I work in the silicon chip industry and wanted to offer some advice to Purism when it comes to the sourcing of the silicon chips in a market of shortages. The automotive industry is starting to lay people off right now while simultaneously experiencing a high demand for their products, for one reason. Silicon chip customers are having difficulty sourcing the needed silicon chips that go in to their products. The work from home situation caused by the pandemic has significantly increased the demand in the consumer electronics market and silicon chip manufacturers can’t keep up. All segments that use any given chip are affected.
Where I work, there is a term for the affect described below. The executives use this term routinely. I’ll avoid using that same term here because I doubt that other silicon manufacturers use the same term to describe this effect. But they must all have some term for the same affect because of how greatly the related issues affect company profitability.
It takes a minimum of ninety days or longer (often much longer), from start of a new lot of wafers until the wafers are ready to be assembled in to IC packages and eventually sold to customers. Five months or more is a reasonable time from placement of a new order until that same product could be shipped to a customer. Of course, that is too long for the customer to wait. So the silicon manufacturer has to predict in advance, what they think the future demand might be and build the chips long before the orders are placed. If they build too many, they end up scrapping un-sold product, which lowers profits. If they make too few, a large backlog occurs, causing customers to wait weeks or up to several months (maybe even years) to receive their orders. When the demand greatly exceeds the supply, customers double and triple or quadruple (or more) their order sizes. This allows them to fulfill their own back-orders and plans ahead for their anticipated future needs, based on the shortage (order more than you really need). It makes them feel better psychologically too, given the shortage. If they order too many, they can always cancel future product deliveries before those orders are shipped to them. Amidst sky-rocketing demands of the moment, the silicon manufacturer has to project how many of these orders are real and how many of them are “phantom orders” (that will be canceled later), as world markets fluctuate and will be different in six months from now than they are today. The manufacturer has to see in to the future to make only enough chips to meet the real demand as it will occur six months from now. If they get that wrong, it costs them money. The pipeline through silicon fabs is slow and narrow. The manufacturer can’t just let their fab employees go for six months while while waiting for their stockpiles to diminish to normal levels and expect these highly skilled fab employees to return to work six months later when they may need to ramp-up production again. They can only add fab employees as needed, and let attrition lower the number of fab employees to decrease staffing over time. Anything less shows disloyalty by the company to the employees and causes a myriad of other problems that result. Whether a layoff is big or small, the company pays a significant price too. So in the midst of an extreme backlog, a silicon manufacturer might even slow production, depending on other factors (near prophetic predictions of future world events and conditions). A game of rapidly escalating and collapsing demand from customers vs near-prophetic prediction of future world events by the silicon manufacturer occurs, as the silicon manufacturer only builds and stores the correct number of chips to balance customer needs against company profits as will occur six months in the future. If they build too many chips, profits suffer. If they build too few chips, customers have to wait several weeks or months (maybe even years) to get the product they ordered.
So if I were Purism, and I knew that my ramp-up and future production of Librem 5 shipments was imminent and not dependant on new demand, I would plan accordingly when ordering the silicon chips. Ask the sales person if the pre-payment of the entire order under terms of no possible cancelation will give your order a priority in order of shipments they send out. If the answer is “yes”, this will let the silicon manufacturer know that none of Purism’s orders might be “phantom”, as created to buffer against other conditions in world markets that might occur in the future. If they let you, pay in advance for all anticipated needs, place the order that way to give your order a higher priority. If the answer is “no” and you need 10K chips for the foreseeable future or to cover the combined needs for all back-ordered Librem 5’s, order 100K chips now and pay the minimum amount down. Be prepared to cancel 90% of the order before it is delivered to you. Set the delivery schedule up to deliver 10K chips now and 10K chips each month afterward. But be prepared to act quickly on any cancelations. Basically, you want to ‘out-phantom’ their prediction of phantom orders to assure that you get your product sooner than others in the market will, under a shortage situation. If the shortage is really bad, they may even ship you partial orders each month after you pay in full. This game involving phantom orders has a name. I am sure that each different manufacturer has their own name for it. You order what you want them to think you need in hopes of receiving more product sooner than you would have received otherwise. They try to predict how big your lie might be. Ultimately, they try to distribute as much product as they can, as fairly as they can until their backlog is caught up. If you only order what you need without pre-paying for it, you might end up being last in line after they consider a possible phantom order element of their over all customer demand.
