How DC/DC Converter Customers Are Affected by the Global Semiconductor Shortage

The semiconductor industry relies on complex global supply chains involving multiple stages, including raw material production, chip fabrication, assembly, and testing. Disruptions at any stage of the supply chain, such as natural disasters, trade tensions, or logistical challenges, can interrupt the flow of electronic components and impact production capacity. Over the last couple of years, the struggles of the semiconductor industry have made front-page news worldwide. Previous disruptions were primarily driven by supply-demand mismatches. However, the COVID-19 pandemic played a significant role in precipitating the current global shortage.

Disrupted supply chains

The pandemic disrupted supply chains globally due to lockdowns, travel restrictions, and border closures. This caused delays in transporting raw materials, electronic components, and finished products. Semiconductor manufacturers faced challenges receiving necessary inputs and delivering products, affecting production and distribution.

Semiconductor plant shutdowns

In response to the pandemic, many semiconductor manufacturing facilities temporarily suspended operations to comply with health and safety guidelines or due to reduced demand. These shutdowns disrupted the supply of semiconductors and created a gap in production capacity. In addition to these immediate effects, several related factors contributed to extending the semiconductor shortage by disrupting the normally finely tuned balance between supply and demand.

• Unforeseen automotive demand: The automotive industry experienced a sudden decline in demand at the start of the pandemic, leading automakers to reduce semiconductor orders. Faced with the prospect of fabs running at reduced production, semiconductor fabs reallocated capacity to the next customers in line. When consumer demand for vehicles rebounded faster than expected, automakers had no semiconductors in the pipeline, leading to production delays and reduced output. Remember those images of nearly completed vehicles waiting for that one critical electronic module?
• Increased demand for electronics: As people around the world were forced to work, study, and entertain themselves from home during lockdowns, demand surged for electronic devices such as laptops, tablets, gaming consoles, and home appliances. This sudden increase placed additional strain on semiconductor manufacturers.
• The shift in consumer behavior: The pandemic caused a shift in consumer behavior, with greater reliance on e-commerce, online streaming, and digital services. This led to higher demand for data centers, cloud computing infrastructure, and networking equipment, which in turn increased the need for semiconductors.

While shortages are evident at several stages of the DC/DC converter supply chain, RECOM’s longstanding arrangements with suppliers have ensured adequate stock for all products.

Although leading-edge devices using sub-10nm nodes manufactured on 300mm wafers tend to attract the most attention, these aren’t suitable for power applications. DC/DC converter and other power modules generally use more mature nodes ranging from 350nm to 90nm, produced in older fabs using 200mm wafers.

For several years, worldwide 200mm fab capacity has been tight. Manufacturers are building new 200mm fabs and migrating older processes from 200mm to 300mm production, but adding new capacity is a lengthy process. One major manufacturer estimates that building a new fab takes about three years, 6,000 construction workers, and US$10 billion. It’s possible to expand production capacity in existing fabs, but that requires a wide array of additional equipment such as probing machines, polish and edge grinders, and photolithography tools. Many equipment manufacturers are already running at full capacity.

The expectation is that shortages will continue across several device types. Two devices critical to DC/DC converter production, power MOSFET transistors and power management ICs (PMIC devices), have been among the mature-node devices facing severe supply constraints over the past couple of years.

Even before passive component manufacturers, such as resistor and capacitor producers, sent employees home due to the pandemic, long-term trends showed a significant rise in demand for their products. Multilayer chip capacitors (MLCCs) are a prime example. Automobiles are adding capacitors rapidly, driven by the switch to electric vehicles (EVs) and the adoption of sophisticated functions such as advanced driver assistance systems (ADAS). A standard combustion engine vehicle uses between 2,000 and 3,000 capacitors. Consumer demand and government mandates drive the market share of EVs with advanced features, creating explosive growth in component content—as many as 22,000 MLCCs may be required in a single EV with ADAS.

Automobiles aren’t even the largest market for MLCCs. That distinction belongs to smartphones. Around 1.5 billion smartphones are produced each year, with flagship models containing up to 1,000 capacitors each. DC/DC converter users feel the pinch as capacitor manufacturers divert production from larger-value capacitors needed for power electronics to meet the growing demand for smaller-value components required by smartphones.

Manufacturers of key raw materials used in semiconductor production were affected by factory closures and disruptions like everyone else. As a result, prices of raw materials—highly sensitive to the balance of supply and demand—have steadily increased over the past few years. Copper prices have risen about 80% since early 2019, and resin prices are up 18%. At one point in 2022, Ukraine's two leading suppliers of semiconductor-grade neon gas, responsible for about half the world's supply, halted operations as Russia intensified strikes, threatening to raise prices and exacerbate existing shortages.

Even cardboard boxes for shipping faced shortages. As the pandemic drove online shopping, retailers like Amazon stockpiled cardboard to meet demand, leaving smaller suppliers empty-handed. In early 2021, the price of cardboard reached a record high, according to the Producer Price Index and the US Bureau of Labor Statistics. At least, this shortage may be easing. US box shipments fell by 8.4% in Q4 2022 according to an industry trade group, perhaps signaling a shift from over-demand to over-supply.

Amid all this disruption, you may be wondering how this affects your supply of DC/DC converters and what RECOM is doing to ensure continued availability and keep your production lines running. As we’ll see in Part 2, RECOM has taken concrete steps to ensure DC/DC power module and industrial power supply availability despite ongoing supply constraints. Learn more in our next blog.