【Introduction】Recently, major PLC manufacturers have raised product prices, with some predicting that prices will continue to rise until next year, while others are even stockpiling in preparation for a profit! Although I am hesitant to draw conclusions, there are some clues from the perspective of the chip shortage.
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1. Chip Shortage Expected to Last Until 2022, Prices Have Already Tripled!
Following the significant chip shortage in Q4 2020, 2021 has seen an escalating global chip shortage “war,” with shortages affecting chips in the automotive, mobile, and automation industries. According to recent research, as many as 169 industries worldwide are affected by the chip shortage to varying degrees.Counterpoint predicts that due to strong semiconductor demand across multiple industries, the supply-demand imbalance will persist, with chip prices expected to rise by at least 10-20% in 2022. Counterpoint’s research shows that certain products from 200mm foundries have already increased in price by 30-40% compared to the second half of last year.
（Image: Network Perspective） 
（Image: Counterpoint） 2. What Are the Reasons Behind the Rapid Increase in Chip Prices?First: It is well known that Malaysia is the world’s seventh-largest semiconductor export center, with over 50 semiconductor companies investing in Malaysia, covering almost all semiconductor giants. However, since June, shopping malls and most businesses in Malaysia have closed due to the worsening COVID-19 pandemic. Experts suggest that this could exacerbate the already severe global chip shortage. Furthermore, Liu Xingliang, a member of the Information and Communication Economic Expert Committee of the Ministry of Industry and Information Technology, stated: “The pandemic in Malaysia, along with extreme cold weather in the U.S. and fires in Japan, will have a significant impact on the entire global chip supply chain.” Unfortunately, on June 4, 2021, a cluster infection occurred at the TSMC packaging and testing plant in Zhunan, Taiwan, which was ordered to shut down for 48 hours, further worsening the global chip industry.Second: The rapid upgrade of global smart devices has greatly increased the demand for chips. For example, a smartphone requires a total of 114 chips, and if even one chip is missing, the phone may not be produced. Additionally, a 5G phone requires approximately twice the number of chips and production capacity compared to a 4G phone, so the rapid development of 5G phones will inevitably increase chip demand.Third: The pandemic has caused many processing plants worldwide to be unable to operate normally, and many companies are facing bankruptcy. Almost all global enterprises and schools have adopted remote work, online training, and online education, leading to a surge in demand for consumer electronics. According to HP’s Q2 2021 financial data, sales in the consumer PC and printer sectors increased by over 70% year-on-year. This has significantly increased chip demand! As Song Zifeng, director of the Industrial Research Office of the Development Research Center of the State Council, stated: “The increase in smart devices and online demand, along with the accelerated digital and intelligent transformation, has led to a dramatic increase in chip demand.”Fourth: In terms of pricing, due to supply chain tensions, the prices of chips and core raw materials have also risen, and some raw materials are difficult to obtain even at higher prices. Statistics show that from January to February this year, the import of integrated circuits from Jiangsu Kunshan Port exceeded 10 billion yuan, with a 20% increase in import volume compared to the same period last year. Furthermore, the rising prices and numerous foundries have directly driven up the prices of chip manufacturers’ products.
Fifth: There is a significant gap in chip production capacity. To expand production capacity, all foundries are investing in new factories, and the entire cycle from establishing chip foundries to production is lengthy, with a persistent gap in 5nm capacity in the short term. This year, in addition to the unprecedented heat in the new energy vehicle sector, internet companies have also joined the automotive industry, and the boom in autonomous driving has directly stimulated the market for autonomous driving-grade chips. Statistics show that by 2030, over 50% of vehicles will achieve some form of electrification. Moreover, as the automotive power system shifts from traditional internal combustion engines to electric vehicles, the semiconductor content in each vehicle will double. Due to the high difficulty, long cycle, and significant investment costs in chip product development, a single wafer run can cost several million to ten million yuan, leaving no room for trial and error. Therefore, careful judgment of projects is essential. The rise in chip prices has significantly impacted many industries, and many industry experts have stated that it may take until 2022 for the global chip supply chain to return to normal, making the future quite challenging!Recently, Siemens launched S7-200 SMART V2.6, which appears to be a software update but is actually a special version released to support a new firmware version that is not backward compatible. The reason for this lack of backward compatibility may be due to the replacement of chips. However, I believe that over time, the old and new will gradually merge. Interested parties can check out the content of the S7-200 SMART V2.6 firmware update. It is evident that PLC prices will continue to be influenced by chip availability for a considerable time.
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