The Best Strategies for Sourcing Discrete Semiconductors in an Allocation Market

Article Highlights:

• Allocation occurs when demand for specific electronic components significantly exceeds supply, and a manufacturer can no longer fulfill the complete orders submitted by their customers. Instead, suppliers will start to make partial fulfillments, rationing their available inventory across their customer base. 
• Right now there are several discrete semiconductor commodity types that are either in allocation or moving increasingly close to it, including SiC MOSFETS, diodes, and IGBTs.
• While there’s no magic wand that can resolve the current supply squeeze and unlock uninterrupted access to MOSFETs, diodes, and other constrained semiconductor commodities, securing a long-term supply agreement is one of the most effective ways companies can protect themselves from allocation and delivery delays.

The current memory chip shortage is no longer breaking news. The explosive demand coming from the artificial intelligence industry and all the data centers AI companies are building has put an enormous strain on semiconductor manufacturers. Memory chipmakers like Samsung, SK Hynix, and Micron are stretched particularly thin, with those businesses producing much of the high-bandwidth memory (HBM) that now play such an essential role in AI infrastructure. 

Because of this demand, the memory segment of the semiconductor market is in the midst of an unprecedented supercycle. Prices for specific commodities are up 100% and even 200% from where they were in the middle of 2025. Original equipment manufacturers (OEMs) grappling with these staggering price hikes are starting to pass the increased costs to customers, who are now beginning to see significant price hikes for smartphones, laptops, and other consumer electronics. And semiconductor manufacturers are being forced to move into allocation, a dynamic that signals a newer, more dire phase of the latest chip supply squeeze. 

Allocation for discrete semiconductors and other chips will make sourcing even more difficult for companies in technology, automotive, and aerospace and defense, as established businesses vie with upstart AI firms for the rights to a finite number of irreplaceable chips. But while the supply landscape is tight and highly competitive, that doesn’t mean that organizations should be resigned to sourcing crises in their future. There are specific strategies companies can implement to put themselves in a stronger, more favorable position to secure some of the more in-demand parts in the electronic component marketplace today.  

What Is an Allocation Market?

Allocation occurs when demand for specific electronic components significantly exceeds supply, and a manufacturer can no longer fulfill the complete orders submitted by their customers. Instead, suppliers will start to make partial fulfillments, rationing their available inventory across their customer base. In this way, allocation ensures that manufacturers don’t completely deplete their stock by fulfilling the full order of a single customer, leaving others with zero inventory and a higher risk of production stoppages and other disruptions. It’s an established mechanism for spreading out the available inventory, distributing the pain and complications of a shortage across a supplier’s full customer base—rather than arbitrarily picking winners and losers. 

In practice on the ground, allocation takes a range of different forms:

• Extensions of lead times, often from four to eight weeks to 20, 30, 40 weeks, or more.
• Partial shipments (as outlined above).
• In worst-case scenarios, “decommitments” from suppliers, in which the manufacturer cancels an order outright due to strict inventory limitations. 

What Discrete Semiconductors Are Threatened by Allocation?

Manufacturers typically go into allocation when the semiconductor market has been in a shortage for a significant period of time. Given that the memory chip supply has now been constrained for over a year, it’s safe to say that we have arrived at the point when allocation should come as no surprise to OEMs and other chip customers. 

Right now there are several discrete semiconductor commodity types that are either in allocation or moving increasingly close to it. 

SiC MOSFETS

Silicon carbide metal-oxide-semiconductor field-effect transistors, better known as SiC MOSFETs, have emerged over the past year or two as highly coveted discrete chips. Electric vehicle manufacturers like Tesla, Stellantis, and BYD all use SiC MOSFETs in their cars, a trend that’s rapidly driven up demand for a highly specialized component. The main manufacturers for these parts include Onsemi, Infineon, and Wolfspeed, and these chipmakers are already at or very near capacity. While these suppliers are responding to surging demand by planning new fabs and expansions of existing manufacturing facilities, these projects will take years to be completed. 

In the meantime, the supply will continue to be severely limited. Current lead times for SiC MOSFETs are being reported at around 52 weeks.

Diodes

The current shortages for diodes start with the Nexperia ownership dispute, something we covered late last year. After a prolonged internal conflict between Nexperia’s headquarters in the Netherlands and a key manufacturing node in Dongguan, China, Nexperia’s chip production declined significantly, triggering planned production stoppages at a number of global automakers who relied on Nexperia’s parts. 

One of the main commodities Nexperia supplied to the automotive supply chain was diodes. Since the chipmaker started struggling with its ownership structure last year, carmakers have worked to rebuild their supply chains around the manufacturer. Many organizations have turned to Diodes Incorporated, another major diode manufacturer for automakers. But as Nexperia’s preexisting customer base has flocked to Diodes Inc. in such sweeping numbers, that supplier has started to see its own supply buckle under the weight of extreme demand. 

Companies sourcing from Diodes Inc. are now reporting lead times jumping from eight weeks to 50 across various product lines—a telltale sign that allocation is manifesting itself in the form of significant shipment delays. 

Companies sourcing from Diodes Inc. are now reporting lead times jumping from eight weeks to 50 across various product lines—a telltale sign that allocation is manifesting itself in the form of significant shipment delays. 

IGBTs

Insulated-gate bipolar transistors (IGBTs) are also facing a supply crunch—one serious enough to trigger significant shortages and the allocation that comes with them. IGBTs are currently in demand from a range of industries and manufacturers, including EVs, renewable energy infrastructure, and AI data centers. As a result, key IGBT manufacturers like Infineon, Fuji Electric, and Mitsubishi Electric are grappling with a level of demand that far outstrips their current production capacities. These suppliers are responding by stretching out lead times significantly, with order backlogs going deep into 2027.

Part of the problem is a structural one similar to the challenges currently faced by the memory market. Production of IGBT modules is heavily concentrated among five or 10 suppliers, including those mentioned above. Because of the top-heavy nature of this niche manufacturing landscape, the individual production capacity and prioritization decisions of each of the top IGBT manufacturers have an outsized impact on the supply for the entire market. If Infineon committed a certain number of IGBTs to AI customers, for example, the downstream effects of that commitment could quickly reverberate to other organizations that rely on the component.

The Best Strategies for Sourcing Discrete Semiconductors in an Allocation Market

Negotiate Long-Term Supply Agreements (LTAs)

While there’s no magic wand that can resolve the current supply squeeze and unlock uninterrupted access to MOSFETs, diodes, and other constrained semiconductor commodities, securing a long-term supply agreement is one of the most effective ways companies can protect themselves from allocation and delivery delays. Instead of leaving themselves at the mercy of distributors who have no choice but to submit to supplier allocation programs, OEMs should attempt to work directly with manufacturers to solidify capacity agreements. While these agreements may still be subject to fluctuations in delivery timelines, they provide businesses with a higher level of prioritization, offering a crucial competitive advantage when the landscape tightens as severely as it has in 2026. 

Qualify Alternative Manufacturers

Because of the level of specialization required to manufacture certain discrete semiconductors, many businesses don’t always go through the trouble of establishing ties with alternative manufacturers. But resigning oneself to this kind of single sourcing can leave businesses vulnerable when their sole source faces overwhelming demand and shifts into allocation. While it may require additional time and due diligence work upfront, qualifying a second and even third source for key components is a proven strategy for mitigating the worst effects of a constrained market.

While it may require additional time and due diligence work upfront, qualifying a second and even third source for key components is a proven strategy for mitigating the worst effects of a constrained market.

Selectively Tap Into Independent Distributors 

Independent distributors have a checkered reputation in the electronic component marketplace. They’re often accused of price-gouging tactics, and the chance of inadvertently sourcing a counterfeit part rises significantly when working with these suppliers. But during certain very specific circumstances, independent distributors can be a helpful pressure release valve. 

Customers that don’t have a preferential relationship with chipmakers and are facing extremely long lead times from authorized distributors can find relief from these independent sources. That’s because these distributors aren’t forced to comply with manufacturer lead times and allocation measures, giving them greater flexibility in providing key inventory to customers willing to pay a premium to secure it. 

Strategic Buffers

It’s important to remember that these supply shocks are highly time-limited events. In the period immediately before and after supply shortages and the allocation they usher in, component pricing and availability are often relatively stable. Because of this, there’s no better time to mitigate allocation risks than when the electronic component market is not in allocation. OEMs and other businesses with a proactive supply chain risk management focus will often carry six, 12, or even 18 months’ worth of buffer inventory for their most important components. 

Maximize Your Visibility Into a Fragile Market

The businesses in the best position right now are those with built-in supply chain resilience—the kind that can absorb shortages, allocations, and other market headwinds without buckling when suppliers make unforeseen adjustments. This kind of supply chain resilience requires both visibility into the electronic component market and the intelligence to analyze that data and offer actionable insights geared toward mitigating risks.

Supply chain risk management (SCRM) platform Z2 offers a powerful, industry-leading combination of these two capabilities. Z2’s electronic component database features over one billion manufacturing part numbers across 1,000+ commodity types. In addition, Z2 allows users to upload their bills of materials (BOMs) onto the platform and access comprehensive analyses of all the risks associated with each component in their BOMs. This BOM resilience feature helps alert businesses to materializing market forces that could impact sourcing and availability in the near future. In addition, Z2’s BOM analysis sheds light on obsolescence risks, geopolitical hazards, and manufacturing vulnerabilities that might not be otherwise visible. 

To learn more about Z2Data’s BOM analysis and supply chain resilience capabilities, schedule a free trial with one of our product experts.