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Will Knight, wired.com-November 14, 2021 at 12:15 PM UTC

The semiconductor industry is at the forefront of technological progress. So why can't it produce enough chips to keep the world moving?

Nearly two years after the disruption caused by the pandemic, a severe shortage of computer chips (the core components of smartphones, laptops and countless other products) continues to affect manufacturers in the global economy.

Unable to produce enough cars, automakers have been forced to suspend production due to declining sales in recent months. The shortage affects industries ranging from game consoles and network equipment to medical equipment. In October last year, Apple blamed its financial performance on chip scarcity, and Intel warned that the drought may extend into 2023.

In short, the semiconductor supply chain has become stretched in new ways that are deeply entrenched and difficult to solve. The speed of demand expansion exceeds the response speed of chip manufacturers, especially for basic but widely used components, which will be affected by huge changes in demand, making investment risky.

Brian Matas, vice president of market research at IC Insights, an analytics company that tracks the semiconductor industry, said: “It’s really surprising that it took so long for the supply chain to rebound after the global economy stagnated during Covid. ."

On the one hand, the sheer scale of demand is surprising. In 2020, as Covid begins to disrupt business as usual, the chip industry has begun to look forward to rising. According to data from the Semiconductor Industry Association, global chip sales fell by 12% in 2019. But in December 2019, the group predicted that global sales will grow by 5.9% in 2020 and 6.3% in 2021.

In fact, the latest data shows that between August 2020 and August 2021, sales increased by 29.7%. Demand is driven by technologies such as cloud computing and 5G, as well as the increasing use of chips in products ranging from automobiles to home appliances.

At the same time, the United States imposed sanctions on Chinese companies such as Huawei, which is a leading manufacturer of smart phones and network equipment, prompting some Chinese companies to start hoarding supplies as much as possible.

David Yoffie, a Harvard Business School professor who once served on Intel’s board of directors, said that working from home, locking in boredom, and switching to e-commerce have caused a surge in demand for high-tech products, which surprised many.

Yoffie said that chip makers did not realize the extent of continued demand until about a year ago, but they were unable to open a penny. The new chip manufacturing plant will cost billions of dollars, and it will take years to build and equip it. "It takes about two years to build a new factory," Yoffie points out. "And the factories have become bigger, more expensive, and more complex."

This week, Sony and TSMC, the world's largest chip foundry manufacturer, said they will invest $7 billion to build a fab that can produce old components, but will not start manufacturing chips until the end of 2024. Intel has also invested in several cutting-edge new fabs, but these fabs will not go online until 2024.

Yoffie pointed out that only ASML in the Netherlands produces extreme ultraviolet lithography machines for cutting-edge chip manufacturing, and ASML cannot quickly produce machines that meet the demand.

Another problem is that not all chips are created equal.

Last edited by Coinductor at 8:20 am on Sunday, November 14, 2021

Last edited by ajmas at 9:09 am on Sunday, November 14, 2021

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