Silicon wafer supply disrupted – CEOs accused of stupidity

Chipmakers around the world will only have an estimated silicon wafer stock of around four to five months if Japanese suppliers fail to get their production lines moving again, a Merrill Lynch analyst has warned.

Another analyst has told TechEye that the situation is the “inevitable outcome of stupidity.”

Dan Heyler, an analyst at Merrill Lynch, said the supply shortage will occur in May as Japanese manufacturers fill 60-70 percent of this industry and the shortage will affect sales revenue of chipmakers in the second quarter. He warned that even big companies such as Taiwan Semiconductor Manufacturing Co (TSMC) has around 30 days of net inventory left

However, although Malcolm Penn, top analyst at Future Horizons showed sympathy for the Japanese tragedy, he said the shortage was the fault of CEOs who had cut inventory, supply chain, stocks and buffers as much as they could.

He told TechEye: “This was the inevitable outcome of stupidity.

“The whole thing has been stretched back as much as possible so that as soon as an issue hit it all unravelled.”

Although no one knows what the full extent of the problem will be, Penn said even if it stood at five percent there would be no fall back.

“CEOs have literally taken everything out of the supply chain, all in a bid to make the books look better. They used to be concerned about the security of the business, now it’s all about how good the books look. This was a disaster waiting to happen.”

He agreed with Heyler, claiming that the industry would “probably see shortages” as
if there is a shortage in wafers there’s inevitably a shortage of chips. He said this in turn would affect everything from cars to iPads.

“As a result we’ll see companies bidding for the available chips and this in turn will raise prices.” he warned.

Heyler added that the shortage would also affect smartphone and tablet PC markets.

He told Taiwan Economic News that his analysis showed that demand for phone products was strong and could outperform the demand for PCs and consumer electronics.

C.H. Chen, a senior analyst at UBS Securities, added that the supply chain of semiconductor industry was now “chaos.”