DOUG SPARKS, CTO, HANKING ELECTRONICS
It is common knowledge how the computer chip shortage is impacting automobile, appliance and smart phone sales this year. Semiconductor integrated circuit (IC) shortages have proven to be a choke point in the automotive and consumer product supply chains. Microelectromechanical systems (MEMS), also known as microsystems, are a segment of the semiconductor industry; both ICs and MEMS are made of silicon and manufactured in wafer fabs. Like computer chips, MEMS chips are also in short supply this year. Anyone trying to buy a MEMS inertial or pressure sensor online is going to find that most parts are now out of stock. This article discusses the recent challenges seen in the MEMS supply chain, how they developed and how they are impacting product costs and availability.
The MEMS supply chain problem is not solely attributable to the COVID-19 (COVID) pandemic, but a combination of other factors. Trade restrictions, energy regulations and higher tariffs and taxes have had a gradual adverse effect on IC and MEMS supply chains. The semiconductor export bans put in place in 2018–2019 pushed affected companies to adopt an inventory stockpile strategy just prior to the COVID shutdowns of early 2020. When the GDP of the global economy sharply contracted by more than 30 percent in Q2 of 2020, many economists looked back to the last recession in 2009, which lasted 24 months and sharply adjusted purchasing downward, preparing for a longer one. Smart phone companies in Asia continued to stockpile chips, buying up the newly available wafer foundry capacity, as did medical device manufacturers. The concurrent 2020 5G rollout and stay-at-home surge in remote work, online shopping and home recreation led to additional wafer fab orders of ICs and MEMS in mid-2020. By Q3 of 2020, the global economy had rebounded by more than 30 percent and more traditional businesses such as automotive resumed manufacturing to accommodate pent up, post-lockdown demand. As the world soon found out, there was no longer any excess wafer fab capacity for many of these orders.
As illustrated in the figure, MEMS products are generally made up of three main parts, namely the complementary metal-oxide-semiconductor (CMOS) application specific IC (ASIC) chip, the MEMS chip and the package. MEMS packages for consumer applications are most often plastic with an embedded panel or printed circuit board (PCB). Copper lead frame embedded plastic packages, ceramic packages and silver-tin solder bumps are used in some MEMS package applications. MEMS product manufacturing and cost can be adversely affected by a supply chain disruption associated with any of these three components or materials. For example, in July of 20201, a fire at a semiconductor factory in Japan belonging to Asahi Kasei Microdevices (AKM) cut off supplies of special fiberglass and polymers used for ASICs and packages. It took many months for the building to be repaired and alternate supplies to be made available, leading to a halt in production of ASICs and packages for many companies. CMOS wafer foundries serve a wide array of markets and applications. The wafer fab IC capacity for COVID-related medical products and related surge in orders for servers and consumer electronics needed for remote work, online retail and gaming overlap with the same CMOS fab capacity used by ASICs found in many MEMS products. If companies cannot purchase their ASICs or packages, lead times stretch out and MEMS product manufacturing grinds to a halt.
Pandemic travel bans put in place by virtually all countries in 2020 also created problems for the MEMS supply chain. These travel bans showed the importance of national support for wafer fabs. For fabs in Asia, only local and large international OEMs and service companies with a presence in the country could provide wafer fab support during this period. This increased equipment downtimes at many wafer fabs and slowed or halted new wafer fab expansions. The zero-tolerance COVID policy that was adopted by many countries in the last two years has also adversely impacted the recruiting of international talent for equipment maintenance and start up work at wafer fabs in these countries. Due to these travel restrictions and multi-week quarantines upon arrival, MEMS product marketing teams have now become used to virtual and hybrid tradeshows and conferences. Travel restrictions have greatly reduced international assistance that could improve supply chain resilience in certain areas, since nobody wants to spend two to three weeks in a hotel under quarantine to attend a two- to three-day international conference or repair, start up or work at a wafer fab. Fortunately, the number of countries still relying on a zero-tolerance COVID policy is rapidly decreasing.
A MEMS product such as the one illustrated in the figure will have a distributed supply chain, especially for fabless companies. For example, MEMS wafers may come from a fab in Germany or Sweden, CMOS wafers from Taiwan or Japan, and the outsourced wafer saw, assembly and test (OSAT) at the package level may be done in Malaysia or South Korea. The silicon wafers are shipped internationally from the fabs to the OSAT location. From the OSAT, the tested and calibrated MEMS products are then shipped to a warehouse and/or another product assembly site, perhaps in China. Complete consumer products are assembled at this location as are modules and subsystems for Tier 1 and 2 suppliers for larger, more complex final products such as automobiles. These products and modules are then bulk shipped across the globe. Logistic problems and cost increases are now occurring at all shipment points in this process.
The 150 to 300 percent rise in shipping costs this Autumn2 have impacted the commercialisation of MEMS products. Both freight rates for ocean shipping and air cargo have increased. The logistic issues observed in the last two years have forced many businesses to abandon the lean, just-in-time (JIT) approach to inventory and return to the old practices of stockpiling and establishing larger local buffers. Stockpiling has put further pressure on wafer foundries as customers place less frequent orders for larger batches and additional unit volumes per bulk shipment than they have historically. The practices of stockpiling and establishing larger local buffers are changing the MEMS manufacturing cycle, and those companies slow to them are seeing very long lead times and are often the ones reporting a shortage of chips.
The rises in material, chemical and energy costs this Autumn have impacted the cost of MEMS products. The silicon purification process is energy intensive. Import and export restrictions on coal and taxes on other fossil fuels have led to energy cost increases and power outages. The new export restrictions and regulatory changes on high purity quartz resulted in a sharp spike in silicon prices in September and October 2021. At one point, the price of silicon was up 300 percent3. A surge in solar panel and electric vehicle manufacturing as well as expanded IC wafer fabs and hence silicon demand has resulted in higher costs for silicon wafers as well as silane-based gases used for chemical vapour reposition (CVD) deposited silicon, oxide and nitride films on both MEMS and CMOS wafers. Prices for metals used in wafer fabrication, such as aluminium and copper, have also increased this year. Inflationary pressure will continue to hit various parts of the MEMS supply chain during the remainder of 2021. Once adjustments are made in the regulatory space and inventories balance out globally, the inflationary spikes seen this Autumn should subside to a lower, more stable level.
Prior to 2020, the semiconductor and MEMS supply chain was global and virtually a single, complex entity linked together4. Historically, there were countries with a higher percentage of the supply chain than the rest of the world. In the 1970-80s, Silicon Valley in the US had a complete IC supply chain, however this is no longer the case. In recent years, Taiwan has demonstrated the power of a local semiconductor supply chain at the Hsinchu Science Park and surrounding TSMC, UMC and Vanguard IC semiconductor foundries and MEMS foundries. In 2014, China established the Big Fund to promote a self-sufficient semiconductor supply chain inside of China and increase the percentage of Chinese-made ICs5. The initial round of funding totalled US$21.95 billion, and this has been followed up by a second round in 2021. As lithography requirements for MEMS are not as aggressive as they are for leading-edge ICs, China has assembled an almost complete MEMS supply chain6. In the last year, there has been more calls for national and regional semiconductor self-sufficiency. This new national supply chain approach is now being developed by not only China but the EU, Japan, South Korea and the US. It will require redundant regional facilities, wafer fabs and associated equipment, substrates and chemical suppliers across the globe. To be a part of this new national supply chain push, TSMC is building wafer fabs outside of Taiwan and China. The company has announced that it is building or considering wafer fabs in Germany, Japan and the US7.
To support the increased need for regional IC and MEMS manufacturing, countries are increasing semiconductor training programmes. In 2020, a Chinese chip school, called the Nanjing Jichengdianlu Institute Limited Company, was established to help meet a chip talent shortage of around 261,000 people8. The switch to multiple, national semiconductor supply chains will require more talent and continue to push costs for silicon wafers, chemicals, fab tools and fab salaries higher, impacting the MEMS supply chain in the future. There is the risk that after this semiconductor infrastructure expansion, global IC and MEMS manufacturing overcapacity in certain segments will see fabs struggling to run at higher operational efficiencies and lower per wafer costs. Furthermore, redundant semiconductor infrastructure, supply chains and workforces will raise baseline cost of IC and MEMS wafers above what the world has become accustomed to, but eventually this should buffer regional economies from the supply chain shocks that have been experiences in the last two years.
Hanking Electronics
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