MT Magazine January/February 2022

SUPPLY CHAIN ISSUE

FEATURE STORY

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Fig. 1 The Pier 300 channel at the Port of Los Angeles during less demanding days. Cargo ship capacity is measured in TEUs, or “twenty-foot equivalent units,” which is based on the length dimension of a cargo container (20 x 8 x 8 ft.). The largest cargo ships in the world can handle more than 23,000 TEUs – which explains why there can be problems in ports when things like COVID-19 hits. (Image: Port of Los Angeles)

vacations, and getting contractors in or landscapers out. The pandemic hit, and, as Goolsbee noted, “Demand for durable goods went up. Demand for cars went up. Demand for houses, way up.” In other words, people are buying durable goods at an unprecedented pace. That’s the good stuff – high demand for durable goods. Which brings us to the bad. Goolsbee said that “all the pandemic shortages coming from the supply chain” are “concentrated on physical goods and stuff coming through the ports.” Let’s take the auto industry, for example. According to Bill Rinna, director, vehicle forecasts, the Americas, at LMC Automotive: “Our current projection for North America lost production due to disruptions is 2.8 million units.” Clearly a massive loss for the industry – as well as all of the peripheral companies that support it. However, Rinna notes that “90% of that is due to the lack of chips.” The Opposite of “Trifecta” The chip shortage is arguably a “perfect storm” event,

combining these factors: 1. COVID. There have been serious shutdowns at semiconductor plants in China, Taiwan, and Malaysia. 2. Weather. Samsung, NXP, and Infineon all shut their chip fabs down in the Austin, Texas, area in February 2021 due to the winter storm. Samsung was down for a month. 3. Fire. At the Renesas Electronics plant northeast of Tokyo, a fire gutted the N3 building where it built 300-mm chips, primarily for automotive applications, on March 19, 2021. The company announced it was back to 100% of its pre-fire operation on June 24 – after some three months of being down. There is no quick fix for this. Like any complex manufactured product – and let’s face it: semiconductors are particularly complex – it takes time to produce. As a general rule of thumb, according to the Semiconductor Industry Association, it can take up to 26 weeks from order to delivery. While there are efforts to build new plants in the United States and elsewhere to increase capacity, the SIA notes that it takes 18 to 24 months to build a semiconductor factory (aka “fab”). The trade association reports that there are 26 fabs going into production this year – three in the United States –