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I am strugling to understand the nature of the global chip shortage. Is there a single driver? Or is it just a confluence of events: The US-China tech war (pr

I am strugling to understand the nature of the global chip shortage. Is there a single driver? Or is it just a confluence of events: The US-China tech war (preventing expansion of Chinese factories, causing stock-piling from companies fearful of sanctions), factory shutdowns due to the pandemic, unforseen demand in certain areas (work from home equipment, TVs, GPUs for cryptomining), random accidents like this one.

londons_explore 6y ago
All an effect of a lack of a futures market in IC fabrication capacity. That means nobody has a global view of future demand (since today most contracts are secret) and cannot invest in capacity accordingly.
- throwaway4good 6y ago
  One could fear there to be massive overcapacity in a short time (1-2 years). As mainland Chinese alternative capacity comes online and when some of the weirder demand peters out (GPUs for mining). My intuition is also that there is less pressure in the "let's buy the latest phone game" than there used to be. (For example I am using a 3 year old iPhone X and have no inkling to buy a new one).
  - londons_explore 6y ago
    No need to fear it - the futures market will find people willing to shoulder that risk for a price.
- throwaway4good 6y ago
  And a futures market would require capacity to be a complete commodity. Which I don't think it is.
  - londons_explore 6y ago
    Stocks are not a single commodity, but stocks in thousands of companies over many exchanges, and there exist indexes and ETFs to try to aggregate them. The same can be done with slightly different silicon fabrication facilities. For example, a company who needs their chips manufacturered at Facility A or B, but cannot use facility C would buy a futures contract letting them do that.
  - newswasboring 6y ago
    Why do we think capacity is not a complete commodity? Is it because of the high setup costs or just the fact that its perpetually in short supply? Or maybe I just don't know the jargon complete commodity.
    - londons_explore 6y ago
      I believe OP means that certain types of IC's (for example memory chips) require pretty different technology and equipment than other chips (eg. processors). That means the production capacity isn't fungible.
      - s0rce 6y ago
        Isn't that true of most things, one can't farm pigs with an oil rig, those facilities really only make one thing. Certain facilities could be retooled/repurposed and this is maybe a bit easier in agriculture for certain things (plant soy vs corn) but you can't just plant an almond orchard overnight.
        newswasboring 6y ago
        Yeah but I think that is the point. In their view the commoditization of something means how easy is it to retool to make something similar. Fabs can be retooled, after all its usually all the same machinery, but the process knowledge is a huge barrier.
dv_dt 6y ago
IMHO some of it is climate change. TSMC is only running with trucked in water due to drought conditions in Taiwan, and multiple fabs in Texas had to go down with their power outages and fab restarts are not fast.

londons_explore 6y ago

All an effect of a lack of a futures market in IC fabrication capacity. That means nobody has a global view of future demand (since today most contracts are secret) and cannot invest in capacity accordingly.

throwaway4good 6y ago
One could fear there to be massive overcapacity in a short time (1-2 years). As mainland Chinese alternative capacity comes online and when some of the weirder demand peters out (GPUs for mining). My intuition is also that there is less pressure in the "let's buy the latest phone game" than there used to be. (For example I am using a 3 year old iPhone X and have no inkling to buy a new one).
- londons_explore 6y ago
  No need to fear it - the futures market will find people willing to shoulder that risk for a price.
throwaway4good 6y ago
And a futures market would require capacity to be a complete commodity. Which I don't think it is.
- londons_explore 6y ago
  Stocks are not a single commodity, but stocks in thousands of companies over many exchanges, and there exist indexes and ETFs to try to aggregate them. The same can be done with slightly different silicon fabrication facilities. For example, a company who needs their chips manufacturered at Facility A or B, but cannot use facility C would buy a futures contract letting them do that.
- newswasboring 6y ago
  Why do we think capacity is not a complete commodity? Is it because of the high setup costs or just the fact that its perpetually in short supply? Or maybe I just don't know the jargon complete commodity.
  - londons_explore 6y ago
    I believe OP means that certain types of IC's (for example memory chips) require pretty different technology and equipment than other chips (eg. processors). That means the production capacity isn't fungible.
    - s0rce 6y ago
      Isn't that true of most things, one can't farm pigs with an oil rig, those facilities really only make one thing. Certain facilities could be retooled/repurposed and this is maybe a bit easier in agriculture for certain things (plant soy vs corn) but you can't just plant an almond orchard overnight.
      - newswasboring 6y ago
        Yeah but I think that is the point. In their view the commoditization of something means how easy is it to retool to make something similar. Fabs can be retooled, after all its usually all the same machinery, but the process knowledge is a huge barrier.

dv_dt 6y ago

IMHO some of it is climate change. TSMC is only running with trucked in water due to drought conditions in Taiwan, and multiple fabs in Texas had to go down with their power outages and fab restarts are not fast.