Chip manufacturers’ raw material inventories hit a record high

The semiconductor industry is facing a shortage of chips and related components is no big news. Similar news has been circulating for several quarters. Many companies have invested to increase production capacity. For example, Intel and AMD have invested in packaging facilities and substrate production to deal with supply chain problems such as the lack of ABF substrates.

According to Nikkei Asia, giants in the semiconductor industry have stepped up to purchase as many raw materials as possible to ease the production pressure caused by various shortages in the supply chain. According to statistics, the world’s top nine chip manufacturers set a record high in raw material inventory in June to ensure that production can be further increased. These chip manufacturers include Intel, TSMC, Samsung, SK Hynix, and Micron. The current raw material inventory is at the highest level in history. Since March 2019, the inventory has been steadily increasing, which is at least 24% higher than normal.

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Although the inventory is large, the consumption is also very fast, which is basically offset by the increased production, which shows that the demand for semiconductors at this stage is astonishing. It is understood that a large part of the increased production capacity is occupied by the automobile industry, and the chips purchased by major automobile manufacturers far exceed the needs of current automobile products. This is not necessarily good news. Over-purchasing chips mean that demand may decline for a period of time in the future, and the excessive inventory of chip manufacturers will put financial pressure on them.

However, the largest consumer of chips is not the automotive industry. The shortage is mainly caused by consumer products such as home appliances, smartphones, and computers. However, the current production capacity is no longer able to meet the needs of the market. Although many chip manufacturers have increased their investment in production capacity, they still have to wait a year or two to solve the problem.