Mega-company buys washing machines to snatch fries • The Register

A major industrial conglomerate is being forced into increasingly desperate measures to meet its chip needs, according to ASML, a maker of chip-making equipment.

In a conference call this week with financial analysts, Peter Wennick, CEO of ASML, said the “magnitude of demand” for chips was “significantly underestimated” by the industry and: “I don’t don’t think it’s going to go away.”

“I met the head of a very large industrial company, a conglomerate, last week, and in fact they told me that they were buying washing machines to rip out semiconductors to put them in modules industrialists. I mean, it’s happening these days,” he said.

“Now you could say that’s an anecdote, but to be honest, it’s happening everywhere. It’s 15, 20, 25-year-old semiconductor technology that’s now used everywhere…driven by IoT-type applications.”

ASML, the world’s largest supplier of photolithography systems, reported first-quarter 2022 revenue of €3.13 billion ($3.41 billion), up 36% year-on-year. and net profit of 1.331 billion euros ($1.45 billion), up 91.5%.

Semiconductor lead times stretched to an average of 26.6 weeks in March, according to financial analyst Susquehanna, which collates data from distributors. According to Avnet, some 93% of 530 engineers surveyed worldwide are seeing delays in chip shipments and most expect the price to jump over the next 18 months.

No industry is immune to supply shortages, although a particularly high-profile victim is the automotive sector, where the supply chain was less flexible and had a harder time restoring supply after the order cancellations at the start of the pandemic.

Richard Gordon, vice president of semiconductor and electronics practice at Gartner, said The Reg the example quoted by ASML seems “a bit extreme” and not representative of the situation.

“More typical over the past couple of years is ‘de-specification’, particularly in automotive where automakers turn off non-essential functions (e.g. rear seat air conditioning and things like that) in order to ‘ship vehicles.’

Gordon said ASML demand comes from immediate customers – semiconductor suppliers – and has “less visibility in end markets”. ASML, he added, was trying to reassure investors about the profit call because it is totally dependent on capital expenditures from these chipmakers to ramp up production.

The long-term outlook for the semiconductor industry looks positive due to new applications including electric vehicles, industrial IoT, 5G and, depending on who you believe, the metaverse as well, but there will be hurdles on the road in the medium term.

Gordon added:

The chip industry expert said he was already hearing about semiconductor stocks being “back on the market and canceled semiconductor orders.”

“The bottom line is that the industry is heading into a down cycle, likely starting in 2H22 but definitely affecting 2023 and 2024 – this means the industry will move from undersupply to oversupply (capacity investment on the side of supply against weakening end-market demand), which will put downward pressure on semiconductor prices and lead to slower revenue growth. The next bull cycle will begin in 2025/2026.

With investments in new chip factories in the US, including from TSMC and others, as well as Europe rallying for action, the situation could become complicated. ®