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Why the Global Chip Shortage Is Hard to Overcome | WSJ

Jun 04, 2021
- This

chip

controls your car, stores data about what you bought, and runs software on your laptop. These

chip

s have come to power our lives, and only a handful of manufacturing plants or factories in the world have the knowledge and infrastructure to make them. So most chips are produced outside the US, like in this Singapore factory. The factory invoice is a big investment. - And now the world is running out of chips because companies can't make them fast enough. - When the order really floods. We had to turn on every piece of machine we could find in the factory. - The pandemic shook supply chains and caused a surge in demand for electronics when people were stuck at home.
why the global chip shortage is hard to overcome wsj
While a perfect storm of natural disasters, a fire at one of the world's leading auto chip makers, and the ongoing trade war between the United States and China have disrupted semiconductor production and distribution. This

shortage

has affected whether you can get a Jeep off the dealership or buy a new PlayStation 5. We visited one of the world's largest contract chip manufacturers to see the complex process and why there's no quick fix to the supply

shortage

. . - The chip usually takes between two and three months to manufacture. - Daniel Rajkumar is a manufacturing director at one of Global Foundries' factories.
why the global chip shortage is hard to overcome wsj

More Interesting Facts About,

why the global chip shortage is hard to overcome wsj...

The American company is the third largest contract chip manufacturer in the world. Companies like Intel, AMD, and Bosch donate some of their circuit designs to Global Foundries. And then it's factories like this one in Singapore that make the chips. - Once we finish manufacturing the circuit, we must test it. It has to go to be repackaged. - In total, it could take up to six months before a chip is ready for your technology. This long process begins here, in the center of the factory called the clean room. - Before entering the clean room, we must get dressed. - Because chips can be as small as a fingernail and packed with billions of components, they must be handled very carefully. - Any form of dust falling on the wafers will cause the chip to become defective.
why the global chip shortage is hard to overcome wsj
And now we can enter the air shower. Well. - Global Foundries says this clean room is a thousand times cleaner than an operating room. And it also takes up a lot of space. - Two soccer fields. That's how big it is. We have between seven and 800 machines. - Here it is also yellow because the chips are sensitive to ultraviolet rays. And this lighting has none of that. - This is always the first step. - The starting material for any chip is here in this room. These super thin disks are called wafers and are made of silicon.
why the global chip shortage is hard to overcome wsj
Over time, one of them will produce between 1,000 and 1,500 individual chips. But first, the wafer is placed in a special container. - We have the raw silicon. We are now trying to register this material and translate it to our wafer support. - Each conveyor can hold up to 25 wafers and there are around 4,000 of them moving through the facility at a time. - We are also a source of particles when we enter the clean room. - So not once during manufacturing does the wafer come into contact with any of the workers. - You will take the wafers directly to the machine.
And in this foundry, basically 95% of all processing jobs are fully automated. - These raw wafers are cleaned before starting a process that Rajkumar describes as similar to making a layer cake. - The main function of diffusion cleaners is basically to remove oxide layers or knock nitrite onto the silicon. - That creates a protective layer. Next is a layer that makes the wafer light sensitive. Then you are ready for one of the most important steps called lithography. - This is the most expensive module of any wafer foundry. The lithography machine number will define how many wafers you can produce in a month or a year. - A lithography machine can cost between 25 and more than 100 million dollars.
And that's because it's responsible for adding layers of circuitry. Basically, electronic components like transistors and diodes that allow chips to eventually store data or run applications. - What I have here is basically a (incomprehensible) circuit design. - Inside this pink box is a photo mask, which is like a glass template. And customers send them directly to Global Foundries. The lithography machine shines ultraviolet light through the photographic mask and prints patterns on the wafer over and over again. The difference between an advanced chip for a 5G smartphone and one for your credit card comes down to the type of wavelength used.
Shorter wavelengths mean you can get finer features and get more performance out of the chips. Some of these transmitters are so small that they are measured in nanometers and compared to strands of DNA. Once the circuit pattern is printed, it is necessary to load the wafer. - These machines use a lot of energy to produce electrical charge that allows electricity to flow into the chip and also creates different types of functions for your electrical chips. - Rajkumar says many of these steps are repeated hundreds of times before manufacturing is complete. And to get to this point, these orders have to be made at least a year in advance. - I have some demonstration wafers here. - The finished wafers are tested and finally cut into individual chips. - One of them is this small wafer die, which is mainly used for bank cards or chips.
And then there's the other one, which are larger die wafers that can be used in other types of applications, like computer processing chips or electrical appliances. - Global Foundry says its Singapore factory typically produces around 600,000 wafers a year. But with the recent increase in demand, around 120,000 more units are being produced. - This whole year is complete. We have no more space for new clients. - Tan Yew Kong is vice president and general manager of Global Foundries Fab 7 in Singapore. And he says there is no quick fix. - There is no space where you can house another lithography tool or any other tool you want to buy.
It's (incomprehensibly) easily anywhere from a year to 15 months before you can see a tool arriving at your factory. - It's not just an accumulation of equipment, but Tan says expanding or building a factory from scratch would require large investments. More than the $1.4 billion Global Foundries has already committed to spending this year to expand its three factories around the world. - You easily need to spend between 7 billion and 15 billion depending on the size of the factory you want to build and the technology you are going to develop can take decades to build the foundation. - So, to fulfill as many orders as quickly as possible, the company turned on the idle machines and opened this factory control tower.
Here the engineers have a panoramic view of the entire factory. And the green boxes show which machines are running at maximum capacity. Before this control tower, when there was a problem, engineers had to sort through the data and gather the information themselves. - Compared to today, just by looking at the screen you already know that this is a piece of machine. You need to pay attention now. - Tan says the time saved is valuable, but to truly address the shortage, the company is working more closely with its customers, suppliers and the government. - We will continue to see more government support because it is becoming a very important part of the entire

global

supply chain. - There is no reason why Americans should wait.
We are investing aggressively in areas such as semiconductors and batteries. - The Biden administration has proposed $50 billion to boost chip production in the United States. That's because while the United States is one of the largest semiconductor markets, most of the complex and expensive manufacturing is done at a few companies based in China and East Asia. - That's because the world's largest foundry, TSMC, is located in Taiwan. Samsung also has a major foundry, as well as some Chinese players. - This concentration of factories means any disruption in the supply chain, such as a drought in Taiwan. Or political tensions with China could have major ripple effects.
Especially when

global

demand is expected to grow more than 12% this year. - We have technologies like 5G and artificial intelligence. And this type of advanced technology means that more chips would be needed to operate the devices we use every day. To meet that demand, the Chip Industry Association says $3 trillion in investment will be needed globally over the next three decades. So, in order for us to buy new devices, Tan says his factory will run 24 hours a day as he turns this challenge into a business opportunity. - From the point of view of wanting to grow the company, this is definitely a positive point for us.
This excess demand will last for a while.

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