Date: 2024-07-27 Page is: DBtxt003.php txt00021437
SUPPLY CHAIN
CHIPS (Silicon Chips)
Debbie at Bloomberg ... The year the chips ran out
CHIPS (Silicon Chips)
Debbie at Bloomberg ... The year the chips ran out
Original article:
Burgess COMMENTARY
Peter Burgess
Bloomberg Technology
Hi, it’s Debby in Taipei. This year will have long-lasting impacts on the chip world. But first…
Chasing silicon
In 2021, users of everything from iPhones and PlayStations to cars and ultrasound machines were jolted awake to a new reality: All these things need silicon chips, and there aren’t enough of them.
Chip booms and busts are nothing new, but the unprecedented severity of this year’s crunch lent the issue added geopolitical weight. The shortage showcased how globalized and interconnected the industry has become. At the same time, it galvanized countries to build up their domestic manufacturing in order to ensure some measure of self-reliance — an effort that’s just getting going.
The chip shortage came into view at the beginning of the year, when carmakers began to complain that they didn’t have the silicon to satisfy an unexpectedly quick recovery in demand. The fretting was justified: while poor planning was partly to blame, shortages cost auto companies an estimated $200 billion in sales this year.
Other industries were just as desperate. Ultrasound machine provider Fujifilm SonoSite Inc. paid $65 for a chip that usually costs $1.49.
Even Apple Inc., the largest corporate buyer of chips with superior supply chain management practices, couldn’t escape unscathed. The Cupertino, California giant said it lost $6 billion in revenue in the last quarter due to supply constraints — which will cost the company more than $6 billion again in the current quarter.
Why can’t suppliers just make more? This year’s predicament showed that silicon manufacturing is a time-consuming and expensive venture. Building a chip fabrication plant takes at least two to three years and can easily cost $10 billion or more. For instance, Taiwan Semiconductor Manufacturing Co. is spending a record $100 billion over a three-year period to grow capacity. The company could spend $29 billion on its 2nm fabrication, the mayor of the central Taiwanese city of Taichung reportedly said this week.
TSMC is also currently building a fab in Arizona with a price tag of $12 billion, but the plant will only begin mass production in 2024.
Right now, Taiwan’s biggest company by market cap dominates the global foundry industry — making semiconductors for companies that lack their own facilities — controlling more than half of the market. That led chip consumers and government officials to appeal to Taiwan for more chips, thrusting TSMC suddenly into the limelight and forcing it to make increasingly political decisions.
Meanwhile, the world’s No. 2 contract chipmaker, Samsung Electronics Co., has a market share of 17%. The highly centralized production of chips in Taiwan and South Korea made other countries uncomfortable this year. And governments around the world have started to build up chip capacity at home.
China’s Semiconductor Manufacturing International Corp., despite being under U.S. sanctions, is adding new capacity in Shenzhen and Shanghai. Japan has offered TSMC support for its joint venture with a subsidiary of Sony Group Corp. to build a $7 billion fab in the country. And Germany will welcome a new Intel production site.
The U.S., for its part, will play host to a new $17 billion chip fabrication plant from Samsung in addition to TSMC’s new fab in Arizona. The state will also be home to two new Intel factories that will cost $20 billion. In India, the country still lacks a chip manufacturing ecosystem, but it’s trying to catch up by offering financial incentives.
“Real men have fabs,” Advanced Micro Devices Inc. founder Jerry Sanders once famously said. He was talking about companies, but this year, world leaders got the memo too. —Debby Wu
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If you read one thing
- Silicon Valley’s push into cars is a test for Aptiv and its more-than $40 billion market cap. Aptiv, which sprang from General Motors’ bankruptcy, evolved into a shrewd tech company. Now, as carmakers change their playbooks, it may have to adapt again.
- Apple is barring customers from its New York City stores as Covid cases spike
- China placed new restrictions on overseas initial public offerings
- The battle for high-tech call centers is accelerating
- Meta’s stock jumped after reports of a good holiday season for the Oculus headset.
- Alternative cryptocurrencies have been outshining Bitcoin.
- Scooters and techy utopias: Here’s how cities rebuilt in 2021.
- Investors can’t get enough startups, even at very high prices.
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