply chain challenges, it will also reduce the industry’s reliance on a cluster of fabs in Asia.

But it won’t bring rapid relief. The complexities of the semiconductor production process mean that even with resources in place, new fab build up takes around 12 to 18 months, followed by a fab ramp of 6 to 18 months5.

Which means chips made on the most advanced process nodes of 3-, 5- and 7- nanometer may be in short supply well into next year. Not only are these chips the hardest to make, but they also tend to have lower yields, and fewer fabs are able to produce them.

Let’s hope the current round of investment will improve that situation. In the short term, however, semiconductor manufacturers have been shouldering up to the shortage by utilizing all current available production capacity. According to the Semiconductor Industry Association6, since the first quarter of 2019, fab capacity has run well above the normal rate, with recent quarters running at over 95% utilization.

This increase has helped to ramp up wafer starts with data to January 2022 revealing that the global industry is producing an additional 4 million wafers per month compared to January 2020. And that’s certainly got to help.

For OEMs facing the current chip shortfall, pressure on purchasing can be extreme. Working with supply chain partners and inventory specialists can help alleviate this stress. With extra resources and insider expertise, AERI can help resolve supply chain bottlenecks and deliver solutions for the hard-to-find parts you need. Submit your most difficult to find parts on our website or give one of our global locations a call in the USA, Asia or Europe.


  1. https://asia.nikkei.com/Business/Tech/Semiconductors/Chip-industry-s-expansion-plans-at-risk-as-equipment-delays-grow
  2. https://www.semiconductors.org/wp-content/uploads/2022/02/SIA_Production-Data-Points_2022-Final_02.09.22.pdf
  3. https://www2.deloitte.com/xe/en/insights/industry/technology/technology-media-and-telecom-predictions/2022/semiconductor-chip-shortage.html
  4. https://www.intel.com/content/www/us/en/newsroom/resources/press-kit-intel-builds-arizona.html?wapkw=Intel%20Arizona
  5. https://www.weforum.org/agenda/2022/02/semiconductor-chip-shortage-supply-chain/
  6. https://www.semiconductors.org/wp-content/uploads/2022/02/SIA_Production-Data-Points_2022-Final_02.09.22.pdf