Chip shortage, hoarding forcing record wait times for technology suppliers

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A combination of the worldwide chip shortage and hoarding by manufacturers is creating a "danger zone," as processor lead times slip to the highest level since 2017.

The global chip shortage, affecting firms from the automotive industry as well as general technology, has led to the longest lead times since the Susquehanna Financial Group started tracking it in 2017.

According to Bloomberg, the group says that the wait time between ordering a processor and having it delivered lengthened to 17 weeks in April. Before the start of 2021, it was more typically around 13 weeks.

Susquehanna report writer Chris Rolland said that this was an average across all industries, and that there are more extreme examples. Auto chip supplier NXP Semiconductors NV now has lead times of over 22 weeks, for instance.

And unspecified smaller companies, manufacturing headphones, have even seen lead times extent to a year. Reportedly, this has led to major redesigns and, in one case, a product being abandoned.

Bloomberg says that a lengthening lead time can mean that companies are buying up more processor capacity. They do it to protect against shortfalls, but this kind of hoarding can cause problems if a firm ends up with more inventory than it can sell.

"Elevated lead times often compel 'bad behavior' at customers, including inventory accumulation, safety stock building and double ordering," wrote Rolland in his report. "These trends may have spurred a semiconductor industry in the early stages of over-shipment above true customer demand."

Adding to the issue is that Taiwan is in the middle of a drought. The country is the base for Apple processor supplier TSMC, and the firm says it does not expect the drought to cause problems.

However, TSMC, and others, have been preparing for drought concerns by experimenting with ordering and delivering water to its facilities.

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