Chip supply chain bites own tail

The logo of Taiwan Semiconductor Manufacturing Company (TSMC) is pictured at its headquarters in Hsinchu, Taiwan, January 19, 2021.

NEW YORK, March 31 (Reuters Breakingviews) - The semiconductor supply chain has become so tangled that its head is biting its tail. ASM International (ASMI.AS) is one company that supplies gear needed to make chips. In an interview with Nikkei Asia the Dutch company’s boss, Benjamin Loh, said lead times for producing its machines have extended because it is having trouble finding enough chips itself.

Semiconductor producers like Taiwan Semiconductor Manufacturing (2330.TW)and Intel (INTC.O) read more are responding to shortages by trying to ramp up production. Their new factories need machines in them, and that has swamped the makers. Fellow Dutch firm ASML (ASML.AS), which makes lithography machines for chipmakers, has also warned of problems increasing its output.

Another wrinkle is that ASM International’s biggest customers focus on producing cutting-edge chips. Yet the worst shortages are in less advanced semiconductors – the ones AMS International is having to fight over with other users, including carmakers read more . History shows that chip shortages resolve themselves thanks to market forces and innovation. But today's supply chain woes will take a while to straighten out. (By Robert Cyran)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own)

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