Marvell Technology said it could take a full year for the semiconductor industry to rebound from a global IC shortage that started as demand recovered from the coronavirus faster than anticipated.
"The supply chain was not completely prepared for the surge in demand and it also needs time to increase capacity," Marvell CEO Matt Murphy said in a conference call with investors and analysts last month. "While we are confident that the [chip] industry will respond to these challenges, we anticipate a supply gap for at least through fiscal 2022" that ends in January 2022, he warned.
“Lead times have extended across the board,” he added. At the foundry level, it is struggling with constraints in in some of the technology nodes it uses in its products for 5G and data centers.
The Santa Clara, California-based company sells networking switch chips that are used to connect cloud servers and corporate data centers, where it competes with Broadcom over market share. It also sells 5G baseband modems to telecom equipment giants such as Nokia and Samsung. It also works with the auto industry, making chips used to connect electronic subsystems in cars.
Marvell said its sales in the fourth quarter of 2021, which ended in January, jumped by 10% to $798 million, buoyed by increasing 5G and cllud demand in its networking chip business.
Most of the world's top semiconductor firms are completely—or for the most part—fabless. That includes Marvell, which outsources all its IC production to TSMC and other contract chip makers. But as demand for cars, consumer electronics, and other chip-heavy hardware has soared over the last year, these foundries have been fully loaded with orders. That has ravaged the global supply chain for chips used by companies ranging from Apple and Sony to GM, Ford, and Volkswagen.
That has exacerbated shortages of chips not only at the most advanced foundry nodes but also on legacy nodes such as 90-nanometers and 180-nanometers. The shortages are also ravaging other parts of the global supply chain for chips. There is also a limited supplies of blank slabs of silicon used in the production process and long lead times for assembly, testing and packaging.
“We are taking extraordinary measures, including securing capacity in advance over much longer-than-usual time periods,” Murphy said, adding that it also is working more closely with customers to project future demand levels. “We are working with customers to get their assistance in helping to absorb some of the incremental costs related to prioritizing their continuity of supply."
Marvell has partnered with TSMC on the development of a series of server chips based on TSMC's industry-leading 5-nanometer node, which has been largely used in 5G smartphones thus far. The deal gives Marvell a guaranteed supply of advanced logic chips for data centers and 5G networks starting in late 2021. The deal also places Marvell in the upper echelons of TSMC's customer base.
The company anticipates its strong growth to continue in the first quarter of 2021, with sales projected to grow around 15% year over year to $800 million, despite ongoing supply shortages.
"The increase in demand we are experiencing for 5G, cloud and auto products appears closely tied to the long-term secular growth drivers present in these end markets," Marvell's CEO said. “This, combined with the sole-source nature of most of our design wins, indicates most of the demand we are not able to satisfy in the near term is not perishable."