Chip Shortage Creates New Power Players

“That visibility is what we need,” said Hassane El-Khoury, chief executive of the chip maker Onsemi, a company previously known as ON Semiconductor.

Many of the chip makers said they were using their new power with restraint, helping customers avoid problems like factory shutdowns and raising prices modestly. That’s because gouging customers, they said, could cause bad blood that would hurt sales when shortages end.

Even so, the power shift has been unmistakable. “Today there is no leverage” for buyers, said Mark Adams, chief executive of Smart Global Holdings, a major user of memory chips.

Marvell Technology, a Silicon Valley company that designs chips and outsources the manufacturing, has experienced the change in power. While it used to give foundries estimates of its chip production needs for 12 months, it began providing them with five-year forecasts starting in April.

“You need a really good story,” said Matt Murphy, Marvell’s chief executive. “Ultimately the supply chain is going to allocate to who they think are going to be the winners.”

It’s a substantial change in psychology for a mature industry where growth has generally been slow. Many chip makers for years sold largely interchangeable products and often struggled to keep their factories running profitably, particularly if sales slumped for items like personal computers and smartphones that drove most chip demand.

But the components are essential for more products now, one of many signs that rapid growth may linger. In the third quarter, total chip sales surged nearly 28 percent to $144.8 billion, the Semiconductor Industry Association said.

Article source: https://www.nytimes.com/2021/11/08/technology/computer-chip-shortage.html