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Semiconductor shortages

Chip shortages spread to backend firms, disrupting supply chains

By Feb 15, 2021 (Gmt+09:00)

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Chip shortages spread to backend firms, disrupting supply chains

A worldwide semiconductor shortage, which started with automotive chips, is getting worse, spreading to equipment makers and backend companies that assemble key components and disrupting the global IT supply chain.

The recent fire at a Taiwanese chip plant and the earthquake in Japan are exacerbating the already short-supply situation, which analysts say will continue throughout the year.

According to the chip industry on Feb. 15, packaging companies are suffering from a short supply of bonding wires used to fix chips to substrates as demand for high-density chips increased from the end of 2020.

Taiwan’s ASE Technology Holding Co., the world’s No. 1 chip packaging company, recently said its wire-bonding capacity is running at full utilization and will remain short of demand at least until the end of the second quarter. Currently, its wire-bonding capacity is 30-40% short of demand, according to ASE Technology.

“Wire bonding accounts for up to 80% of the chip packaging process. But the wire supply is quite limited for now,” said a local chip industry official.

ABF (Ajinomoto Build-up Film) substrates used to connect chips to the mainboard are also in tight supply, as Taiwan-based substrate makers including Nan Ya PCB Corp. and Unimicron Technology Corp. are striving to secure interlayer insulating materials from Japan’s Ajinomoto Co.

The substrate shortages were compounded by a fire that hit one of Unimicron’s plants in Taiwan on Feb. 4, the second blaze striking the same plant in four months.

Manufacturers of solid-state drives (SSDs), a storage device using NAND flash memory, are struggling with tight supply of controller chips, which work as the brain in the SSDs.


Chip shortages spread to backend firms, disrupting supply chains
Tech giants such as Samsung Electronics Co. and Intel Corp. are producing controller chips in-house, but most chipmakers outsource the production to foundries such as Phison Electronics Corp. and Silicon Motion Technology Corp.

However, outsourcing isn’t easy as foundries, which make semiconductors for fabless firms, have already boosted their operation rates close to 100% in recent months.

The prices of SSD controllers have risen about 15-20% amid tight supply.

The foundry boom, which analysts and industry officials expect to persist throughout the year, was caused by surging chip orders as consumer demand for TVs, smartphones, laptops and cars bounced back from the COVID-19 crisis sooner than expected.

With an exacerbating supply crunch, electronics firms and automakers are racing to procure system chips used in graphic processing, data communication, signal conversion and computation.

Demand for such chips has picked up alongside the growing popularity of 5G phones, smart cars running on system semiconductors and artificial intelligence-applied gadgets.

Chip shortages spread to backend firms, disrupting supply chains

As chipmakers are increasingly finding it hard to procure new equipment to make automotive chips, second-hand and refurbished equipment are also in growing demand.

Key Foundry Co., a Korean pure-play foundry company specializing in eight-inch wafers for automotive chips, recently bought a refurbished machine from a reseller for 6.6 billion won ($6 million).

Write to Jeong-Soo Hwang at

In-Soo Nam edited this article.
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