The semiconductor supply chain - especially chip vendors - as well as downstream distribution channels and end-market customers, are rushing to pile up inventories by the end of 2017, seeking to secure better sales performance in 2018 amid lingering tight supply of upstream materials, parts and components, although market prospects for end-market devices remain unclear for next year, according to industry sources.

The ongoing round of supply shortfall was mainly triggered by tight silicon wafer supply. As China will fully gear up to bolster its wafer foundry sector in 2018, global silicon wafer supply is expected to stay short of demand in the coming 2-3 years. This is why wafer suppliers, chipmakers, and downstream customers are actively stocking up more products, lest the shortage of silicon wafers and even chips should affect their sales performance in the coming year, the sources said.

In fact, many types of chips are already in tight supply, including DRAM, NOR flash, MOSFET, MCU and LCD driver chips, and even suppliers of LED chips, sapphire substrates, and passive components are reportedly raising their sales prices. Facing tight supply of upstream materials, parts and components, downstream customers might be forced to offer higher prices to secure stable upstream supply sources.

The sources continued that the strong demand for upstream supplies, which is expected to last into the first quarter of 2018, has been keeping foundry houses running at high capacity to meet tight chip delivery schedules. The delivery lead time for six-inch and eight-inch wafer plants of Taiwan Semiconductor Manufacturing Company (TSMC), United Microelectronics (UMC) Vanguard International Semiconductor (VIS) has extended to over 12 weeks - a lead time that is usually seen at 12-inch fabs.

Theend-device markets are still expecting shopping sprees during the Christmas shopping season in the US and Europe, and the Chinese New Year holidays. But industry sources said that once chip suppliers, distributors and end-market customers have each increased their inventory by 10%, the terminal market demand will have to increase by 30% to digest the upstream inventories.

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