In Part 2 of our series, we’re taking a look at node sizes from application and supply-demand perspectives and laying out predictions for 2023 and beyond.
As we wrote about in Part 1 of our Outlook for 2023, things are beginning to feel different in the electronics supply chain. A period of slower growth has ushered in a rebalancing of inventory across the market. Manufacturers have taken note and responded by pivoting away from lower-profit margin parts and toward the production of higher-profit next generation products. The implications of this shift is being felt throughout the market.
Here’s a high-level overview of where things stand and where things are headed.
Now, let’s take a closer look at what is driving demand for specific node sizes and what the supply outlook is for each.
LEGACY: >=65 NM
On the whole, as the industry looks to maximize transistor density and push against the boundaries of Moore’s Law, we can expect to see production of fewer node sizes greater than or equal to 65 nm, or what are called legacy products. These parts have become less available from manufacturers and traditional distribution networks and are sometimes only able to be replaced by re-fabrication. Application examples using these products include:
- Low power process technology
- LCD drives
- Power Mgmt IC
- Auto IC
- Microcontrollers
While some legacy products may become obsolete and have limited use cases, others may continue to be in demand for certain applications. For instance, legacy parts that are used in industrial, automotive, or military applications, where long-term reliability and stability are critical, may continue to be used for many years. However, these may require specialized manufacturing processes that are no longer available, making them more expensive and harder to find.
Current supply increases intended to alleviate recent shortages are expected to tail off in future years given slower consumer demand. With new fabs focused on next-gen products and existing fabs making limited investments in producing parts with node sizes greater than 65 nm, the market for legacy products is expected to experience the highest supply shortages over the next few years.
CURRENT GENERATION: 11-64 NM
Node sizes 11-64 nm are considered to be part of the “older” or “mature” technology nodes, but they are still in high demand for a variety of applications. These components are readily available directly from manufacturers, franchise distributors, or catalog distributors.
The demand for current-generation products is particularly strong in industries such as consumer electronics, automotive, and data centers – industries that require high-performance parts to handle complex applications and provide an optimal user experience. Further demand for these parts is driven by the increasing use of cloud computing and the growing need for high-performance computing systems to handle large volumes of data. Parts in this category will continue to be in demand for the foreseeable future, but the supply outlook varies depending on specific node size.
20-64 nm
Applications for node sizes 20-64 nm include digital television (DTV), application processors (APs), wireless connectivity, and smart wearables. The supply for these node sizes is expected to come online given the high usage in Industrial and Aerospace end markets and because this node category is a common step down from legacy products. We will see a continuation of moderate shortages close to historical levels.
11-19 nm
Node sizes 11-19 nm represent an area that could be the next major supply shortage. Applications for these parts include:
- Central Processing Units (CPUs)
- IoT (Internet of Things)
- High-speed networking chips
- Consumer electronics
There is a growing shortage environment in this category as manufacturers move supply at 300 mm fabs towards <11 nm nodes. As such, supply growth in this category will be slower relative to next-generation products. However, demand is expected to be strong in the coming years since these nodes can be used as an alternative to these newer products.
NEXT GENERATION: <11 NM
The demand for next-generation products with node sizes smaller than 11 nm is increasing rapidly, particularly in applications for artificial intelligence, machine learning, 5G, and the Internet of Things (IoT). These smaller nodes offer improved performance, increased power efficiency, and higher transistor density, making them ideal for uses that require high computational power in a small form factor.
As it stands today, these are products that are primarily purchased directly from the manufacturer. This category is experiencing the fastest-growing supply and demand. With fabs ramping up production of these size node products, more supply is coming online. Manufacturing these smaller nodes is not without its challenges, though; fabs can expect to encounter increased production complexity, higher manufacturing costs, and technical issues such as transistor leakage and initial low yields. Supply for these products is not expected to be balanced over the next few years, meaning shortages will still exist, but will not be as significant as current shortage levels.
The overall outlook for the electronic components market remains uncertain as it looks to recover from global supply chain disruptions and, at the same time, meet the increasing demand for electronic parts. When examining the market more closely, though, there is reason to be optimistic. There has been significant recent investment in new production capacity and manufacturers are beginning to explore alternative supply chain strategies. It may take several years, though, for these efforts to result in a stable supply of electronic components.
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