Everyone who can afford it is signing extended pay-to-play commitments with draconian terms, widening the sourcing gap and evoking the specter of past shortages and gluts.
By Bolaji Ojo
What’s at stake?
Ironclad semiconductor purchase commitments are now heavily favored by chipmakers and foundries seeking to spread the financial burden of IC production, but the rigid terms of the often-lengthy contracts could spell trouble for everyone if market conditions change.
Leading electronics manufacturers and semiconductor suppliers are signing ironclad, multibillion-dollar supply contracts as they struggle with unprecedented shortages and a spike in average selling prices for components and raw materials. The contracts terms typically require the prepayment of huge sums in multiyear commitments, further widening the sourcing gap between the industry’s biggest and richest enterprises and their smaller competitors.