If you are a supply chain manager at an OEM provider, you know that buy- and sell-side headaches are simply part of the job. Yet right now, to paraphrase a well-known expression, those in charge of the supply chain are cursed with living in particularly interesting times.

The biggest problem facing the industry today is what analysts are calling the first semiconductor memory supercycle since 2018. A combination of AI accelerators demanding high-bandwidth memory (HBM) consuming 4x the wafer capacity of standard DRAM, DDR4 production falling while demand persists, and a long lead time before new capacity arrives, is causing the crunch. Yet while the parameters may change, the patterns are often the same.

Margaret Upshur is founder and CEO of Mobius Materials, a certified component marketplace used by contract manufacturers and OEMs to directly buy and sell excess electronic parts and provide a trusted layer to the semiconductor gray market. Prior to this, she was senior director of operations at an IoT module manufacturer, with her experiences there inspiring her to build dual-sided liquidity in the market.

On the buy-side, Upshur recalls the capacitor shortage of 2018, driven in part to a major increase in sensor output from the automotive industry. At its peak, one forum user said a vendor had given them a lead time of just under two decades for a capacitor. This is where the parallels with today come in. Much like automotive then, data centres and AI applications are eating up the memory market as they’re higher up the value stack, Upshur notes.

It was the sell-side issue which was a more direct inspiration for Upshur to found Mobius. “As an IoT company, you’re constantly revving your product because you have generation after generation of communication type,” she says. “In order to do that, it meant that you were sunsetting old product lines very fast – and every sunsetting decision comes with this giant bill.

“We ended up realising it was cheaper for us to landfill all these chips than it was to sell them back to the market,” adds Upshur, noting the gray market’s dangers from the compliance and data leakage sides. “We made this decision, and it ate me up inside, because not only was that a lot of value lost in the supply chain that shouldn’t be lost, but also it was a major environmental disaster.”

With the ongoing memory concern, Mobius’ perspective is that the supercycles could continue to be a problem for ‘at least 12 months.’ Upshur notes there are two routes OEMs can go down; they could redesign to use memory that’s in less constrained categories or, alternately, they could effectively stockpile memory.

The right solution depends partly on OEMs’ relationships with the ‘big three’ memory providers – Samsung, SK Hynix and Micron – but also their own strategies. “I’d say it’s an individual decision by the company, but you’ve got to run the numbers on whether a redesign makes sense or if a stockpiling strategy make sense,” says Upshur.

Either way, Upshur believes previous cycles suggest this could be a long ride yet. “If we look at the other shortage situations that have happened in the past, there is an underlying demand crash, and that’s a true thing, but then there’s a bullwhip effect that happens on top of the underlying demand trend that makes it way worse,” she says.

“So, my perspective on the memory crisis, and why I think it’s going to go on so long, even if we have underlying improvements in memory usage by data centers, is one, the trend is still upward on the data center usage, despite the improvement, and two, I think the bullwhip effect generally takes six to nine months to settle out.”

Of all the headwinds facing manufacturers, Upshur notes memory is the toughest to navigate. It’s worth thinking of it this way: a problem which makes your cost go up is better than one which makes your production line go down. “If your production line is down, that’s your number one problem no matter what,” she says. “As OEMs stack rank problems, the first thing they always put at the top of the list is something that could bring down their production line, because that’s a zero-revenue situation. If you have something like a 10% cost increase, that’s just a margin problem.”

In this increasingly volatile landscape, the job of a supply chain manager, Upshur argues, is more like that of a commodities manager. “I think you’ve got to be essentially a trader,” she says. “You’ve got to be somebody that’s looking at macro trends. The people that notice the memory prices starting to go, and acted on it fast, are going to be in an amazing situation now because they’re going to be able to underprice all their competitors, as consumer prices are going to have to go up to react to the memory prices.”

The good news is that Mobius is looking to help supply chain managers in this transition. One ‘big development’ in the works, in Upshur’s words, is making the buying process a lot easier, moving beyond a one-off basis. “Nobody wants to enter in a bunch of alphanumeric MPNs,” says Upshur. “Now, you can actually add an entire bill of materials on the site and track the cost of that over time, just like you would on, say, an ETF.”

Watch this space for those, alongside the recently launched two-week auctions on parts, where manufacturers with excess can set up a monthly or quarterly cadence selling at predictable prices. Ultimately though, for those managers who are worried about the memory supercycle, Upshur offers this advice.

“I’d say the main thing now is that you want to be diversifying your supply base, and you want to be starting to do a lot more characterization of tier 2 and tier 3 memory suppliers,” she says. “They still have a lot of volume there, and those sources of memory are still totally viable for most use cases.

“There’s more sophisticated use cases they’re not going to work for, obviously, but I would say probably the best bet for most engineering teams right now is just to validate a bunch of additional sources right now at the tier 2 level.”

Mobius Materials is participating at Microelectronics US, taking place in Austin, Texas on April 22-23.