The Great Semiconductor Drought May Be About To Break

It's not your imagination – it really is getting easier to find critical semiconductors.

According to Susquehanna, a company that researches markets to inform its complex equity trading strategies, semiconductor lead times were down four days on average last month. "September represents the first real signs of [lead time] capitulation in our data," the analysts wrote in the firm's latest SemiSIGnals report.

Silicon to regulate power, metal-oxide-semiconductor field-effect transistors (MOSFETs), and clock and timing chips saw the largest improvements, with lead times falling by 13–16 days in September.

While lead times for product delivery are heading in the right direction, the report still rates them as being in a "danger zone". On average, lead times still measure in the half-a-year range, at 26.3 weeks. The situation remains dire for some components – like microcontroller units, MOSFETs, insulated gate bipolar transistors, and automotive products.

Shortages are still clearly biting in the latter category as just last month, Toyota reported it was once again facing delays and warned it would have to shutter its Japanese factories for up to 12 days for lack of parts.

Lead times for some chips can still exceed a year.

According to the report, once lead times fall to between 10 and 14 weeks the great semiconductor drought will be over. Some market segments are getting close. Optoelectrical components saw lead times fall to 20.7 weeks.

• TSMC downgraded as analysts warn of worst slump in a decade
• PC shipments fall at fastest rate ever as businesses slam wallets shut
• TSMC cuts back on investment budget despite revenue surge
• China doesn't need to take Taiwan's fabs to escape US trade bans

While there's reason to believe semiconductor supply will continue to improve over the next few months, the report asserts that some chipmakers aren't helping by prioritizing larger orders from big customers. For an example of that in action, consider how networking vendor Arista splashed out $4.3 billion to bolster its supply of critical components and reduce lead times for its own customers.

As the chip shortage eases, the industry faces a possible demand dive due to the wobbly state of the global economy.

Concerns over future prospects became evident this week when financial analysts downgraded their forecasts for Taiwanese foundry giant TSMC over fears of a downturn in tech spending. The decision came after TSMC said it would cut its investment budget by at least ten percent due to the semiconductor slow down.

Some chipmakers don't appear to have got the memo and are pushing ahead. Micron, for example, recently announced a $100 billion chip fab destined for New York state.

We've already seen market corrections along these lines in the PC market. During their most recent earnings calls, Intel, AMD, and Nvidia have all reported sliding demand for PC and gaming hardware. Intel was arguably hit the hardest in Q2, recording a 25 percent reduction in its Client Computing Group. A Gartner report published last week found that PC sales were down 20 percent from last year.

While there are signs that supply and demand could to be coming back into balance, recent geopolitical factors could change that. Earlier this month, the Biden administration brought the hammer down on China, barring the export of US chipmaking equipment and software to some of the Middle Kingdom's largest chipmakers, including Yangtze Memory Technologies Co. ®