Integrated circuits are fundamental to today’s studio hardware. And when the semiconductor industry sneezes, the music business catches a cold...
Most of the time we don’t really care how studio equipment works, as long as it does its job and we can get hold of it when we need it. Often it takes a crisis of some sort for us to lift the lid and pay more attention to what’s happening behind the scenes. In the world of music technology and many other industries, this is exactly what is happening right now. Most coverage of the ‘global semiconductor shortage’ has focused on the automobile and smartphone industries, but the music technology industry is equally vulnerable, and equally anxious.
To be precise, what’s in short supply is not semiconductors as such, but integrated circuits. Semiconductors are materials such as silicon, germanium and gallium arsenide which are partially conductive of electricity. Their conductive properties can be modified by the controlled introduction of impurities, in a process known as ‘doping’, to create components such as transistors and diodes. These are the basic building blocks of modern electronics.
An integrated circuit or microchip incorporates thousands or millions of such components on a single small piece of silicon. Photolithography — that is to say, laser etching on a minuscule scale — is used to engrave geometric patterns, which enables doping to be applied selectively to different areas of the silicon. After being tested with probes to measure properties like power supply and current consumption, the defective parts of the semiconductor ‘wafer’ are discarded. The remaining individual chip‑size pieces, the die, are then cut out and packaged. For scale, a six‑inch wafer can contain 3500 individual die.
Integrated circuits are at the heart of almost everything in the modern studio. Filters, oscillators and amplifiers in an analogue synth; A‑D and D‑A converters and headphone amps in audio interfaces; and, of course, your computer’s central processing unit are all examples. Even a modest home studio may well depend on hundreds of ICs to function. However, although the tech industry is a fast‑moving and dynamic beast, the microchip supply chain moves glacially by comparison. Wafer fabrication plants run 24 hours per day, 365 days per year, cost billions to operate and consist of machinery more finely tuned than you can imagine. Alterations in production lines take a lot of time and even more money, so market trend predictions need to be as accurate as they are far‑reaching. Building a brand‑new factory from scratch costs about $10 billion and takes three years.
Dan Parks is co‑founder of Californian‑based IC developers Sound Semiconductor, who design chips for Sequential, Moog, Elektron, UDO, IK Multimedia, Fender, Electro‑Harmonix, MXR and many others. Parks founded SSC with Dave Rossum in 2017, the pair having previously worked together at Solid State Music, “whose chips are now kind of legendary for being the heart of the voices of the Rev 1 and Rev 2 Prophet 5, among other things”, Dan explains. “We often get people asking, ‘When are you going to bring back the SSM 2020?’ because they have an old Prophet Rev 2, but that’s not how the chip business works.”
Angling his camera to show me a six‑inch wafer (“this one’s a VCO”) with thousands of individual die, Dan takes me through the manufacturing process before giving a stark reminder of quite how tight the margins in the IC industry are. “What’s amazing to me is that through all that process we throw away less than five percent of the die on the wafer,” he remarks.
So why is there a shortage of integrated circuits? The answer is that there’s no single cause. Rather, it’s a perfect storm of interconnected issues ranging from disasters at plants to pandemic‑related order cancellations, production shutdowns, international port restrictions and sanctions on Chinese companies like Huawei (who subsequently began stockpiling chips).
A particular one‑two punch came from destructive fires breaking out, astonishingly, at two different Japanese semiconductor plants just five months apart. The first was at Asahi Kasei Microsystems in Nobeoka City in October 2020. AKM specialise in A‑D and D‑A converters, and their chips are used in the vast majority of modern audio interfaces. AKM was “a factory that almost everyone depended on for their A‑D/D‑A converters”, Dan explains. “Everybody was scrambling.”
The other fire was at Renesas’ Naka factory in Tokyo in March of this year. Renesas control almost a third of the global market share for microcontroller chips in cars, and although their problems don’t directly affect the music business, wider problems in the automotive business certainly do. A modern car can contain several thousand ICs, from suppliers around the world. Predicting a slump in demand due to the pandemic, powerful multinational car manufacturers temporarily shut down production and prepared for a holistic market slowdown. They cancelled their orders for chips from major foundries like the Taiwan Semiconductor Manufacturing Corp, or TSMC, who subsequently reassigned their products to the companies conversely predicting a surge in demand over the pandemic — for example, those involved in making smartphones and laptops.
When the automobile industry began to bounce back more quickly than it anticipated, heavy orders were made and chip foundries suddenly found themselves with more demand than their supply could meet, a problem not helped by the aforementioned foundry fires and one that looks set to continue for some time. You can see how easy it is for distortion to move up the supply chain through rapid fluctuations in decision making in a process known in economics as the ‘bullwhip effect’.
This isn’t the first chip shortage, and it won’t be the last. Those of a certain generation will remember Tamagotchi, an unprecedented craze in the Summer of 1997 which diverted microchip production to the Japanese company Bandai on such a scale that other industries were left without. “The chip industry has had many shortages before,” New York Times technology contributor Don Clark explains, “but they usually are in a particular kind of chip, like memory chips. This time it’s across the board, which is a sign that demand is really going through the roof.” According to some analysts, at least 169 different industries around the world are feeling the impact of this particular crisis.
“People in the audio industry are equally hit by these availability issues,” Dan Parks explains. “It’s across everything. We’re really struggling just to get stuff produced — a lot of it is in Taiwan and China. Then, once it’s produced, we have to find a container ship so it can get here. And once that ship gets off the coast of California, we have to find room on the port for the container. It’s all portions of our life. Covid has impacted the labour at the ports — the longshoremen unloading the containers and in the warehouses — so at any given time about 20 percent of them were out with positive Covid tests.”
Further along the supply chain are companies like Apogee, also based in California and with a significant pedigree when it comes to ICs. “During the early days of the pandemic, with the ‘work at home’ order in place, we counted on family and friends to test, pack and ship products!” remembers Apogee co‑founder and CEO Betty Bennett. “Then there were fires, riots, protests, armed national guards on every corner, curfews and then — of course — shipping delays.”
At times like this, recording equipment developers can easily find themselves sidelined by far bigger players in the tech industry. “Often, suppliers prioritise larger companies’ demand over smaller companies such as ours,” Betty continues. “We don’t have enough buying power to pressure suppliers to offer at best cost, because our demand is so small compared to auto makers or large electronic manufacturers.
“It’s not just semiconductors that now have increased lead times. Capacitors, resistors, PCBs [printed circuit boards], packaging and cables… Lead times on all of those have tripled. Things that used to be readily available are no longer in the market. Due to raw material shortages, prices have gone up by between 20 and 40 percent.”
“You get a feel for the number of contractors we work with,” says Dan Parks. “The main problem is that they’re all running at full capacity. What used to be a 90‑day lead time is now closer to six months. We just have to wait our turn, meaning it’s incumbent upon us to do a better planning job. Our other problem — part of this trifecta of problems — is that for the most part our customers don’t give us forecasts. It’s not uncommon for a customer to say ‘Hey, I need to pull this order in to a sooner date,’ or ‘ASAP’, so we’re trying to plan in a vacuum, doing our best to anticipate what the demand is going to be. We have to be looking six months out, and when we’re not getting lead times from customers and they’re moving around with their demand, it creates a real challenge.”
Apogee's Betty Bennett: “We had to redesign five products... The AKM fire delayed production by about three to eight months.
Apogee’s Betty Bennett reports even worse delays than this, as well as more pressure to plan ahead in that vacuum as such issues move along the supply chain. “Lead times are out — 60+ weeks,” she says. “Some suppliers, like Microchip, have gone on allocation: you have to place a non‑cancellable, non‑returnable postal order one year plus in advance, so that they can pipeline parts for you. And even this way they don’t guarantee the needed supply.”
On the other side of the pond is another company established in 1985, Focusrite, who have since gone on to acquire Novation, ADAM and Martin Audio, among others. Their experiences mirror those of Apogee. “We have seen the lead time increase fairly substantially over the last six to 12 months,” the company’s head of product Will Hoult explains. “This has meant that we have had to start placing orders further in advance than we normally would, or we run the risk of not building enough of our products to satisfy our customers. It hasn’t been easy.”
It is a picture of an industry where even seemingly isolated shocks to the system ripple (or rather, whip) through all aspects of the process, be they supply chains, lead times or client behaviour. Take the fire at AKM, which is still fresh in Betty Bennett’s memory. “We had to redesign five products,” she states. “The AKM fire delayed production by about three to eight months. Most manufacturers use ‘just‑in‑time’ to bring in material, to allow greater cashflow flexibility, and with AKM ordinarily being a very reliable supplier with steady 12‑week lead times, we found ourselves with little stock of very specific components, like many manufactures in this space.”
Understandably, many companies are reticent when it comes to talking about the impact of the shortage. In situations like these, the effects of negative PR can last even longer than the initial problem itself. “We don’t want to be those guys who shut down their production line,” says Dan Parks. “And all of a sudden get high visibility because of that. Bosses become interested in who has shut down their line, and that’s not the kind of visibility we want.”
Likewise, at American synth manufacturers Sequential Circuits, keeping a cool head is the name of the game. “Integrated circuit shortages are affecting Sequential, as they are for most manufacturers in the music and tech industries,” the company’s director of communications Mark Wilcox tells me. “We are fortunate that as a small company, we can move quickly to buy additional parts, and also make minor design modifications to our existing designs so we can use parts that are more readily available.”
Even minor design modifications are easier said than done, however. “The bill of materials on a synthesizer has probably got 400 items,” Dan Parks estimates. “And you need 400 out of 400 in order to ship that box. And redesigning it is not a simple endeavour.”
“Redesigning old products was not only expensive,” explains Betty Bennett. “It required a new PCBA [printed circuit board assembly], market buy for new parts, new tooling, new software that needs to be compatible with old devices so that customers don’t see a difference, new manufacturing challenges and that learning curve… It also meant the engineering team was tied up for five months, meaning they could not work on the new product pipeline or on other software needs.”
Kris Kaiser, co‑founder of Los Angeles‑based innovators Noise Engineering, thinks the crisis could prove fatal for some manufacturers. “I fear a reckoning for some companies,” she tells me in no uncertain terms. “Parts have literally disappeared. Even some of the most common parts have disappeared, and everything is increasing in price. The microprocessors we use are currently at one‑year lead times. We’re sitting on several products which are done, but we can’t release them because we can’t build them. Other parts we’ve gotten but at price increases that would shock you. Even our knobs have increased in price with every single shipment.” You read that right: every single shipment.
Kris Kaiser: We’re sitting on several products which are done, but we can’t release them because we can’t build them.
So how is this crisis affecting us, the consumers, and what consequences should we expect to see?
“Well, you’re probably seeing it now,” says Dan, “even with how long it takes to get something like an iPad.” A keen musician himself, Dan offers a snapshot of his experience as a consumer. “I ordered a Fender Telecaster recently,” he remembers, “and it was, like, two months on delivery. And that’s probably because Fender were having the same problems that we’re having. Maybe their planning had been caught off guard. Maybe they were having problems getting hold of any number of components involved in manufacturing that guitar. I was scouring every seller online, every day. One of them showed availability all of sudden and I jumped on it! But I still had to wait about a month. I’d imagine that will describe anyone who wants to get the latest synth. Everybody’s having trouble lining up chips.”
“Some products will sometimes take longer to order in than they might have previously,” Focusrite’s Will Hoult admits, but he insists that: “The quality of our products won’t suffer through the shortages. Our commitment to quality remains high.”
We can also expect to see hardware companies turn to software development, where there are no comparable supply‑chain issues. Noise Engineering, for instance, this year announced their foray into plug‑ins with Sinc Vereor, Virt Vereor and Ruina.
The good news, though, is that everyone agrees the crisis is temporary. “The semiconductor industry is famous for its ebbs and flows,” Dan reminds us. “Long‑term, I think these issues of supply aren’t going to be around forever. It’s a snapshot in time.”
At Apogee, Betty Bennett suggests that better times are not far away: “The good news is that we made it through, the future is bright and we are counting our blessings.”
“It’s of course a lot of extra work,” reflects Sequential’s Mark Wilcox, “but so far we’ve been able to keep our products shipping with only minor hiccups. It’s a challenging time for all of us.”
“Fortunately, we have superb relationships with our resellers as well as our suppliers which has meant that we have been able to adapt our processes accordingly,” says Focusrite's Will Hoult. “The fact that we have been able to avoid total stock outages on our lines is testament to the hard work our operations team has been putting in.”
The common priority is clear: to keep going no matter the odds. At Sound Semiconductor, Dan emphasises: “The last thing we want to do is shut down our production line. That’s the worst thing we could possibly do.” He adds, “we haven’t done it yet. Knock on wood.”