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From: phil@amd70.UUCP (Phil Ngai)
Newsgroups: net.micro
Subject: Re: chip availability
Message-ID: <4528@amd70.UUCP>
Date: Wed, 11-Apr-84 15:03:55 EST
Article-I.D.: amd70.4528
Posted: Wed Apr 11 15:03:55 1984
Date-Received: Fri, 13-Apr-84 06:11:34 EST
References: <2262@ecsvax.UUCP>, <423@dual.UUCP>
Organization: AMD, Santa Clara, CA
Lines: 56

> From: mats@dual.UUCP (Mats Wichmann)
> Newsgroups: net.micro
> Subject: Re: chip availability
> Message-ID: <423@dual.UUCP>
>
> Topic for discussion: WHY is the supply of chips so short right now?
> If people were making chips at the rate they were a few years ago,
> there would be plenty of parts for everyone.
>
> My theory: most of the chip mfgs. got caught with their pants down in the
> latest recession. They were building along at a merry pace and all of a
> sudden, BANG, nobody was willing to carry inventory any more. Where most
> people carried 6 months or more parts stock, all of a sudden they were
> trying to pare down to only keeping this weeks' production requirements
> in stock. As a result, the chip mfgs. got left with a huge oversupply.
> They survived this, although a look at financial reports from a few years
> back will show that it wasn't easy on their pocketbooks. It seems that
> this time around, they are going to throttle the supply so that they
> won't get burned the same way if another recession hits - they will
> be building at somewhat under the demand so that if a slump hits, they
> will be building right at or a just a little over the demand. Besides,
> a supply which is less than the demand would tend to drive the prices
> up, right?
>
> As I say, only my theory, but it makes sense to me. Any comments?
> 	    Mats Wichmann
> 	    Dual Systems Corp.
> 	    ...{ucbvax,amd70,ihnp4,cbosgd,decwrl,fortune}!dual!mats

It's true that people aren't making chips at the same rate they were several
years ago: they're making them at a much higher rate. But they are being
purchased at an even faster rate. Consider the following quotes:

From Fortune, Mar 19, 1984

"U.S. chipmakers started to build about 90 wafer fabrication lines in 1983
and will start perhaps 200 this year, increasing their total number of
lines by 30%. The big five spent $874 million for land, buildings, and
capital equipment last year; those items should grow 73% this year, to
$1.5 billion. Since it takes about two years to build a new line and bring
it up to speed, much of this capacity will come on stream around 1986."

From San Jose Mercuy, Jan 13, 1984

"Customers ordered about $3.4 billion worth of semiconductors in the last
three months of 1983, about 2 1/2 times the $1.3 billion they ordered in
the last three months of 1982, the Semiconductor Industry Association said."

Probably the biggest problem is that many people seem to think semiconductor
capacity can be turned on with the flip of a switch when actually it takes
about 2 years to bring a new fab online.

	by the way, I'm not biased, oh nooo...

-- 
Phil Ngai (408) 988-7777 {ucbvax,decwrl,ihnp4,allegra,intelca}!amd70!phil