Currently, there's a global shortage of semiconductors, which are predicted to be in short supply through 2021 and beyond. The industry struggles to meet demand due to various factors:

• The digital push since the start of the COVID-19 pandemic
• Demand for electronics
• U.S. China trade war

The incredibly high demand for chips has impacted automakers and consumers around the world. Automakers, General Motors and Ford, claim they've had to cease production of specific vehicle models because of semiconductors' absence. According to a recent MarketWatch article[1], Maribel Lopez, a principal analyst at Lopez Research, explains that the industry faces a "perfect storm" of demand and supply issues that are unlikely to resolve anytime soon.

People expected high demand for mobile-device chips; however, the pandemic caused another level of instability to supply chains and the manufacturing processes to produce semiconductors.

The frustration felt by manufacturers and consumers hasn't stopped chip industry stocks from skyrocketing to all-time highs. "The PHLX Semiconductor Index (SOX), which tracks dozens of the largest chip-related stocks, has gained more than 70 percent in the past 12 months," according to MarketWatch.

Unfortunately, some experts believe there's no rainbow in sight. Stifel analyst Matthew Sheerin, who follows tech supply-chain issues, believes, "We don't see any major correction on the horizon, given ongoing supply constraints as well as continued optimism about improving demand in 2021." Stifel goes on to say, "We remain more concerned with continued supply disruptions, and increased materials costs than we do an imminent multi-quarter inventory correction."

Working to Tighten the Gap

Many chip-equipment suppliers seem optimistic that manufacturers will increase capacity allowing for improved designs that won't be well-served by current fabrication facilities.

For example, Applied Materials, Inc. expects to supply a decade-plus investment cycle for chipmakers. Additionally, strong earnings and outlooks from chip-making equipment companies KLA Corp. KLAC, 1.29% and Lam Research Corp. LRCX, 3.67% noted that chip makers needed to build out their manufacturing capacities even further.

To that point, Taiwan Semiconductor Manufacturing Co. TSM, 1.68%, the third-party manufacturing giant that fabricates silicon for many chip makers like Apple Inc. AAPL, 2.31% and others said it plans to spend $28 billion to build out its facilities in 2021.

Improved Semiconductor Manufacturing Processes Can Help

Scot Forge recently began forging components for semiconductor manufacturing equipment. Working with one of our customers, we were able to deliver significant material reductions and improved supply chain lead time.

"When we work with a new customer, we analyze their processes and look for ways to save material costs and increase efficiency. Working with one of our semiconductor manufacturing customers, we eliminated labor and overhead cost associated with removing 70 percent of input material, which dramatically reduced overall material spend. We believe that if more manufacturers were to improve components structure through near-net forgings and dramatically reduce materials and lead times, more manufacturers could become more efficient and improve the supply-shortage situation." - Matt Davis, Defense, Aerospace & Semiconductor Sales Engineer

Forging Components Benefits 

Semiconductor Manufacturing Equipment 

Using forged components for semiconductor manufacturing equipment can eliminate capital expenditures for milling equipment and decreased process time.

Historically, semiconductor manufacturing equipment components are produced by machining a block of material to achieve the desired shape. However, using the advanced forging process can save time and money.

Forged Components Are Stronger

Forgings have an inherently superior molecular structure compared to cast or fabricated parts due to the grain flow and material reduction achieve through the forging process.

Scot Forge takes these benefits one step further with near-net shaped forgings, which provide a shaped part that reduces machining time and material cost. You no longer have to machine out a hexagon or an octagon from a block for a transfer, vacuum or pressure chamber. Our forgings can get you closer to your complex shape while maintaining quality and delivering reliability.

The bottom line: If semiconductor manufacturers can prolong their machine components' lives, improve processes, and increase efficiency, the global semiconductor market may see correction sooner than later.

[1] Witkowski, Wallace. 2021. “Worldwide Chip Shortage Expected to Last into next Year, and That’s Good News for Semiconductor Stocks.” MarketWatch. February 22, 2021. https://www.marketwatch.com/story/worldwide-chip-shortage-expected-to-last-into-next-year-and-thats-good-news-for-semiconductor-stocks-11614020156.