BSH Home Appliances Group

Philipp Molendo

During the last three years, all of us involved in our semiconductor industry experienced a challenging amplitude in terms of supply disruptions and forecast uncertainty. Famous “2- to 3- or even 4-Party calls” dominated our daily schedules, depending on the supply chain steps involved. The job description ‘Chip Hunter’ was born, and the whole industry was chasing to keep the increasing global demands supported as much as possible while juggling different industries.

In recent months, we have seen the pendulum strikes almost fully in the other extremum. First, the multimedia industry started to phase global declining figures; meanwhile, several consumer and even automotive industries are suffering continuous declining sales figures.

This, combined with a high share of ‘NC/NR’ orders, easily described as take-and-pay deals many companies followed to secure their supply, now leads to fast-increasing, huge stock levels. This dramatically affects the cash flow situation in all layers of the electronics industry. We all need money, regardless of which process level our companies are in, to put into new innovative products and required capacity extensions. On top, the declining consumer market situation increases again the cost pressure to fight for remaining market shares. Combined with the intense price increases of the last two years, there might be a stronger push or chance for new Asian players to step into business regardless of any decoupling discussions.

Global Chip Demands Will Grow, But Growth Suffers Temporarily

We are all willing to participate in the chances of electrification, growing connectivity, and new sustainable energy concepts offered to us. Leading to higher electronic content all around our daily lives, driving our business growth and pushing global chip demands.

"The job description ‘Chip Hunter’ was born, and the whole industry was chasing to keep the globally increasing demands supported as much as possible while juggling different industries"

But what might happen now? All around our industry, huge capacity extension projects kicked off partly supported by several governmental funds targeting to decouple global dependencies. Nevertheless, in certain industries, the customer base is forced to use 2nd half of 2023 or even 2024 to rebalance their demand and stock situation, even now leading to pushouts or further declining demand forecasts for 2024. Thus requires again time for close 2-3 years of alignment on demands between partners involved in the chip supply chain. With a focus on all sets of technologies, not only continuously constraint ones like, e.g., power semiconductor devices, where we still see an intense focus on multiyear supply agreements.

Finally, we need to catch up with the right momentum with the situation between demand/stock balancing. Hopefully, an increase in consumer demands will soon happen, targeting not to create our next supply shortage period. In parallel, despite decreasing sales, the semiconductor partners must stick to their capacity extension plans to prepare for the predicted growth in various global industries. It is up to us as leaders in the industry now to guide our people and all partners involved in the process chain.