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Electronic Components Future Semiconductor Supply Chain Technology

What is fabless production?

A fab is short for ‘fabrication’, which is a facility that produces electronic components. When it comes to fabless production, it refers to when companies outsource their manufacturing. The development of fabless production is a pretty recent development, but one that has flourished since its conception.

How did it come about?

Fabless production didn’t exist until the 80s, when surplus stock led to IDMs offering outsourced services to smaller firms. In the same decade the first dedicated semiconductor foundry, TSMC, was founded. It is still one of the biggest foundries in operation to this day.

In the following years many smaller companies could enter into the market as they outsourced manufacturing. More manufacturers, each with different specialities, also came to the fore.

Advantages

One of the original reasons it became so popular was due to the cost reduction it provided businesses. With the actual semiconductors being manufactured elsewhere, companies saved money on labour and space.

With production outsourced, companies also had the ability to focus more on research and development. No doubt this gave way to many advancements in semiconductor technology that wouldn’t have been possible otherwise.

Having a choice of which manufacturers to work with is beneficial too. Depending on your requirements you can choose someone who best suit your needs.

Disadvantages

When you outsource production, you are putting part of your business under someone else’s control, which can be risky. There could be a higher chance of defects if manufacture isn’t being directly overseen.

It also means that, in terms of quantity of product and price of production, you don’t have total control. If a manufacturer decides to change the quantity they produce or the price, customers are limited to their options. They either have to accept the changes, or search for an alternative which, in a fast-paced market, would be risky.

Conclusion/Disclaimer

The fabless business model, as it is known, will probably continue long into the future. TSMC’s continued profit, among other companies, is a key indicator of its success. And with big names like Apple, Qualcomm and Nvidia working fabless, it would be safe to say it’s popular.

That’s not to say that an integrated business model, with every stage of production occurring in-house, is a bad choice either. There are many just as successful IDMs like Samsung and Texas Instruments.

For a ‘fab-ulous’ stock of both foundry and IDM components, check out Cyclops Electronics. We specialise in obsolete, day to day and hard to find electronic components. Send us your enquiry at sales@cyclops-electronics.com, or use the rapid enquiry form on our website.

This blog post is not an endorsement of any particular business model, and is purely for informational purposes.

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Component Shortage Electronic Components Future Semiconductor Supply Chain Technology

Ukraine – Russia conflict may increase global electronics shortage

Due to conflict between Russia and Ukraine, both of whom produce essential products for chip fabrication, the electronic component shortage across the globe may worsen.

Ukraine produces approximately half of the global supply of neon gas, which is used in the photolithography process of chip production. Russia is responsible for about 44% of all palladium, which is implemented in the chip plating process.

The two leading Ukrainian suppliers of neon, Ingas and Cryoin, have stopped production in Moscow and said they would be unable to fill orders until the fighting had stopped.

Ingas has customers in Taiwan, Korea, the US and Germany. The headquarters of the company are based in Mariupol, which has been a conflict zone since late February. According to Reuters the marketing officer for Ingas was unable to contact them due to lack of internet or phone connection in the city.

Cryoin said it had been shut since February 24th to keep its staff safe, and would be unable to fulfil March orders. The company said it would only be able to stay afloat for three months if the plant stayed closed, and would be even less likely to survive financially if any equipment or facilities were damaged.

Many manufacturers fear that neon gas, a by-product of Russian steel manufacturing, will see a price spike in the coming months. In 2014 during the annexing of Crimea, the price of neon rose by 600%.

Larger chip fabricators will no doubt see smaller losses due to their stockpiling and buying power, while smaller companies are more likely to suffer as a result of the material shortage.

It is further predicted that shipping costs will rise due to an increase in closed borders and sanctions, and there will be a rise in crude oil and auto fuel prices.

The losses could be mitigated in part by providing alternatives for neon and palladium, some of which can be produced by the UK or the USA. Gases with a chlorine or fluoride base could be used in place of neon, while palladium can be sourced from some countries in the west.

Neon could also be supplied by China, but the shortages mean that the prices are rising quickly and could be inaccessible to many smaller manufacturers.

Neon consumption worldwide for chip production was around 540 metric tons last year, and if companies began neon production now it would take between nine months and two years to reach steady levels.

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Electronic Components Future Semiconductor Supply Chain Technology

Could Graphene be used in semiconductors?

A new discovery

Graphene was first isolated at the University of Manchester in 2004. Professors Andre Geim and Kostya Novoselov were experimenting on a Friday night (as you do) and found they could create very thin flakes of graphite using sticky tape. When separating these fragments further, they found they could produce flakes that were one atom thick.

Geim and Novoselov were awarded the Nobel Prize in Physics for their ground-breaking experiments in 2010, and since the two had first identified the material since the 60s it had been a long time coming.

Despite its thinness Graphene is extremely strong, estimated to be 200 times stronger than steel

Is silicon outdated?

Semiconductors are inextricably linked to Moore’s Law, which is the principle that the number of transistors on a microchip doubles every year. But that observation Intel co-founder Gordon Moore made in 1965 is now losing speed.

Silicon chips will very soon reach their limit and will be unable to hold any additional transistors, which means that future innovation will require a replacement material. Graphene, with its single-atom thickness, is a contender.

In 2014 hardware company IBM devoted $3 billion to researching replacements for silicon as it believed the material would become obsolete. The company said as chips and transistors get smaller, as small as the current average of 7 nanometers (nm), the integrity of silicon is more at risk.

IBM revealed its new 2nm tech last year, which can hold 50 billion transistors on a single silicon chip, so the material is not going obsolete just yet.

Disadvantages

Graphene is nowhere close to being a replacement for silicon, it is still in the development stage and the cost of implementing it into supply chain would be extensive. A lot more research and adjustment is required, and it would have to be introduced step by step to avoid prices skyrocketing and supply chains breaking down.

Graphene is not the only contender to be the replacement for silicon either. Carbon nanotubes are fighting for prominence, and other 2D materials like molybdenum disulfide and tungsten disulfide are also vying for the position.

Another disadvantage of Graphene is that there is no bandgap, which means the semiconductor can’t be switched off. The possibly jagged edges of the material could also pierce the cell membranes which may disrupt functions.

Other applications

Thanks to its 2D properties Graphene is also being studied for its potential uses in other areas. In relation to semiconductors there has been research from Korea on the uses of graphene as a filtration device for semiconductor wastewater. The oxide-based nanofiltration membranes could remove ammonium from the wastewater created by semiconductor production so it can then be recycled. As a wider application of this Graphene could be used as a filtration device for water or to remove gas from a gas-liquid mixture.

Graphene is also being researched for its uses in the biomedical field, which include being a platform for drug deliverybone tissue engineering, and ultrasensitive biosensors to detect nucleic acids. Graphene has other sensor-based uses, because the sensors can be made in micrometre-size they could be made to detect events on a molecular level, and could be of use in agriculture and smart farming.

There is a possibility Graphene could be combined with paint to weather-proof or rust-proof vehicles and houses, and to coat sports equipment. It also could have potential within the energy field for extending the lifespan of lithium-ion batteries.

When can we expect change?

Consultation company McKinsey estimated there would be three phases to the implementation of Graphene, none of which have begun just yet. Phase one would be to use Graphene as an ‘enhancer’ of existing technology, and will simply improve other devices by extending the lifespan or improving the conduction. This phase is estimated to last for ten years, after which phase two will begin. In this step graphene will become a replacement for silicon and will be the next step in the improvement of semiconductors and electronics. After 25 years we can expect the next step in graphene applications, things we can only dream of now.

In the meantime, people will still be using silicon-based semiconductors for quite a while. If you’re on the lookout for chips, or any other day-to-day or obsolete electronic components, contact Cyclops today at sales@cyclops-electronics.com, or use the rapid enquiry form on our website.

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Component Shortage COVID-19 Electronic Components Hard to Find Components Semiconductor Supply Chain Technology

The global electronic component shortage – what happened?

Arguably the biggest ongoing crisis in the tech industry is the global semiconductor shortage. You can’t go far online without seeing news about it, and many people have seen it firsthand when trying to buy a brand-new car, or a recently released games console.

When did it start?

The obvious factor contributing to the shortage is COVID-19. The virus infected millions and sent the world into lockdown, which then led to the housebound masses logging in and going online.

At the start of lockdown in March 2020, 60% of 18-24-year-olds were increasing their use of home delivery instead of leaving the house. Amazon’s revenue also rose at a quicker pace than in previous years, with the company making $88.91 billion in Q2 2022.

Alongside the increase in online shopping came an increase in other digital activities like PC and console gaming. In the last quarter of 2020 desktop, notebook and workstation sales rose to a record 90.3 million units. Tech company Sony saw 25% of its revenue come from game and network services, and around 18% from electronics products and solutions.

In another case of bad timing, both Microsoft and Sony were about to release their next generation of game consoles, and Nintendo Switch sales were booming. All of this meant demand for components was skyrocketing.

This then led to delays in car manufacturing. Why? Because all the available chips were being bought up by computer and electronics manufacturers, so there were none left for the automotive industry. A car part may need between 500 and 1,500 chips, and are used for many parts including the dashboard display and to control the airbag.

There were other elements that contributed to the shortage before this: The US and China had been imposing increasingly high tariffs on each other for the past two years, and natural disasters and fires took out several factories in Japan, Taiwan and China.

When will it end?

The comeback from the semiconductor shortage will not be quick. Some factories that were shut down by natural disasters are still repairing the damage and trying to reopen production. But as the demand is staying high, there will need to be new facilities created to cater for the increase in demand.

The time, expertise and money needed to start a new factory will be too much for smaller firms to manage, so then the hole in the market needs to be filled by larger corporations like Intel and Samsung. Both companies currently have plans to open new fabs in America, but it will be a while before they can start production.

Intel’s ambitious plan to construct the one of the largest chip factories ever in Ohio would alleviate demand, but is not due to start production until 2025. Similarly, Samsung’s Texas fab will not be operational until 2024.

Despite smaller factories opening, the substantial backlog will not be solved by these alone. There will need to be a combination of an increase in production, time efficiency and, with the pandemic in mind, automation to decrease person-to-person contact. There will also need to be a stock of chips manufactured to avoid shortages in future.

Europe and America have both put an emphasis on increasing their domestic chip production in the next decade, in the hopes that this will prevent importing issues in the future.

The speed at which technology is currently being developed also puts manufacturers in a tight spot. Not only are more electronic devices being produced all the time, but the technology of the components within them is also advancing quickly.

While it is difficult to forecast entirely, experts say the shortage could last a few more years. Hopefully with the opening of the larger plants estimated for approximately the same time, the chip shortage might be mitigated by 2025.

We can help

The market is currently just as competitive in the case of other electronic components, but Cyclops can help. With our extensive stock of day-to-day and obsolete components we can supply you when others cannot.

For all your component needs, contact Cyclops Electronics today at sales@cyclops-electronics.com. Or submit a rapid enquiry through our website.

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Component Shortage Electronic Components Future Semiconductor Supply Chain Technology

The European Chips Act and its impact on electronic component sales

Semiconductors are vital for our day-to-day life. They are in all the electronics you own but are also in your kitchen appliances, your car, your electric shower and many more. But what if we lost access to these components?

The huge reliance on imported semiconductors was made abundantly clear last year. Europe’s current share of the global semiconductor market is only about 10%, and the continents is otherwise dependent on supply from abroad.

The need for independence and autonomy in the European chip market has been made very apparent due to factors like Brexit and COVID-19.

The European Chips Act was first mentioned in the EU’s 2021 State of Union Letter of Intent, calling the act a key initiative for 2022. The EU created the Industrial Alliance for Processors and Semiconductor Technologies alongside it, to plan and oversee progress on the act.

One of the aims of the alliance is to increase Europe’s share in global chip production to 20% by 2030, but they will first have to identify issues with the market and map out a way to improve design and production.

During the ‘State of the World’ Special Address by European Commission president Ursula von der Leyen on January 20, the chips act was mentioned once again, and they announced draft legislation for the chips act is due in February of this year.

The European Commission president said that there would be five steps taken to improve the chip sector, and that they would focus on research first, then design and manufacturing. After these there would be an adaptation of state aid rules to increase provisions in case of shortage.  Lastly, she said the EU would work to support smaller, innovative technology companies.

In 2020 the United States accounted for the largest share in the semiconductor industry, with 47%. Following the US was South Korea with 20% of the market. China’s share has also increased quickly in recent years, putting it narrowly behind Korea. Despite Japan previously having a larger share in the market, they are currently on equal footing with Europe with a share of around 10%.

Despite no longer being a member of the EU, and therefore not directly signing the Chips Act, the UK could also have the potential to increase its standing in the global semiconductor race.

According to some UK-based chipmakers, the country has an advantage in the area of research and development. If research facilities like the University of Manchester were given the right attention and funding, they could develop sustainable resources like graphene to replace mined silicon in processors.

The UK electronics sector will always be considerably smaller than huge countries like China and America, but with significant investment they would have the ability to make a difference in the current chip shortage. And Cyclops is a perfect example of a smaller company making a big difference.

Cyclops is an electronic component distributor with a wealth of contacts from all over the world. With unrivalled stock and suppliers, Cyclops will put you ahead of your competitors. Contact us today at sales@cyclops-electronics.com.

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Component Shortage COVID-19 Electronic Components Future Semiconductor Supply Chain Technology

Latest electronic component factory openings

We’ve all heard about the shortages in standard components like semiconductors and chips. Cars, phones and computers, items we use every day, are no longer being produced at the speedy rate we’ve come to expect. The cause of this shortage is, in part, due to the COVID-19 pandemic.

This is especially noticeable in Europe and America, where production has often been outsourced to Asia in the past.

So who are the latest companies expanding operations, and how much are they spending? Check out our quick run-down of factories and when they should open:

Company: Intel

Location: Ohio, USA

Product: Chips

Completion date: 2025

Cost: $20 billion (£14.7 billion)

The latest, and possibly greatest, announcement on our list comes from Intel. The corporation revealed in January that they would be committing to building two chip manufacturing plants in New Albany, Ohio. The move is said to be due to supply chain issues with Intel’s manufacturers in Asia, and should boost the American industry with the creation of at least 3,000 jobs. Construction should begin this year.

Company: Samsung Electronics

Location: Texas, USA

Product: Semiconductors

Completion date: 2024

Cost: $17billion (£12.5billion)

The household name announced late last year that they would begin work on a new semiconductor-manufacturing plant in Taylor, Texas. The Korean company stated the project was Samsung’s largest single investment in America, and is due to be operational by the middle of 2024.

Company: Infineon

Location: Villach, Austria

Product: Chips

Completion date: 2021

Cost: 1.6 billion (£1.3 billion)

After being in construction since 2018, Infineon’s Austrian plant became operational in September last year. The chip factory for power electronics, also called energy-saving chips, on 300-millimeter tin wafers began shipping three months ahead of schedule in 2021, and its main customer base will be in the automotive industry.

Company: Northvolt

Location: Gdańsk, Poland

Product: Batteries

Completion date: 2022

Cost: $200 million (£148 million)

The Swedish battery manufacturer is expanding its operations with a new factory in Poland. While initial operations are supposed to begin this year producing 5 GWh of batteries, it hopes to further develop to produce 12 GWh in future. Northvolt has also just begun operations at its new battery factory in Skellefteå in Sweden.

Company: Vingroup

Location: Hà Tĩnh, Vietnam

Product: Batteries

Completion date: 2022

Cost: $174 million (£128 million)

The Vietnamese electric vehicle manufacturer is due to start production at its new factory later this year, where it will produce lithium batteries for its electric cars and buses. The factory will be designed to produce 10,000 battery packs per year initially, but in a second phase the manufacturer said it will upgrade to 1 million battery packs annually. VinFast, a member of Vingroup, is also planning on expanding operations to America and Germany.

Company: EMD Electronics

Location: Arizona, USA

Product: Gas and chemical delivery systems

Completion date: 2022

Cost: $28 million (£20.7 million)

The member of the multinational Merck Group is expanding operations with the construction of a new factory in Phoenix, Arizona, to manufacture equipment for its Delivery Systems & Services business. The factory is due to be operational by the end of the year, and will produce GASGUARD and CHEMGUARD systems for the company.

A bright future

These electronic component factory openings signal a great increase in business, and will aide in the easing of the component crisis. But it will take a while for these fabs to be operational.

Can’t wait? Cyclops is there for all your electronic component needs. We have 30 years of expertise, and can help you where other suppliers cannot. Whether it’s day-to-day or obsolete electronic components, contact us today at sales@cyclops-electronics.com, or use the rapid enquiry form on our website.

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Component Shortage COVID-19 Electronic Components Hard to Find Components Semiconductor Supply Chain Technology

Will continued global Covid measures extend electronic component shortages?

Continued global Covid measures will likely extend electronic component shortages, hindering manufacturers for several years.

The coronavirus pandemic has reshaped the global economy irreparably. Demand for electronic components has shifted, supply chains are broken, and new, more infectious variants threaten to bend normality further.  

It looks like the world is running out of electronic components, but there’s more to shortages than meets the eye.

The coronavirus pandemic is the biggest reason behind component shortages. With this single statement, we can deduce that shortages will subside when the pandemic subsides, freeing up supply chains through fewer restrictions.

However, we know the coronavirus isn’t going anywhere, and its persistence and ability to evolve means we have to learn to live with it.

Add raw material shortages, soaring prices, low investment in new manufacturing facilities, and geopolitical issues related to supply and demand. Now we have a recipe for several years of component shortages.

How covid reshaped supply chains 

In May 2020, the first wave of the coronavirus pandemic hit most of the world. Countries locked down, and most sectors of the economy suffered.

Demand for some categories decreased, while demand for others increased. For instance, demand for vehicles evaporated while demand for home computers soared, creating an imbalance in the supply chain.

Estimates suggest that vehicle sales fell by 50% or more within a single month. In response, vehicle manufacturers scaled backorders for components.  

At the same time, demand for electronics chips and parts soared as more people spent time working from home.

When demand ramped back up for vehicles, there weren’t enough components to serve them and electronics. This is a story shared by multiple industries, with supply chains broken by supply and demand imbalances.

The matter wasn’t helped by local and national lockdowns, circuit breakers, new variants, and mitigating problems like floods and climate change.

There is no easy solution or fast fix 

The pandemic has also caused prices for common and rare earth metals to explode, increasing over 70% since the start of 2021 for some metals. These prices are made even worse by soaring inflation.

Trying to build supply chain resilience during the coronavirus pandemic is like trying to build a house of cards on a jittering floor. Just when you think you have it, something comes along that knocks it down, and you have to start over.  

The simple fact is that the world needs more factories to make components, and it needs to get a grip on inflation. The Covid pandemic is not going away, although the virus appears to be getting milder, which is a good sign for the future.

You can bolster your supply chain by working with an electronic components distributor like us, increasing your inventory, and quickly moving to equivalent components when you experience shortages of active and passive components. Email us today with your component inquiries sales@cyclops-eletronics.com

Although global Covid measures are likely to extend electronic component shortages, there is no reason why they should stop you from doing business.

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Future Hard to Find Components obsolescence obsolete components Semiconductor Technology

Obsolescence Management Before It Becomes A Problem

Like the device you are reading this on, all electronic components become obsolete eventually. As a supply chain manager, it is your job to manage obsolescence and make sure it doesn’t become a problem for your company.

The three reasons for electronic component obsolescence are short product life cycles, innovation, and increased demand.

Short product life cycles fuel update cycles that demand better components, innovation fuels new component releases, and increased demand squeezes supply chains, creating new batches of components that replace the old.

The good news is obsolescence management isn’t rocket science. With planning, you can safeguard your supply chain from the inevitable. Cyclops can help you do this in various ways, working with you to keep your supply chains moving.

How Cyclops helps you manage obsolescence 

With technologies advancing rapidly, the rate of electronic component obsolescence is picking up pace. Life cycles are getting shorter for many components, and shortages are challenging obsolescence management plans.

At Cyclops Electronics, we specialise in the procurement of electronic components, working with global distributors to source tens of millions of parts. Our staff go further than most to find your obsolete parts, and if we can’t source the exact parts you need, we will work just as hard to find appropriate alternatives. 

Here’s how we help you manage obsolescence:

Proactive planning

We keep tabs on component supplies for you and provide timely reports detailing risks. By keeping you in the loop, you get a bird’s eye view of your electronic components, giving you a competitive edge and greater buying power.

Obsolete component sourcing 

Obsolete components might no longer be made, but we hold 177,232 line items in our warehouse and 14 million parts globally. There’s a strong possibility we have the obsolete, discontinued components you need ready to go.

Equivalents 

When obsolete components are unavailable, we can specify equivalents that meet your performance and financial specifications. We can cross-reference many components, such as semiconductors, to find exact equivalents.

Integrated advice 

We can help you identify and mitigate risk when parts and spares become obsolete by integrating with your mitigation plan. We can replace obsolete parts as they age, providing an automated, streamlined obsolescence solution.

Obsolescence is inevitable but manageable 

Component obsolescence occurs when an old component is phased out. Without management, this event can disrupt a supply chain, costing businesses tens of millions (or billions) in lost revenues and corporate costs.

A great example of this is any company that manufactures equipment and supports it over several years, like a boiler company. Electric boilers are supported for around ten years, so the components have to be replaceable over that time.

Obsolescence is a problem because it sends ripples through the supply chain, requiring ongoing management to foresee events and mitigate risks. Cyclops Electronics has seen all this before across all sectors.

Speak with us about obsolescence management 

We’re here to help you manage supply chain risks and deal with obsolescence before it becomes a problem. Contact us here.

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Component Shortage COVID-19 Electronic Components Future Semiconductor Supply Chain Technology

Semiconductor Supply Chain Will Remain Vulnerable Without Robust Investment in Advanced Packaging

new U.S. study has found that the advanced semiconductor packaging supply chain needs strengthening to meet the increasing demand for chips.

According to the report, without robust federal investment, the semiconductor supply chain in the U.S. faces an uphill battle to meet demand.

The study also highlights the crucial role of advanced packaging in driving innovation in semiconductor designs. At present, most of the chips in the U.S. are sent abroad for packaging and assembly into finished products. By moving packaging to North America, the entire electronics ecosystem can be improved.

“Semiconductor chips are critically important, which is why IPC supports full funding for the CHIPS for America Act. But chips can’t function on their own. They need to be packaged and interconnected with other electronic components to power the technology we all rely on, from cell phones to automobiles and beyond,” said John Mitchell, IPC president and CEO. “The data in this report shows that North America is well behind Asia in the advanced packaging of chips and in other key parts of the electronics manufacturing ecosystem.”

The big players in the U.S. include Applied Materials, Amkor Technology, Ayar Labs, Lam Research, Microsemi Semiconductor and KLA-Tencor Corporation. These companies have seen unprecedented demand for semiconductor packaging, with growth predicted to rise as the world becomes smarter and more connected.

Other report findings 

The study also found that while the U.S. can design cutting-edge electronics, it lacks the capabilities to make them. This is creating an overreliance on foreign companies, including companies in China, creating considerable risk.

Looking at the most recent data, the study highlights that North America’s share of global advanced semiconductor packaging production is just 3 per cent. In other words, at present, the U.S. is incapable of assembling its own chips.

The study concludes that the U.S. also needs to invest in developing and producing advanced integrated circuit substrates. Advanced integrated circuit substrates are crucial components for packaging circuit chips. Currently, the U.S. has nascent capabilities, putting it behind Europe, China and most other countries.

What can we deduce from the report? That the U.S. is behind in most aspects of semiconductor packaging. Decades of low investment and overseas partnerships have led to a manufacturing ecosystem devoid of domestic talent.

“The findings of this report make clear that, as a result of decades of offshoring, the United States’ semiconductor supply chains remain vulnerable, even with the new federal funding that’s expected,” says Jan Vardaman, president and founder of TechSearch International and co-author of the report. “It’s critical that the U.S. government recognises and responds to industry needs on these systemic vulnerabilities, particularly integrated circuit substrates, where domestic capabilities are severely lacking.”

As the U.S. comes to terms with its poor manufacturing ecosystem, China is ramping up assembly plants. In the face of increasing competition, the U.S. must focus on domestic investment in the near and medium-term. Without robust investment, they could fall further behind and lose out to their biggest competitors.

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Component Shortage COVID-19 Electric Vehicles Electronic Components Future Semiconductor Supply Chain Technology

A raw materials shortage is set to hit the EV battery supply chain in 2022

The automotive sector is on red alert amid speculation that raw material shortages will impact the EV battery supply chain in 2022.

The lithium-ion batteries in electric vehicles use a combination of rare earth metals like neodymium, praseodymium, dysprosium, and common and uncommon minerals like cobalt and lithium in great quantities.

Bloomberg blew the whistle in July, predicting that raw material shortages for batteries will be the next big test after the semiconductor crisis.

Recent reports back this, with the global lithium shortage giving EV manufacturers pause for concern. Sky News reports the world needs four new lithium mines per year to make supply meet demand, but the pipeline doesn’t come close to meeting this requirement.

Some EV manufacturers are hoarding raw materials, and the world’s biggest electric car maker, Tesla, is moving away from cobalt to LFP chemistry because they consider cobalt to be the biggest supply chain risk for EV batteries.

The EV industry has a battery problem 

Most electric vehicles have a lithium-ion battery pack because Li-ion has a high energy density for its weight and can charge and discharge at any state of charge. The technology is proven, and manufacturing Li-ion batteries is easy.

However, the growing demand for electric vehicles is fuelling demand for EV battery raw materials like lithium, cobalt, nickel, manganese and rare earth metals.

The mines in operation today are not sufficient to make supply meet demand one year from now, which is a cause of great concern in the automotive sector.

Additional factors could confound the problem:

  • Price volatility in raw materials (the price of rare earth metals has exploded, moving nearly 50% higher on average since March)
  • Battery composition changes (while lithium-ion is the top dog today, solid-state batteries use a lot more nickel and cobalt)
  • Trade tensions between countries (China controls 55% of global production and 85% refining output of rare earth metals).

Making supply meet demand

Accurate forecasting is crucial to making supply meet demand. Manufacturers must anticipate fluctuations in the supply chain and make allowances for events.

For instance, no one can predict the next coronavirus pandemic, but a 25% drop in raw material mining output can be incorporated into forecasts.

Manufacturers might also like to look into alternative battery chemistries. As we mentioned before, Tesla is switching the chemistry of its long-range batteries to reduce dependency on cobalt. Other battery manufacturers can do the same to fortify their supply chains.

The downside to switching chemistries is it is only possible following extensive (and expensive) research and development. The world’s leading EV battery manufacturers won’t invest in this area without proof it will turn a profit.

EV battery recycling is another important future step. Swedish company Nothvolt made the world’s first fully recycled EV battery in November. Today, however, Li-ion battery recycling is not economical on an industrial scale.

Another option is limiting EV battery production, either in total volume or in cell volume (installing smaller batteries). With EV batteries becoming more efficient, smaller capacities might not be detrimental to range in the future.

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