#36 - The Global Chip Shortage Crisis
“The 9-to-5 workday is dead”
— Salesforce while announcing that most of its employees will work on a flex schedule (1 to 3 office days per week
Some bits,
Apple, Facebook, Google, Microsoft and Amazon consume 45 terawatt-hours of power every year to keep their data centers cool. That is more than New Zealand’s power consumption in a year.
Tesla announced that it has bought upto $1.5 billion worth of Bitcoins, and will accept payments in bitcoin in the future.
And, the global process of mining bitcoin takes more power than the amount of power consumed by Argentina.
The looming Semiconductor chips shortage crisis
The background
There are 3 major chip manufacturers in the world - Taiwan Semiconductor Manufacturing Company (TSMC), Intel and Samsung.
TSMC & Samsung accounts 83% of the manufacturing, while Intel fell way behind. TSMC manufactures chips for major companies such as AMD, Apple, Broadcom, Marvell, Qualcomm, Nvidia, etc, and for any chip startups.
Why there is a shortage problem?
There are many reasons for the current crisis. And all of them came together.
The COVID-19 Pandemic. First there was a sudden drop in chip demand during Q2 of 2020, and with pandemic control measures such as social distancing and lockdowns meant production slowed down.
But the demand exploded soon after. With a huge surge in demand for electornic devices such as laptops, 5G phones, gaming consoles, automobiles, etc, manufacturers such as TSMC just could not keep up with the demand.
US ban on Huawei and SMIC. Simply put, Huawei has the best chips for 5G. Fearing further tighter restrictions, Huawei has placed a bulk order to procure and hoard chips.
In Sep-2020, US has declared Shanghai based Semiconductor Manufacturing International Company (SMIC) as a military-end user. That means its existing customers such as Qualcomm, Texas Instruments and Broadcom, cannot place order with it and have to move elsewhere.
Potential Chinese invasion of Taiwan. China has always considered Taiwan as its territory which Taiwan and other countries dispute. If China invades Taiwan, then TSMC will be under the Chinese whims. TSMC has invested billions and is now caught in geo-political cross roads.
The situation right now
The crisis is already here. The auto-manufacturing industry is the first to take the heat and this can cascade to other industries soon
Ford has stopped its production of its bestselling F-150 truck due to shortage of chips. GM has already announced the temporary closure of 4 plants due to the same issue. Globally, auto manufacturers will take a $61 billion hit.
Indian customers too face anywhere from a 3 to 6 month delay in getting their new cars.
Smartphone manufacturers such as Apple just could not keep with the demand of 5G phones. Gaming consoles manufacturers are also not able to keep with demand due to supply chain bottlenecks.
Back home, ISRO ambitions are also severely impacted by shortage of locally manufactured chips.
What are governments doing now?
Most western governments such as US, Germany and others have already woken up to the crisis and are reaching out to the automobile manufacturers to help. The Biden administration is expected to unveil measures to start chip production in US. It is also expected to increased its support to Taiwan.
In India, we just lack a ecosystem of semiconductor manufacturers. ISRO owns Semi-Conductor Labs (Chandigarh). But most of the chips from this plant is for strategic purposes and the production capability is set to 180 nm chips. Compared to the fact that TSMC can manufacture chips as minute as 5nm.
There is no set policy for semiconductor manufacturing. But the Indian govt is inviting interests in manufacturers to set up semiconductor fabs in India, or acquire some overseases. ISRO is planning to set up an additional fab unit in SCL. IISc is waiting for an approval to set up a facility to build Gallium Nitrade Semiconductors.
Whatever be the measures taken by the governments, the global chip crisis is here to stay for a while. So be careful when you drive a car or using an electronic gadget. If it is damaged, your replacement gadget/car will arrive after a long wait.
Hope you find this edition information. Till the next edition, Stay Healthy
Best
-Senthil
Tatas are entering the semi conductor field. Perhaps, they may play some role in the supply chain or manufacturing.
Also TSMC in Taiwan is an unique and interesting case. It may be the only case in Geopolitics where a scientific research/commercial enterprise becomes the bulwark of a nation's defence. TSMC may be the most pressing reason for US to actively defend Taiwan.