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Are You Part of a Healthy, Competitive Supply Chain?
- Catégorie(s) :Industry news
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- Date de publication :2022-01-17
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【Description sommaire】Critical subsystems technologies for semiconductor applications are highly engineered and specialised pieces of equipment. By their nature, only a select group of companies are able to produce these products to the high specifications demanded by the semiconductor industry and in the volume required. Analysis of the market share profiles for the most important critical subsystem products highlights significant risks for buyers of subsystems should their preferred supplier not be able to deliver.
Are You Part of a Healthy, Competitive Supply Chain?
【Description sommaire】Critical subsystems technologies for semiconductor applications are highly engineered and specialised pieces of equipment. By their nature, only a select group of companies are able to produce these products to the high specifications demanded by the semiconductor industry and in the volume required. Analysis of the market share profiles for the most important critical subsystem products highlights significant risks for buyers of subsystems should their preferred supplier not be able to deliver.
- Catégorie(s) :Industry news
- Auteur :
- Source :
- Date de publication :2022-01-17
- Visites : 0
Critical subsystems technologies for semiconductor applications are highly engineered and specialised pieces of equipment. By their nature, only a select group of companies are able to produce these products to the high specifications demanded by the semiconductor industry and in the volume required. Analysis of the market share profiles for the most important critical subsystem products highlights significant risks for buyers of subsystems should their preferred supplier not be able to deliver.
Critical subsystems include products such as control valves (vacuum), thermal based mass flow controllers (fluid control), RF power supplies (power) and cryopumps (vacuum). At VLSI research we track over 60 of these product lines, of which 39 have a market size of greater than $50 million annually. Figure 1 shows the distribution of market shares for the top 5 vendors of each of these 39 product lines in 2019(P). Looking at the distributions, it is of concern that for most critical subsystem products there is a significant tendency for there to be only one or perhaps two main suppliers. In fact, on average the number one vendor has more than 50 percent market share. We can also see a rapid drop off in market share as we look to the 3rd, 4th and 5th ranked vendors, indicating that there is no more than a small selection of significant suppliers for any particular product.
Figure 1. Includes data from 39 critical subsystems product categories with a market size greater than $50 million in 2019
While monopolies in small markets for very niche critical subsystems might be expected to form, this is not a problem that escapes the larger and more common critical subsystems technologies used in a wide array of semiconductor manufacturing equipment. Figure 2 shows the vendor share profile for a product with a market size of >$250 million annually. The largest vendor has an astonishing 80% of the market. The next alternative vendor – just 8 percent.
Figure 2. Example vendor share profile of a critical subsystems product with only one significant supplier. The grey lines are the profiles of all other critical subsystem product lines - included for reference. *The product category name has been anonymised and is used for demonstration purposes.
Vendor profiles such as these are worrying not just for buyers of this critical subsystem but also the wider industry as a whole. For buyers, there is a concern that if the number one vendor cannot meet demand, the next biggest supplier (with a considerably smaller market share) may not be able to fill the order due to being too small to deliver the quantity needed, selling an inferior product or they may even not be willing if it only represents a small part of their overall business and they have other priorities. This could also be a problem for the wider industry. If not enough of this particular product can be supplied, it can lead to a bottleneck delaying the shipment of certain types of equipment which in turn delays buying decisions elsewhere.
In the case of the product in Figure 2, the situation over time is getting worse, not better. Figure 3 shows how the vendor profile for this segment has evolved between 2013 and 2018. Not only has the number one vendor consistently increased market share, but both the next two alternative suppliers have lost market share indicating that their products are becoming even less competitive.
Figure 3. Market share trends for product category X (same product as in figure 2) between 2013 and 2018
While this is one of the more extreme examples, the general profile is not atypical of other critical subsystem products (see the grey lines in Figure 2).
Buyers of critical subsystems should look to fully understand the competitive dynamics of their suppliers to ensure they are part of a healthy, competitive market. This knowledge will highlight the products with a number of credible suppliers. It is possible to bargain on price with these companies. For products that have developed monopolies, a more careful buying strategy is required to encourage alternative suppliers and reduce the reliance on one main supplier. There is also a delicate balance to be made between trying to encourage alternative suppliers to step up, whilst making sure the dominant supplier is not disincentivised. This could especially be a problem if the dominant supplier is part of a larger conglomerate, for which semiconductors account for only a small proportion of revenue.
Many critical subsystems products that are vital to the semiconductor manufacturing supply chain have significant concentration risk. While seemingly only a small part of the overall supply chain, a bottleneck in the supply of a critical subsystem product with only one credible supplier could have serious consequences upstream. In order to take part in a healthy supply chain, all participants should be aware of the market dynamics of the products they are buying and how these dynamics are developing over time. This can inform their long-term buying strategies and help to identify and manage any emerging risks.
For more information about critical subsystems and the VLSI Research Critical Subsystems database, please visit https://www.vlsiresearch.com/public/csubs.
Julian West is a technical and market analyst at VLSI Research Europe.
Topics: mass flow controllers , semiconductor manufacturing , Critical Subsystems , semiconductors , VLSI Europe , control valves , RF Power Supplies , Cryopumps
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