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Things can only get better – or not

Some electronic components are becoming harder to get hold of and are now on allocation. Why is this happening?
The reason, according to industry watcher Malcolm Penn, is under investment in capacity. Previous slumps in the semiconductor market have, in general, been driven by over capacity. But Penn says there was barely enough capacity before the global economy collapsed. When it did, more capacity was taken offline and investment in new capacity reined back.

Over the last couple of years, Penn has developed a fierce antipathy to a new generation of semiconductor executives; people he believes are driven by spreadsheets, rather than by industry experience.
With economies still unstable – and some economists pointing to a 'double dip' recession – Penn claims any hint of slowing is 'enough to trigger global paranoia at the expense of common sense, logic and clear thinking'.
These continuing problems with the global economy means many companies – not just those in the semiconductor world – are only taking short term decisions. But the semiconductor industry needs to take long term decisions today. And it seems there is a great reluctance to do so.
For this reason, Penn expects the situation to get worse. "[Capacity will] continue to get progressively tighter through the remainder of this year."
Things won't get better for a while either. He points out that it takes about a year to bring capacity back online; two years if it's a new build. "2009's CapEx spend – down 46% on 2008 – has already determined 2010's capacity," Penn points out. Because of that, fabs are nearly at full capacity and he doesn't see that changing until 2012.
Whether this is paranoia or good business practice is open to discussion.
However, if you're looking for devices such as standard logic or power components, don't expect things to get any better soon.

Graham Pitcher

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