Flea shortage is likely to get worse before it gets better

One of the biggest problems with the technology in the last few months is due to one of its smallest components: the chips. Months after the shortage began, the effects have extended far beyond the difficulty of buying an Xbox Series X or PS5. Auto manufacturers are the hardest hit, and even home appliances could start to experience supply issues.

Earlier this year, companies expected supply chains to be sorted and products to be more systematically put back on shelves by summer – but June is almost over and there is apparently no no end in sight. And with the next list of big tech releases and the holiday shopping season looming, expect things to get worse before they get better.

“We thought probably six or seven months ago, like everyone else, that it would be relatively short-term.” Jahmy Hindman, Chief Technology Officer at John Deere, commented on Decoder Podcast. “But I think we’re there for the next 12-18 months.”

It’s not just tractors and trucks, however. Intel CEO Pat Gelsinger expressed a similar sentiment, commenting in a the Wall Street newspaper interview in April that it could be two years before production can increase. “It will take some time before people can put more capacity in the ground.” And AMD CEO Dr Lisa Su noted at an investor event in May that the company was forced to prioritize its high-end chips over low-power parts due to shortages.

There are two different forces at work here. For some products the demand is too high, which affects high-end chips like the GPUs of a PlayStation 5 or an RTX 3080 graphics card. While chip shortages have undoubtedly played a role, it There are also simply more people who want to buy these products than there is enough for everyone.

Take the PS5, for example, which is the best-selling console in US history despite continuing difficulty in buying a month after launch. “Even if we secure a lot more devices and produce a lot more PlayStation 5 units next year, our supply would not be able to catch up with demand,” said Hiroki Totoki, Sony’s CFO, during a private analyst briefing, according to Bloomberg.

Or take GPUs, whose prices have finally started to drop over the past few weeks – not because Nvidia magically figured out how to produce more coins, but because demand is finally slowing down following the fall in Bitcoin prices and to the Chinese crackdown on cryptocurrencies.

It is in the interest of chipmakers to keep trying to produce these parts: newer chips are more lucrative. If you’re TSMC or Samsung, it’s in your best interests to focus on making (and expanding) those production efforts.

On the other hand, however, there are supply issues, especially for older chip designs. Unlike a new iPhone or Xbox, a Ford truck or John Deere tractor does not need advanced chips that use TSMC or Samsung’s 5nm process. They use older, less powerful (and cheaper) chips than those using brand new technology.

The impact here is already being felt. A Bloomberg A report last month notes that automakers are starting to forgo offering high-end features like navigation systems or additional displays in order to further expand their chip offering. Nvidia reused old GPUs into special cryptocurrency mining cards to free up more new GPUs for gamers. Even Apple noted that it was struggling to get hold of these older chips, due to additional competition. “The bulk of our problem is with the licensing of these legacy nodes, there are a lot of different people not only in the same industry but in other industries using legacy nodes,” Cook said in the results of Apple in the second quarter.

Revathi Advaithi, CEO of Flex – the world’s third largest electronics manufacturing company – noted a similar issue on Decoder last month. “Automotive semiconductors are pretty obsolete,” she explains, noting that automakers either need to invest in upgrading to newer technologies more comparable to consumer devices, or foundries need to expand more capacity. for those specific legacy chips – parts that aren’t really useful for phones or laptops.

The problem is exacerbated by the fact that, on a larger scale, the semiconductor industry has become increasingly consolidated. Despite the growing importance of computer chips in virtually every hardware product in many industries, the number of companies manufacturing these chips – especially high-end specialty chips – is shrinking.

TSMC alone accounts for 92% of the advanced chip supply, with Samsung providing the rest, according to a the Wall Street newspaper report. The company is also said to manufacture around 60% of the chips for automakers around the world. Which means when these companies are low on capacity, there aren’t many other places to go to get these processors.

It’s also why chip shortages likely won’t affect some of the bigger devices, like Apple’s upcoming iPhone or any other fall flagship from Samsung, at least not as badly as they have. hit Ford trucks or GPUs. Digital hours reports that TSMC is already prioritizing orders from Apple (as well as those from automakers) before the fall. Because of the size and scale of Apple’s orders – think how many iPhones it sells each year, all using cutting-edge TSMC chips – it has the power to stay ahead of the pack.

The bad news is that the crisis is likely to get worse before it gets better. TSMC, Intel and Samsung are all investing heavily in expanding and building new factories. The Biden administration is also trying to help, pushing billions to pump semiconductor manufacturing in the United States. But as the CEO of Intel noted, it will take months, if not a few years, for these investments to mature.

And with the holiday season just around the corner and a new wave of products from all market segments all battling for chips, there will almost certainly be more product delays, shortcuts, price hikes, and more. parts shortages ahead.

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