Chip Shortage Continues to Have an Impact Across Industries

Intel chief executive Pat Gelsinger revealed it may take two years to ramp up chip production, while Advanced Micro Devices chief executive Lisa Su noted that her company is prioritizing high-end chips found in a PlayStation 5 game console or Nvidia GeForce RTX 3080 graphics card over “lower-powered parts.” The auto manufacturing sector has been hit hard by the semiconductor shortage — with some indicating no end in sight. At John Deere, chief technology officer Jahmy Hindman said that he expects “we’re into this for the next 12 to 18 months.” 

The Verge reports that part of the problem is supply and demand: GPU prices, for example, are dropping because “demand is finally slowing down following plummeting Bitcoin prices and China’s crackdown on cryptocurrencies,” but the PS5 is hard to find because, as Sony chief financial officer Hiroki Totoki said, “even if we secure a lot more devices and produce many more units of the PlayStation 5 next year, our supply wouldn’t be able to catch up with demand.”

Unlike the iPhone or Xbox, however, trucks and cars “use older chips, which are less powerful (and less pricey).”

According to a Bloomberg report, automakers are responding by cutting down on “premium features like navigation systems or extra screens in order to stretch their supply of chips further.” But chipmakers can’t always put their hands on enough older chips. At Apple, chief executive Tim Cook said that, “there are many different people not only in the same industry, but across other industries that are using legacy nodes.”

Adding to the problems is the fact that “the semiconductor industry has become increasingly consolidated.” Even as the need for chips has exploded, TSMC (Taiwan Semiconductor Manufacturing Company) now “accounts for 92 percent of the supply of cutting-edge chips, with Samsung providing the rest.” When they run out of chips, “there’s not a lot of other places to go to get those processors.”

TSMC is reportedly already “prioritizing Apple’s orders” for the fall. The Verge predicts that, “the bad news is that the crunch will probably get worse before it gets better.

Bloomberg reports Intel’s Gelsinger agreed that, “for a variety of industries, I think it’s still getting worse before it gets better,” but that the company’s “ownership of its factories has left it better placed to keep up with demand than other companies that out-source production.” He predicts that, “longer term, the chip industry is positioned for a period of growth” due to 5G phone systems, more artificial intelligence uses and electric vehicles.

Not everyone is as sanguine as Gelsinger, with Broadcom chief executive Hock Tan stating that, while his company did have a 15 percent sales growth in its latest quarter, “chip production is a mature industry that will return to lower growth.”

Elsewhere, Bloomberg reports that three Arm customers — Broadcom, MediaTek and Marvell Technology — “expressed support” of Nvidia’s proposed purchase of UK semiconductor group Arm, for $40 billion.

Competitors Qualcomm and Microsoft are worried that “Nvidia could limit the supply of the company’s technology to its competitors or raise prices,” and the UK Competition and Markets Authority will soon “deliver a review that may oppose the takeover.” The U.S., European Union and China are also scrutinizing the deal.