ST STMicroelectronics once again announced the price adjustment notice: it will start to increase product prices on June 1 to cover all product lines. This move will undoubtedly make the originally tense trend of out-of-stock price increases even more severe.

ST mentioned in the price increase letter that the current shortage of semiconductors has seriously affected the industry chain. Semiconductor demand continues to rise, although we have made capital investment to meet the demand, we still face great challenges. An important challenge is the cost of raw materials, so we have to increase prices. In the past six months or so, the price of ST products has risen all the way, and at the most popular time it has doubled more than ten times. In the fourth quarter of 2020, the price of ST single-chip microcomputers doubled several times in a week, and the shortage of ST has continued for several months, and there is no sign of relief. On January 1 this year, ST has announced a wave of price increases. ST said it has decided to increase the prices of all product lines starting from January 1, 2021. In the follow-up, the company's production capacity will be allocated according to the customer's order arrangement and the best demand visibility to maximize the efficiency of manufacturing operations.

In response to this, ST responded at the STM32 Summit held in Shenzhen and said that it is working closely with all customers and partners to balance production capacity covering all end-demand markets. At the same time, ST is also striving to optimize its internal fabs, packaging and testing, and supply chain to support customer needs. At the same time, expanding production capacity is also a major means for ST to respond to market demand. But in fact, everyone knows that the expansion of chip factories is usually an irreversible process. If the expansion is to make up for the current gap, it is very likely to cause problems such as subsequent inventory backlogs. Therefore, not all companies are willing to risk a huge amount of wafers. Plant operating costs and other risks to expand production. Judging from the fact that ST had to raise prices twice in just six months, after this round of price increases, the scarcity of chip products may be even higher. Since the second half of 2020, the lack of stock and price increases have become the main theme of the semiconductor industry, and the lack of cores has even affected the normal operation of downstream terminal markets. According to data from the American Semiconductor Industry Association, global semiconductor sales in February 2021 were 39.588 billion U.S. dollars, a year-on-year growth rate of 14.66%. Among them, the Chinese market was USD 13.735 billion, an increase of 18.91% year-on-year. The supply of chips is not optimistic. The biggest reason for the shortage of chips is nothing more than market demand and the shortage of upstream material supply. The supply of upstream raw materials also puts cost pressure on wafer manufacturers. Now, not only has there been no relief, but it seems to have worsened. TSMC is the world's largest foundry company, accounting for more than half of the global advanced process foundry market share, but the current production capacity of TSMC has appeared "second light" situation, orders are scheduled to the end of 2022. Chairman Huang Chongren even said that since 2020, foundry prices have increased by 30-40%, and supply and demand continue to be tight, and price increases will continue. The production capacity in 2022 has already been booked by customers and has now begun to start. Reservations for 2023.

Today, Malaysia, India, Taiwan and other regions are making a comeback, and the supply of upstream raw materials is still under pressure for wafer manufacturers. The supply of chips in the second half of this year is not optimistic. Regarding the current situation of tight production capacity, when will it be resolved in the future, most of the current market views are not optimistic. This will have another impact on the recovery of the semiconductor industry.

Although the chip shortage market has a serious impact, it is not entirely a bad thing when combined with the development of some industries. Domestic manufacturers have basically matured, and some domestically produced substitutes have even stronger performance in some features. Industry insiders believe that, with the current shortage of chips in the chip market continuing, the local chip industry chain is expected to accelerate market expansion and increase product shipments to meet market demand. This may be a new opportunity for domestic substitution. However, due to the abnormally tight wafer delivery and packaging and testing capacity, domestic manufacturers have begun to extend the delivery period and gradually increase prices. Behind the high growth rate of chip sales is the hidden worry that supply cannot keep up with demand. Nowadays, chip shortages have become the norm. Many electronic industries, such as mobile phones, computers, smart electronic equipment, automobiles, etc., may stop production due to chip shortages. More people who are unemployed have appeared, and this has brought significant pressure to the society.

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