Squeezed by the booming demand and limited labor availability, South Korea’s leading semiconductor makers are facing daunting challenges in ramping up the production of advanced memories.

It was recently announced that the U.S. Department of Commerce will propose a ban on using Chinese software and hardware in ICE and EV automobiles. Reportedly, the ban on Chinese software would take effect with 2027 model-year vehicles, and hardware prohibitions would be effective with 2029 and 2030 model-year vehicles. Recognizing that in the U.S. and Canada, an automotive model year is not the year of production (e.g., 2025 models have been offered for sale since June from some automakers) – if these reported model-year timeframes to become effective, it is likely that automotive OEMs and suppliers will be unable to meet at least some of the measure’s hardware restrictions due to the lengthy qualifications processes for replacement devices. Decoupling from China for automotive ICs will prove even more difficult as the nation has doubled down on trailing-edge semiconductor manufacturing, given that some 90% of automotive-grade semiconductors are manufactured with 40-nanometer and larger process nodes.

Process nodes of 40 nanometers and above are utilized to manufacture some of the most common components widely used in auto applications, including microcontrollers (up to 100 per vehicle), sensors (up to 120 per vehicle), and analog ICs. According to Supplyframe Commodity IQ analysis, analog ICs (produced on more mature semiconductor process nodes and numbering about 100 per vehicle) are poised to become again supply-constrained for autos due to limited production capacity on mature nodes as soon as 2025, and the expected 20% or more increase in the number of these ICs in automobiles in just a few years.

An extended walk-off by members of the International Longshoremen’s Association (ILA) employed at United States East and Gulf Coast ports would raise rates by thousands of dollars per container via carrier surcharges. Thousands of ILA workers seek hefty pay increases and a crane and port container truck automation ban. From Northern Europe to the U.S. East Coast, forty-foot container pricing is up 32% month-on-month per the Xeneta Shipping Index. Any impacts would add to additional service fees or price hikes from component makers and distributors, including Avnet, which added service fees for new shipments in June.

The high-purity quartz (HPQ) market was dealt a big blow by flooding in the aftermath of Hurricane Helene. Spruce Pine, North Carolina, received over 24 inches of rain over three days, halting the two quartz mining operators, Belgium-based Sibelco NV and China's Quartz Corp. Spruce Pine mines produce the most and highest-purity quartz in the world, and there are limited deposits elsewhere. HPQ is vital for manufacturing semiconductors and semiconductor wafers, photovoltaics, and frequency control devices. Chip and passive component buyers should expect increased pricing in the coming months, particularly since there are no firm dates for mines to restart. Meanwhile, due to the storm's wrath on the U.S. Gulf Coast, soft demand and flat-to-declining pricing for ABS and PBT resins will not change materially. 

Overmining and processing of lithium, particularly in China, has led to large stockpiles of critical battery material worldwide. The Commodity IQ LCO Global Price Index was less than a third of its 2018 baseline in August. However, pricing can be dynamic within variants of the same battery chemistry. For hydroxide-based LMO batteries, the index was 38% lower than in the same period just two years ago but has climbed 27% on average for August compared to March and is hovering about 15 points below the baseline; alternatively, the index of carbonate-based LMO units is relatively stable at 1.3 times the baseline.

MLCCs lead times are mostly in the 12-to-16-week range, yet, overall, the Q4 share of 0-to-12-week contracted lead times fell by nine percentage points compared to Q1, according to the Commodity IQ At-Volume Lead Time Trend. Utilization rates for most manufacturers remain between 60% and 80%, depending on location, with Taiwanese and Chinese operations at the lower end of the range. High-temperature and high-capacitance parts are constrained, and there is little to no ability to expedite orders. Automotive-grade and general-purpose large case size and high-voltage capacitors also present supply problems.

NAND Flash and DRAM memories have the same market volatility. And, as of late, the same pricing dynamics, with the overall memory Commodity IQ Price Index averaging three times the index baseline in Q3 and Q4, are forecast to remain in similar territory despite spot pricing declines. In 2019, both technologies experienced dramatic demand drops due to overcapacity, and last year; the technologies suffered sharp declines in tremendous excess capacities and bloated channel and customer inventories. One of the main differences that will impact pricing and other supply chain dimensions is that DRAM has comparatively highly concentrated manufacturing, signaling consolidation in the NAND market to the disadvantage of memory buyers.

For some 20 months, the analog IC market has seen negative growth, making it the lowest-performing semiconductor commodity. While higher semiconductor prices have propelled the active component market recovery, analog ICs like converters and amplifiers have fallen 2%, compounded annually through August on the Commodity IQ Price Index. Consequently, analog IC sub-commoditised in August dropped on average by 5%. Cautious about demand recovery, some analog manufacturers continue to wrestle with oversupply, presenting further negotiation opportunities for buyers as suppliers seek to maintain and expand market share while sustaining production levels.