According to one report, the time between ordering a chip and receiving it increased to 17 weeks in April.
Chip shortages are affecting the entire industry, stopping businesses from shipping their goods. Automakers are forecast to lose $110 billion in revenue this year as a result of idle factories due to a shortage of critical components.
Shortages in the semiconductor industry are worsening, complicating the global economy’s rebound from the coronavirus pandemic. According to Susquehanna Financial Group report, chip lead times, or the period between ordering a chip and receiving it, increased to 17 weeks in April, suggesting that consumers are becoming more urgent to secure supply. Since the firm started monitoring the data in 2017, in what it refers to as the “risk zone,” this is the longest wait.
Susquehanna analyst Chris Rolland wrote in a note Tuesday that “all big product categories up considerably,” citing power management and analogue chip lead times as examples. “These were some of the most significant increases since we began keeping track of the data.” Chip shortages are affecting every industry, stopping businesses from shipping anything from vehicles to video games to refrigerators. Ford Motor Company, General Motors Company, and other automakers are forecast to lose $110 billion in revenue this year due to a shortage of critical components. This is undermining economic growth and jobs, as well as increasing concerns about panic ordering, which could lead to potential distortions.
Lead times are closely monitored by the chip industry and its customers as a measure of supply and demand balance. A widening of the gap means that semiconductor consumers are more likely to commit to future supply in order to prevent shortages. Analysts watch these figures for signs of hoarding, which can lead to an overabundance of inventory and a drop in orders.
“Extended lead times also force consumers to engage in ‘bad conduct,’ such as inventory accumulation, safety stock construction, and double ordering,” Rolland wrote. “These developments may have sparked an early stage of over-shipment above true consumer demand in the semiconductor industry.”
Some consumers may have placed excessive orders because they are worried about the effect of shortages on their companies. Companies have been able to cancel chip orders without penalty in the past, but this is starting to change.
