Chip Delivery Times Hit Record As Shortage Worsens

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by Tyler Durden
Friday, Jan 07, 2022 - 05:44 PM

Delivery times for chips jumped in December, signaling the semiconductor shortage is worsening into the new year, according to research by Susquehanna Financial Group.

On average, lead times increased six days to approximately 25.8 weeks last month compared with November. This is the longest wait time since the firm began monitoring the data in 2017. 

As a refresher, lead time is the gap between when a semiconductor is ordered and delivered. An increase would suggest chip shortages are persisting, and declines would indicate easing. 

"The rate of lead time expansion has been choppy, but picked up again in December," Susquehanna analyst Chris Rolland wrote in a note to clients on Tuesday. 

"Lead times for nearly every product category witnessed all-time highs, with power management and MCUs (microcontrollers) leading the charge," Rolland said. 

Longer wait times for microcontrollers, particularly used by automakers, could spell out more trouble for new car production. 

Rolland noted that companies are purchasing more inventory than they need to mitigate future chip disruptions. The pull forward is often called double ordering.

Semiconductor shortages have hampered many other industries, including electronics, heavy equipment, appliances, and other consumer durables that rely on automated applications.

The bottom line is supply chain disruptions continue and are possibly worsening despite President Biden's pledge to fix the mess. 

For now, the shortages have been a boon to chipmakers. Philadelphia Stock Exchange Semiconductor Index is up more than 200% since the COVID low in early 2020. 

There are still no signs that lead times will peak this month.