Possible chip glut scenario


Malaysian Institute of Economic Research (MIER) senior research fellow Shankaran Nambiar (pic) told StarBiz that semiconductor and electronic manufacturers had ordered more than necessary. “They stocked up over the past nine months because they had worried about a shortage situation."

George Town: The local technology sector could face a possible chip glut situation soon.

Malaysian Institute of Economic Research (MIER) senior research fellow Shankaran Nambiar (pic) told StarBiz that semiconductor and electronic manufacturers had ordered more than necessary. “They stocked up over the past nine months because they had worried about a shortage situation.

“The lead time – the time it takes for orders to arrive – has risen as a consequence. The current waiting period for chips across the semiconductor and electronic industries is 14.1 weeks, up from 13 weeks in January. Anything beyond the 14-week waiting time is considered a danger zone.

“Many customers are worried that the automotive industry competed for components, causing the shortage and delay. They reacted by ordering more, double-ordering, to be well-stocked, ” Nambiar said.

He added that this would not be a problem during normal circumstances, as the excess stock would be absorbed.

“The current pandemic situation, however, restricts the market’s consumption capabilities. When products cannot move, manufacturers will start cancelling orders for electronic components, spelling bad news for suppliers, who are expecting more orders, ” Nambiar said.

<a href='/business/marketwatch/stocks/?qcounter=GTRONIC' target='_blank'>Globetronics Technology Bhd</a><a href='http://charts.thestar.com.my/?s=GTRONIC' target='_blank'><img class='go-chart' src='https://cdn.thestar.com.my/Themes/img/chart.png' /></a> chief executive officer Datuk Heng Huck Lee said that the need to refill inventories, cater to fresh orders from the smart telecommunication segment, automotive industry, 5G infrastructure and adopt precautionary measures to insure against supply chain disruptions could have led to overstockingGlobetronics Technology Bhd chief executive officer Datuk Heng Huck Lee said that the need to refill inventories, cater to fresh orders from the smart telecommunication segment, automotive industry, 5G infrastructure and adopt precautionary measures to insure against supply chain disruptions could have led to overstocking

Nambiar added that the automotive industry made up less than 10% of sales for the semiconductor industry.

“It is not a lot, although the automotive industry’s consumption of electronic components is rising rapidly.

“However, it is still not enough to create the shortage that they have been experiencing.

“Double-ordering looks more like the culprit here, ” he said.

Daiwa Capital Markets, a renowned Japanese securities firm, has forecast that The Taiwan Semiconductor Manufacturing Company is likely to face a glut that will result in an inventory correction in the first half of 2022.

Nambiar added that local semiconductors and electronic manufacturing companies had gotten feedback from their customers that there could be a second-half contraction.

“The glut could flatten the demand for them in the second half, leading eventually to a dive in orders in 2022, ” Nambiar said.

He said the outcome would be a slide in the export volume of electronic products from Malaysia, lowering total exports since the electronic industry contributed to a significant share of total exports.

“Unless exports of other goods can compensate for any drop in exports from the electronic sector, we can expect our export profile to be insipid as the year progresses and probably till 2022, ” he said.

Globetronics Technology Bhd chief executive officer Datuk Heng Huck Lee said that the need to refill inventories, cater to fresh orders from the smart telecommunication segment, automotive industry, 5G infrastructure and adopt precautionary measures to insure against supply chain disruptions could have led to overstocking.

“We manage our inventory cautiously and have a healthy stock to carry out our four projects in hand.

“Our expansion plans to digitalise operations and extend the production floor will be implemented according to schedule, ” he said.

<a href='/business/marketwatch/stocks/?qcounter=MMSV' target='_blank'>MMS Ventures Bhd</a><a href='http://charts.thestar.com.my/?s=MMSV' target='_blank'><img class='go-chart' src='https://cdn.thestar.com.my/Themes/img/chart.png' /></a> managing director T K Sia (pic) said that the automotive industry represented less than 10% of the semiconductor industry’s sales.MMS Ventures Bhd managing director T K Sia (pic) said that the automotive industry represented less than 10% of the semiconductor industry’s sales.

In the 2021 second half, the group will work on delivering two sensor projects for premium range smartphones.

“These sensors are used in the display functions.

“The other two sensors for 2022 are for enhancing the performance and interconnectivity of IoT and smart devices, ” Heng said.

Meanwhile, MMS Ventures Bhd managing director T K Sia (pic) said that the automotive industry represented less than 10% of the semiconductor industry’s sales.

“The automotive industry is not a competitor for the electronic components that are short now.

“Perhaps double-ordering is the real culprit here, ” Sia said.

He added that the group was still projecting to ship out RM50mil worth of semiconductor test equipment in 2021.

“We are shipping out to customers who will employ the test equipment to check micro-LED sensors to be used in the lighting features of yet to be released smartphones, ” he said.

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