Stuck in the middle of a Recode piece about the chip shortage is this paragraph:
Chipmakers are already producing chips at their maximum capacity, according to Falan Yinug of the Semiconductor Industry Association, a trade and lobbying group that represents the chip industry. “Chip production has, in fact, increased substantially, and more chips have shipped in recent months than ever before,” Yinung told Recode.
Here's a paragraph from NikkeiAsia:
TSMC — a key supplier to nearly all major automotive chip developers, such as Infineon, NXP, Sony and Renesas Electronics — said it plans to increase output of microcontroller units (MCUs) by 60% this year. That represents a 30% increase over the 2019 pre-pandemic level, according to the company. MCUs are essential components for a range of car parts, from air-bag and motor controls to tire pressure monitors and lighting systems.
The old story of the chip shortage had to do with automakers and others cancelling orders during the pandemic, causing chipmakers to shut down production—which is hard to start back up. But recent stories are suggesting that the problem is more related to massive demand simply outstripping production capacity. Everyone is pumping out as many chips as they can but there aren't enough to go around. So what's the real story?
I'm not sure, but apparently the problem is centered mostly on chips using old 40 nm technology, which are sort of the 60-watt light bulbs of the industry. Production capacity for these chips is limited because nobody has been investing money in new fabs for a technology that seemed unlikely to grow. That's not a pandemic problem, it's just a garden variety capacity and forecasting problem.
So . . . I dunno. But the more I read about this the more it seems like it's mostly a coincidence that it happened during the pandemic. Overall, it's just your basic problem of an old technology that chipmakers thought would go away over time but has instead stuck around longer than they thought it would. This would have come to a head in 2020 under normal circumstance, but the pandemic put it off until 2021.
If anyone can point me to toward a reliable piece that dives into this more deeply, I'd be grateful.
Accords with what my friend who works at a Detroit automaker said...the chip manufacturers are prioritizing production of the latest chips, and the ones used in cars are older tech because of the long lead time from design to production for a car model, and of course a model isn't redesigned every year, either.
I started this morning going over the list of hard or impossible to get components with our purchasing department. Here's my speculation, FWIW. Companies like us can't afford to shut down production. There are no other models we can sell instead. So we have paid 5 times the normal cost to get parts, and bought 1-2 years worth instead of 3 months or so. If there are enough companies like us, that has to be having an effect.
You can give us grief for "hoarding toilet paper" but I just don't see any way around it when a part suddenly shows up as a 56 week lead time. This is for a product that represents 40% of our revenue. If we couldn't ship for the better part of a year we would have to put most of the production staff on half weeks and deal with the attrition.
I mean, Bill Gates bought up all the chips and put them in the vaccines. So what do you think is going to happen?
dear heaven, it's all adding up!
Also, the quote from Falun in the original article.
Might as well just bang a gong. The evidence couldn't be more obvious if they tried.
To follow up on what @MarkedMan is saying, the thing looks like a bubble of pent-up or anticipatory demand. And the order increase he reports fits that.
Mind you, graphics cards have been very hard to come by in the last year, too. Big firms, like HP and Dell and so on, have been getting them, but retail shops and one-off computer maker/repair shops can't get their hands on any.
I don't know the reason for this, but it seems related. Maybe those boards have some lower tech components?
The graphics cards are in short supply, and have been for years, due to the demand for them for Bitcoin mining. The computer manufacturers have long term contracts, so their supply is fine. It's just the aftermarket that's been hit so hard.
So the only real effects that bitcoin has are increasing green house gases and causing shortages in ASICs and GPUs. And it returns nothing.
Seems like there would be some chips moving to new(er) process nodes. One would think that the RTL is already proven out, and doing verification for design rules and layout, while non trivial, is do-able. It also means a power and performance win.
While true, the cost of the new mask sets at the new technology is astoundingly high, so any company has to have significant volume to amortize that cost. In addition, fabs won't take your design if your volumes are not high enough.
You correctly note that transition to a new process node is non-trivial, however new processes also add risk at the system level where changes in timing and electrical performance can reveal previously masked design issues.
While I have been retired for 3+ years, the 40nm node was really in a sweet spot for cost/performance for many applications. High-end processors, graphics chips, and memory are the ones who need the latest technology as they are competing mostly on performance and density.
Is smaller really lower power? I thought we'd reached the point that smaller meant more power with greater leakages and bigger stray effects.
Along the lines of what MarkedMan posted, I heard a discussion on NPR that for many of the orders that were cancelled, companies were simply giving up their place in line - there were plenty of customers willing to buy. But the companies that cancelled had to move to the back of the line and now face extreme lead times for delivery.
Sony itself suggested the lack of PS5s was more to do with them not anticipating demand rather than a chip shortage. Just one industry though.
Kevin
One of your linked blogs had this discussion:
https://cepr.net/a-two-year-shortage-of-semi-conductors-is-not-a-supply-chain-problem/
"not anticipating demand..."
I wonder if FABs are minting money right now....and who would want to turn off the spigot?
"These companies presumably have projections of demand for these products which should give them a reasonably good idea of future demand for semi-conductors." The people who had this information were the fab companies and the smart phone manufacturers. The 2nd paid to be first and line and to minimize the pain and the 2nd crunched the numbers and concluded a two year shortage wouldn't pay the costs to build a new fab, especially given the fact that they can now sell at an extremely high premium. the auto companies are feeling the pain most severely because this is the first time since the 1930s that they aren't the big dog in the arena and can use their clout to move the pain elsewhere as the phone makers are.
I wouldn’t worry about a chip shortage. We’re doomed!
https://www.theguardian.com/environment/2021/aug/05/climate-crisis-scientists-spot-warning-signs-of-gulf-stream-collapse
Climate scientists have detected warning signs of the collapse of the Gulf Stream, one of the planet’s main potential tipping points.
The research found “an almost complete loss of stability over the last century” of the currents that researchers call the Atlantic meridional overturning circulation (AMOC). The currents are already at their slowest point in at least 1,600 years, but the new analysis shows they may be nearing a shutdown.
Such an event would have catastrophic consequences around the world, severely disrupting the rains that billions of people depend on for food in India, South America and West Africa; increasing storms and lowering temperatures in Europe; and pushing up the sea level in the eastern North America. It would also further endanger the Amazon rainforest and Antarctic ice sheets.
Yup. Unfortunately most of our wise leaders rely mostly on the Mk1 eyeballs for their proofs. When DC begins flooding regularly, they'll shrug and cut taxes.
https://wp.me/pOYWd-hzy
Climate Crock of the Day.
Been telling you guys.
Move the NYSE and FED RES of NY out of lower Manhattan
THAT will get a LOT of people's attention
Think about this
Camp LeJeunne in NC disappears
As does Charleston SC the east coasts largest container shipping port
And many other military installations along the water front
But hey we should be MOST concerned with Mike Huckabee losing his waterfront property in FLA
Not to mention the 109 Nuclear Power plants that sit along the waters edge world wide
Take your snowball and stuff it.
😉
In algore's hungry maw!
I'm pretty sure you meant RAISE taxes.
If you haven't been paying attention, there is certain species of politician that only cuts taxes (at least that's what they roar at the podium) and has a penchant for snowballs.
Just a quick correction. When car makers cancelled orders, they lost their place in line, and going back to the end of the line meant months of wait time. The chipmakers didn't shut down production--they continued making what was now on order.
There was also real down time. A fire in a major FAB--I think in Asia. Plus the TX freeze knocking out a number of FABs in TX, mainly older designs. The uncontrolled shut down meant at least some of the chips and possibly wafers being made had to be tossed. A day or two of down time meant up to months of recovery.
Even a little ripple in tight market can grow into a giant wave...
I work at a big 5 semi manufacturer. AKM had the Asian fire that devastated (and continues to devastate) supply in high end and consumer audio. They also quietly made a significant silicon inside TCXO's a timing component inside IOT radios. The blackouts in TX hit Samsung and NXP.
Good analysis Golack. Fabs take months to recover from seconds of interrupted power. They all have backups, but what if the backups can't get natgas (as happened in TX as people froze). Covid continues to significantly interrupt production in the 3rd world - particularly packaging and test in Malaysia. Those die from the fabs are packaged into chips in some farflung corners of the globe often forgotten.
Best argument ever for electric vehicles,
Russia Captures No. 2 Rank Among Foreign Oil Suppliers to U.S.,
https://www.bloomberg.com/news/articles/2021-08-04/russia-captures-no-2-rank-among-foreign-oil-suppliers-to-u-s
We are setting up for a monumental oversupply condition in ~q1 2023 as new supply finally eclipses demand. Then the customers who are over-inventoried will begin to burn off all the horded parts and then demand will absolutely collapse. Prices will inevitably collapse. Government funding of new capacity will exaggerate the problem in the 'law of unintended consequences'. The shortage / glut cycle is part of the industry for 30+ years and is pretty predictable. The WW shipments of silicon are through the roof as every fab in the world is running 24/7 at capacity. There is huge hoarding and panic buying started as the Auto industry spooked the market through their ineptitude as they cancelled their orders then were unprepared for Covid to end and panic bought.
No excuse any more for not going nuclear. A thousand Chernobyls wouldn''t cause the damage this is causing.
Oh .. and electric vehicles are still mostly run on electricity generated by oil .. with the additional misfortune of requiring rare and toxic elements that must be transported over oil driven transportation from farflung places like China.